09-05-2023 12:36 PM | Source: Reuters
Indian automakers must be vigilant about ``alarming`` inventory levels - industry body
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Inventory levels for passenger vehicles in India hit an all-time high in August ahead of the key festive season, an "alarming" trend that needs vigilant monitoring by automakers, an industry dealers' body said on Tuesday.

The average inventory of passenger vehicles (PVs) at the end of August ranged from 58-63 days, up from 50-55 days in July and 30-35 days in August last year, the Federation of Automobile Dealers Association (FADA) said.

Higher inventory days indicate dealers are storing vehicles for longer before being able to sell them.

India's festive season, which starts in late August and goes on till November-end, usually draws the most vehicle purchases.

However, analysts have flagged concerns about poor rains denting demand, with the country poised to experience its lowest monsoon levels in eight years.

"Festive demand is the key monitorable now. If the monsoon trend continues in September, the entry level segment in two wheelers and PVs, where inventory is higher, will be impacted. Original equipment manufacturers (OEMs) then will have to take corrective action sooner," said Rishi Vora, associate vice president at Kotak Securities.

Retail sales of vehicles increased by 8.6% in August, with PV volumes rising 6.5%, data from FADA showed.

FADA said that the lack of sufficient rainfall could "adversely affect" consumer purchasing power.

Meanwhile, sales of three-wheelers soared 66% in August, surpassing July's record high, while those of two-wheelers grew just 6%, hurt by poor consumer sentiment and increasing competition among key players.

"In the two-wheeler market, subdued rural demand due to insufficient rainfall could temper sales growth," FADA said.

Retail tractor sales rose more than 13% year-over-year, but fell more than 18% sequentially, according to FADA data. Last week, tractor maker Escorts Kubota said that monthly sales fell, partly due to deficient monsoons.