Despite the arrival of the festive season, passenger vehicle inventories in India have reached unprecedented levels, currently averaging between 80 to 85 days. As it stands, dealers nationwide are holding a staggering 7.9 lakh vehicles, collectively valued at approximately ₹79,000 crore. This situation unfolds even as overall automobile sales experienced a significant decline of 9.26 percent in September.
Specifically, passenger vehicle sales fell by 18.81 percent, while two-wheeler sales saw a drop of 8.51 percent. Commercial vehicle sales also suffered, decreasing by 10.45 percent, according to statistics provided by the Federation of Automobile Dealers Associations (FADA).
The FADA has raised concerns regarding these elevated inventory levels, noting that automobile dealers are facing considerable financial strain amid increased cash flow difficulties. In light of these challenges, the association has urged the Reserve Bank of India (RBI) to implement stringent guidelines concerning funding to alleviate the risks that automobile dealers encounter.
In the past, inventory levels for passenger vehicles held by dealers typically ranged from 67 to 72 days, while normal inventory levels are about 35 to 40 days. FADA has pointed out that the heavy discounts currently offered by original equipment manufacturers (OEMs) could negatively impact dealer profitability if sales do not improve during the festive period.
C.S. Vigneshwar, the President of FADA, emphasized that the industry is relying on the remaining weeks of the festive season to recover its business momentum. He stated, “Passenger vehicle inventories have reached an all-time high. We acknowledge the pressure this situation puts on automobile dealers, but we are also witnessing a fourfold increase in inquiries. Historically, 30 percent of annual sales occur during the festive season, so we are optimistic about a surge in sales during this time.”
Moreover, Vigneshwar noted that OEMs have acknowledged the difficulties facing dealers and have assured the association that they will manage inventory levels more effectively following the festive season. He anticipates that as inquiries begin to translate into actual sales, the passenger vehicle inventory situation will stabilize within the next 45 days.
Manish Raj Singhania, the chairman of the Research & Academy at FADA, indicated that it might take two to three months for inventory levels to normalize. “Last year, during the festive season, passenger vehicle inventories were also at an all-time high, but they stabilized by January.
In September, prolonged rainfall led to a reduction in customer foot traffic, as India’s market is often influenced by auspicious buying days or ‘muhurat’ periods. Customers tend to be sensitive about their purchases, and recent weather patterns—including heat waves and extended rains—have also affected dealership visits,” he explained.
Analysts predict that the growth trajectory of the passenger vehicle industry is likely to remain in single digits. “We anticipate a marginal growth in vehicle sales of a lower single digit for the fiscal year 2025, particularly given the current inventory challenges and retail pressures,” stated Hemal Thakkar, Senior Practice Leader and Director of Consulting at CRISIL Market Intelligence and Analytics.
The FADA has also noted that the unusually high southwest monsoon, which exceeded expectations by 8 percent, disrupted automobile retail performance in various regions, adversely affecting customer footfall and demand for vehicles.
