Indian automobile industry may be in for bigger scare after the sharp drop in sales in the recent months. Piled up inventory with the dealers and less than expected sales revival in the festive season show that the production and carmakers' sales will continue to be under immense slowdown pressure. During the festive season, the domestic passenger vehicle sales rose marginally by 0.28 per cent in October, after sliding continuously for eleven months. However, vehicle sales across all segments fell over 12 per cent in the month. Now, looking forward, the inventory piling up with the dealers may force them to order fewer vehicles, pulling down the wholesale sales numbers.
Slowdown in the automobile industry in India is well documented over the past few months. However, its actual intensity goes deeper. The difference between wholesale and retail sales figures, individually posted by two different automobile bodies — SIAM and FADA — paint a picture worth noticing in the above context. While automobile companies sold over 2.2 lakh passenger vehicles to dealers in September 2019, only around 1.5 lakh hit the roads.
The difference arose due to two separate computations of car sales: Wholesale sales from companies to dealers by SIAM; and retail sales from dealers to customers by FADA. The difference between the wholesale sales and retail sales results in inventory building up with the dealers, who may, in the future, buy fewer vehicles from companies.
FADA president Ashish Harsharaj Kale said that both dealers and component manufacturers felt that it would have been easier to predict the ongoing auto slowdown if retail numbers, instead of wholesale numbers, were reported, as this would have helped in their inventory management and would have kept all better placed in facing these dynamic times. To overcome this confusion, the FADA president had even written a letter to the SIAM president Rajan Wadhera requesting him to shift to actual registrations to calculate the market share.
Inventory levels started piling up as early as the last festive season in 2018. One of the reasons is the continuous push lead of passenger vehicles on account of higher optimism of the OEMs about higher sales during the festive season, which did not happen.