Society of Indian Automobile Manufacturers (SIAM) has sought to allay concerns over rising PV inventories in the country, expressing confidence that automakers will take steps to reduce the levels of inventory at dealers.
High stock levels are associated with financial stress at the dealerships and can eat into their profits, with extreme situations leading to serious trouble. According to market reports, PV inventories have reached levels of 65-67 days of sales.
“Over a period, the inventory situation is not a concern, as eventually it would be corrected by individual OEMs,” said Vinod Aggarwal, SIAM President. “It is a regular phenomenon that keeps happening on and off as OEMs do produce more in certain months in the anticipation of higher sales. We believe that all OEMs will take responsible actions if dealers are struggling with excessive inventory.”
Aggarwal explained that it is the prerogative of the respective OEMs how they ensure dealer viability and the financial health of their retail partners, and ensure quick turnaround in their working capital. “Therefore, we do not see the whole industry inventory as a concern, but if dealers of some OEMs have higher inventory levels, we are certain they (OEMs) would correct it going forward,” he said.
“There is a good equilibrium between demand and supply, and any OEM which is facing high stock levels, will take corrective action. It is not in the interest of anyone if the working capital cycles do not remain quick,” he added.
While the PV segment recorded overall sales of 1,026,006 units in April-June 2024, and only registered a moderate growth of 3 percent, Aggarwal says there is optimism about the economy, and we must wait and watch for the situation going forward.
“Fundamentally, wholesale inflation is under control, and the expectations regarding overall inflation are not aggressive either. Therefore, we are very optimistic about Q2, based on the good predictions for the monsoon, as well as the upcoming festive season,” Aggarwal said, while adding that certain demand-side measures, particularly for the rural economy, from the government in the upcoming fiscal Budget could further drive the industry’s growth.
Also read: Mainstream car, SUV brands offer discounts as demand tapers