The Federation Of Automobile Dealers Association (FADA) are planning to approach financiers asking them to stop overfunding automobile dealers. Dealers have alleged that they have passenger vehicle inventories worth Rs.70,000 crore.
According to FADA, the passenger vehicle inventory is between 67 and 72 days, the highest recorded in a year. The dealers state that they have not been able to make profits with passenger vehicle inventories beyond 30 days.
“We plan to approach financiers to stop overfunding dealers. This is in the interest of the automobile dealers as it is high cost and we have to take measures to reduce the inventory levels. The dealers are not able to rotate stocks in 60 days. We have also approached SIAM to intervene,” said a senior official who did not want to be named.
The association has also approved the vehicle manufacturers to increase production of the cars in demand.
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“The ideal inventory at the dealer end is up to three lakh vehicles. We are at the lowest point in the industry and the Original Equipment Manufacturers (OEMs) are burdening us. Manufacturers should align their wholesales with retail. Every OEM has three models that are popular among consumers and have a long waiting period. However, the waiting period issue is not addressed by the manufacturers. The OEMs should immediately recalibrate and realign their production to the vehicles that are in demand from the customer’s end,” Manish Raj Singhania, President of FADA had earlier told the businessline.
Analysts have flagged a slowdown in the passenger vehicle segment during the year.
“We are concerned about slow down in the PV industry, underperformance at its small car segments and over-dependence on the SUV segment,” mentions LKP Securities.
FADA had earlier written to financiers asking them not to overfund the automobile dealers in November 2023 with passenger vehicle inventories of up to 66 days.
Festival cheer
While the festive season is expected to reduce the inventory levels and Original Equipment Manufacturers (OEM) have started to align vehicle production, the impact on the passenger vehicle industry is expected to continue.
“We expect the offtake to grow marginally by a lower single digit for the year FY25 considering the pressure on retails and the current inventory situation,” said Hemal Thakkar, Senior Practice Leader & Director of consulting, CRISIL Market Intelligence and Analytics.
