As India's festive season approaches, passenger vehicle dealers are seeing a notable increase in inventories, yet discounts remain surprisingly moderate compared to previous years, signalling a tighter demand-supply balance in the automotive market.
Key Points
- Passenger vehicle dealer inventories reached 38-40 days in August, exceeding the recommended 21-day level, as manufacturers prepare for the festive season.
- Despite the inventory build-up, current discounts on mass-market models are moderate, ranging from ₹50,000 to ₹3.35 lakh, significantly lower than the ₹5-10 lakh seen last year.
- Wholesale volumes grew 36.5 per cent year-on-year in August, outpacing retail registration growth of 16.14 per cent, indicating substantial stock movement into the channel.
- Inventory levels vary by manufacturer; Maruti Suzuki has lower-than-preferred stock, while Hyundai maintains healthy levels with disciplined discounting.
- The industry faces a key test to absorb elevated inventories through retail demand during the festival season without a broad increase in incentives, amidst risks like weaker demand and monsoon deficits.
Passenger vehicles (PVs) dealers reported inventories of 38-40 days for August -- around five days higher than in July -- as automakers stock up ahead of the festivals, but the buildup has so far not triggered the steep discounts seen last year.
Dealer-level offers are ranging from around Rs 50,000 to Rs 3.35 lakh across several mass-market models.
Som Kapoor, partner and future of mobility leader, EY-Parthenon, said discounts on some models had reached Rs 5 lakh-10 lakh last year, as against around Rs 3 lakh now.
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Inventory Surge and Wholesale Growth
The inventory increase comes as manufacturers' wholesale volumes grew 36.5 per cent year-on-year in August, more than twice the 16.14 per cent growth in retail registration.
The August data with Society of Indian Automobile Manufacturers (Siam) showed PV wholesale volumes at 439,309 units, significantly ahead of the Federation of Automobile Dealers Associations' (Fada's) retail registration of 402,398 units.
The nearly 37,000-unit gap, coupled with the increase in dealer inventories, points to a sizeable amount of stock moving into the channel ahead of the festival season.
Fada's data of inventories at 38-40 days at the end of August is well above the association's recommended 21-day level. About 56 per cent of dealers reported higher inventories.
Manufacturer-Specific Inventory and Discounts
The buildup, however, is not uniform across manufacturers.
Maruti Suzuki, the country's largest PV manufacturer, had around 16 days of network inventories, according to Partho Banerjee, senior executive officer, marketing and sales.
This is below the company's preferred festival inventories of around 30 days.
The company has also received more than 60,000 bookings for its Victoris, indicating that stock availability remains a constraint for some products.
Hyundai Motor India's inventories stood at four to five weeks, which Managing Director and Chief Executive Officer Tarun Garg described as healthy.
The company has been maintaining a disciplined approach to discount, whose rate is 2.8 per cent of revenue in the first quarter, broadly in line with the previous year.
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Current Market Offers
At industry level, available dealer-sourced offers also do not point to a uniform escalation in discounts.
Tata Motors has benefits of up to Rs 3.35 lakh on select Curvv electric-vehicle variants and up to Rs 2.75 lakh on the Harrier EV, while for Mahindra & Mahindra those are up to Rs 2.5 lakh on select sport utility vehicles.
Maruti Suzuki's Grand Vitara carries headline benefits of up to Rs 3.10 lakh, including a zero-road-tax benefit of up to Rs 1.85 lakh.
Hyundai's Creta has benefits of up to Rs 1 lakh, while Kia's offers range from Rs 50,000 on the Sonet to Rs 1.5 lakh on the Carnival.
Honda's Elevate has benefits of around Rs 2.44 lakh.
These are dealer-sourced figures and can vary by location, variant, model year, stock and customer eligibility.
Outlook for the Festive Season
Kapoor attributed the moderation in discounts from last year to a tighter demand-supply balance.
The comparison, however, is based on his talks with original equipment manufacturers rather than an industrywide discount series.
The key test now is whether the elevated inventories can be absorbed through retail demand in the festival season without a broadbased increase in incentives.
Fada's survey showed 81.62 per cent of dealers expected growth during September-November, although this was lower than the 87.85 per cent a month earlier.
The expectations come against a high base.
Siam has attributed part of August's wholesale growth to the lower base of the previous year, while Fada has flagged risks such as weaker than expected demand, a deficient monsoon in several states, and price increases.
Feature Presentation: Rajesh Alva/Rediff
