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Dealer's call to auto cos: Correct inventory levels

As per data available with FADA, passenger vehicle inventory now stands at 50-60 days.

, ET Bureau|
Updated: Mar 14, 2019, 07.53 PM IST
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Reuters
Cars-reuters
Commercial vehicle registrations too fell 7.08% to 61,134 units in the period under review.
Saddled with high stocks amid slowing demand in the local market, automobile dealers have urged manufacturers to rationalise production and correct inventory levels across the country. Sluggish sales in the past few months have led to a surge in inventory levels across dealerships.

As per data available with Federation of Automobile Dealers Association (FADA), passenger vehicle inventory now stands at 50-60 days, while that of two-wheelers are even higher at 80-90 days. For commercial vehicles, inventory levels range between 45 and 50 days.

“Inventory for two-wheelers has particularly reached alarming levels, and in some geographies, has breached the unheard level of 100 days stock as per today’s retail situation,” said Ashish Kale, president, FADA. Facing a substantial increase in operational costs in recent times due to various factors as well as increased working capital needs, and that too in a tight liquidity environment, prolonged maintenance of such high inventory and its additional costs are becoming unsustainable. What’s worse is demand continues to be a challenge, prompting dealers to desperately look to reduce their inventory in March and April, said Kale.

Retail demand for automobiles fell sharply last month with liquidity tightening in the market and high interest rates forcing consumers put off purchases. As per data collated by FADA, passenger vehicle registrations in February declined by 8.25% to 2,15,276 units. Commercial vehicle registrations too fell 7.08% to 61,134 units in the period under review.

Two-wheeler registrations dropped 7.97% to 11,25,405 units. “After a month of spike in passenger vehcile sales in January which was largely due to year-end stock clearance getting extended and a few new launches which generated some excitement, the industry is once again experiencing downward trend as February turned out to be one of the slowest months for auto retails during this financial year,” said Kale.
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