Car Makers Must Apply Brakes

Dealers say oversupply Leading to 50-55 day inventory levels, call for recalibration of production from OEMs

MUMBAI, Feb 13 (The CONNECT) Despite an all round positive retail growth, inventory worries remain a challenge for automobile dealers pan India, Federation of Automobile Dealers Associations (FADA) said

“January 2024 began on a promising note for the calendar year, demonstrating 15% overall retail growth compared to the previous year. All vehicle categories – 2W, 3W, PV, Tractors, and CV – achieved positive YoY growth of 15%, 37%, 13%, 21%, and 0.1% respectively, said FADA President, Manish Raj Singhania, releasing the January 2024 sales data.

Serious concerns, however, remain regarding passenger vehicle inventory levels, now in the 50-55 day range, he said and called for  an immediate recalibration of production from OEMs to better align with actual market demand and avoid future oversupply issues.

As adaptability is crucial in this dynamic industry, OEMs must balance innovation with strategic production planning to ensure sustained success and overall market stability, Singhania said.

Several positive trends in the 2W market signalled a robust start to the year. Improved vehicle availability, due to adjustments post-OBD 2 norm implementation, the introduction of new models and a shift towards premium options all contributed to increased demand.

This, combined with a good harvest, a positive marriage season and effective follow-ups and offers, indicate a favourable trajectory for the 2W sector. Furthermore, despite supply shortages, increased interest in electric vehicles highlights evolving consumer preferences within this segment.

The 3W sector revealed a mixed landscape. While growth and optimism continue within the commercial 3W market, intensified competition from electric models underscores a significant market shift – now 55% electrified.

January 2024 presented a complex scenario for the CV segment, demonstrating limited YoY growth. On one hand, increased infrastructure development, port activity and positive crop yields fuelled certain market segments. However, this momentum was hindered by extreme weather, tightened liquidity, high vehicle costs and more restricted financing.

A record-breaking month, the PV segment achieved all-time high retail sales of 3,93,250 units and impressive 13% YoY growth. SUV demand, along with the introduction of new models, greater availability, effective marketing, consumer schemes and the auspicious wedding season, underpinned this strong performance.

FADA said February 2024 presents a multi-faceted outlook for Indian Auto Retail. While Dealers anticipate growth, it’s crucial to acknowledge the prevailing challenges that require close navigation:

Factors Promoting Growth:

• Demand Drivers: The ongoing marriage season, anticipated income from agricultural sales provide a positive foundation for continued consumer spending, supporting growth in the 2W segment.
• New Launch Momentum: Increased vehicle availability and successful new model introductions across all segments hold the potential to stimulate market demand
• Policy Impact: Favourable post-Union Budget policies are expected to drive growth in the CV sector, particularly within infrastructure-related industries.

• Potential for Further Growth: The Government’s optimistic crop production estimates and continued support measures are expected to boost the rural economy, potentially leading to even higher tractor demand and increased sales of entry-level 2Ws in rural areas.

Challenges and Market Complexities:

• Market Uncertainty: Anticipation of upcoming elections may introduce caution among consumers, affecting purchasing decisions across vehicle segments.
• Supply Constraints: Persistent supply bottlenecks for specific high-demand models present a risk factor for consistent growth across 2W, CV and PV segments, highlighting the need for OEM optimization of production lines.
• Finance & Liquidity: Fluctuating market liquidity and the potential for tighter financing in the CV sector require a focus on consumer financing solutions to support overall sales.

On an overall basis, the Industry Outlook leans towards cautious optimism but shows growth potential in near term.