Massive Unsold Car Inventory Crisis! Worth Rs 60,000 Crores

Adverse weather, tight credit, and economic slowdown have slowed passenger vehicle purchases, leaving dealerships with a surplus. 

“As per FADA, there are 6-6.5 lakh unsold units valued at Rs 60,000 crores, up 77,000 units in the last two months. In May 2024, dealers faced a similar issue with 4 lakh cars worth Rs 44,000 crores unsold.”

1. High Inventory Levels:

   - The passenger vehicle (PV) industry has an all-time high inventory of 62-67 days.
   - Unsold inventory amounts to approximately Rs 60,000 crore.

2. Market Sentiment:
   - Despite improved product availability and discounts, demand remains low.
   - Extreme heat has led to 15% fewer showroom walk-ins.

3. Stock Accumulation:

   - Carmakers increased stock in anticipation of post-election demand and a good monsoon.
   - Dealers requested manufacturers to curb supplies due to low consumer offtake during the monsoon season.

4. Inventory Figures:
   - Total unsold inventory: 600,000-650,000 units.
   - Average ticket size per unit: Rs 9.5 lakh.
   - Inventory increased by 77,000 units in the last two months.

5. Sales vs. Dispatches:
   - June wholesale dispatches: 341,000 units (4% growth).
   - June vehicle registrations: 281,600 units.

6. Bank Lending Issues:
   - Banks are cautious and prefer lending to customers with good CIBIL scores.
   - This caution impacts demand generation and results in higher discounts.

7. Discounts and Promotions:
   - Discounts on cars, including new models, have reached multi-year highs.
   - Maruti Suzuki extended dealership hours and held evening sales promotions to combat low showroom walk-ins.

8. Retail Volumes:
   - Maruti Suzuki’s retail volumes dropped by 8% in June.
   - The overall industry saw a 7% year-on-year drop in sales volumes to 281,566 units.

9. Challenges and Recommendations:
   - Challenges include low customer inquiries and postponed purchase decisions.
   - Effective inventory management is crucial to mitigate financial strain from high interest costs.

Parameter	Details
Total Unsold Inventory	6,00,000 to 6,50,000 units
Average Ticket Size per Vehicle	Rs 9.5 lakh
Total Inventory Worth	Rs 60,000 crores
Inventory Increase Last 2 Months	77,000 units
Current Industry Inventory	62-67 days worth
June 2024 Sales Growth (Wholesale)	4%
June 2024 Sales (Registrations)	2,81,600 units
Sales Decline (YoY in June 2024)	6.77%
Leading Automaker Sales Decline	Maruti Suzuki: 8%
Factors Affecting Sales	Adverse weather, credit tightening, economic slowdown, lower footfalls
Sales Promotion Efforts	Heavy discounts, extended dealership hours, promotional events in evenings