After sparring over market share numbers, the Federation of Automobile Dealers Associations (FADA) and OEMs are at loggerheads over inventory levels. While FADA says dealerships are carrying too much stocks, automakers don’t think so.
“It is clear from the wholesale numbers (provided by SIAM) and retail sales data (provided by FADA) that while OEMs are showing a growth in their sales, at the retail level, these number of vehicles are not being sold to the end customers. The gap in between is creating an excess inventory at dealers end,” Vinkesh Gulati, President, FADA, told BusinessLine.
According to SIAM data (of wholesale despatches), in August passenger vehicle sales were up 14.16 per cent year-on-year, while FADA numbers (tracking actual sales to customers) show that PV sales fell by 7.12 per cent. Similarly, in the two-wheeler segment, going by SIAM numbers, sales were up 3 per cent y-o-y in August, while FADA said sales to customers fell 28.71 per cent. “If wholesale is more and retail is less, it means inventory build-up is happening,” Gulati explained.
However, OEMs have a different story. Shashank Srivastava, Executive Director (Marketing and Sales), Maruti Suzuki India, said that for the PV industry, the current inventory levels are not high. “We need to use the Vahan data (FADA data are sourced from Vahan) with caution as some States’ numbers are not uploaded. Then, there is also the issue of the delay between invoicing to customers and the permanent registration, as reflected in Vahan,” he said, adding that OEMs’ data indicate low stock levels, going by the benchmark of stocking days. Shailesh Chandra, President, Passenger Vehicles Business Unit, Tata Motors, also said that the company’s cumulative retail sales in the first quarter of 2020-21 was 27 per cent higher than the wholesale number. “The trend has continued with our retail sales being higher or nearly equal to our wholesale numbers. As we approach the festival season, we will ensure that we maintain our focus on retail and avoid any major build-up of inventory at dealerships,” he said.
Build-up of stocks
Hetal Gandhi, Director, CRISIL Research, said since inventory levels in July were below normal, they were built up for festivals in August as well as the upcoming Dasara and Diwali in October and November. “We expect inventory build-up at the dealer level to continue in September; however, retail sales are expected to be lower in the first half of the month, owing to the Shraadh period.”
Rakesh Sharma, Executive Director, Bajaj Auto, said there is a regular stock build-up ahead of the festival season and this is nothing out of the ordinary.
FADA’s Gulati, however, said OEMs continue force billing their dealers as there is no franchisee protection law in the country. FADA, which was advocating a 21-day inventory pre-Covid, is now advocating for stocks of 10 days inventory so that the interest burden remains in control. “If this increases even slightly, there is additional burden on dealerships’ sustainability. Auto dealers get wafer-thin margins from OEMs, the lowest globally,” Gulati said.