Nearly 800,000 unsold cars worth Rs 79,000 crore

A variety of reasons, including rising car prices, inflation and a preference for new models, could be responsible for high inventories

Reports indicate that car dealers can only maintain inventory for 80-85 days, which is a worrying development. This is an all-time high number that affects dealers of most car brands. Even the holidays don’t seem to be mitigating the high inventory situation.

Inventories piling up since May 2024

Data shows that inventory at the dealer level has been piling up since May. There are around 790,000 unsold vehicles parked at dealerships with an estimated value of around Rs 79,000 crore. One reason could be higher volumes being shipped to dealers at a time when sales are lower than usual.

It’s common for dealers to increase inventory during the holiday season due to expected high demand. However, FADA sales data for September showed that car sales grew negative by -18.81%. If this continues, dealers may start to face cash flow issues.

Sluggish demand for Rs 10-25 lakh cars

After the epidemic, cars priced between 10 lakh and 25 lakh rupees drove sales growth. However, this number has decreased in recent months. The only exception is the high-end segment models that continue to maintain stable sales. Similar situations have occurred before with small cars with the highest inventories. The segment has faced low growth over the past two years. However, by reducing production and dealer scheduling, automakers were able to prevent the situation from getting worse.

Can October and November sales be saved?

FADA hopes that car sales in October and November will be better than in previous months. Strong sales during Dussehra and Diwali are likely to significantly reduce dealers’ huge inventories. Without exact data, it’s difficult to determine which car brand has the highest dealer inventory.

However, Maruti Suzuki, being the largest carmaker, has the highest dealer inventory in terms of total sales. When estimated as a percentage of monthly sales, brands with relatively low sales are likely to have the highest dealer inventories. These include brands such as Nissan, Citroën and Jeep.

Older models have more inventory issues

Sales figures show car buyers are investing their money in newer models. Some examples include Maruti Fronx, Maruti Swift, Tata Curvv, Hyundai Alcazar, Mahindra XUV3XO and Thar Roxx. All have experienced strong growth since launch. None of these have any high inventory issues. Increased demand for new models suggests high dealer inventories may include a large number of older models.

Extreme weather events may also be a reason for slow car sales starting in May 2024. The hot summer and subsequent monsoon rains may prompt car buyers to delay purchase decisions. Auto sales are likely to see positive growth in the coming months as the weather becomes more tolerable across much of the country.

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