FADA Urges Automakers To Take Corrective Action As Car Inventory Rockets to Record High

Pune: The Federation of Automobile Dealers Associations or FADA on Monday raised concern over unsold passenger vehicle (PV) inventory reaching a critical high of 7.9 lakh units, urging automakers to take corrective steps.

These vehicles are collectively valued at an estimated Rs 79,000 crore, creating significant financial pressure on dealerships, it noted.

The unusually high inventory levels have been attributed to aggressive dispatches by original equipment manufacturers (OEMs), while weak consumer sentiment, seasonal factors, and heavy rainfall have hindered retail sales.

Automobile retail sales fell 9 per cent on-year to 17,23,330 units in September due to sluggish demand.

"Seasonal factors such as Shraddh and Pitrapaksha, coupled with heavy rainfall and a sluggish economy, have exacerbated the situation, leaving dealers with historically high inventory levels of 80-85 days' equivalent to 7.9 lakh vehicles worth Rs 79,000 crore," said CS Vigneshwar, president of FADA.

FADA also called on the Reserve Bank of India to issue an advisory to banks, mandating stricter channel funding policies based only on dealer consent and on actual collateral, to prevent dealers from facing additional financial pressure due to unsold stock, he noted.

Vigneshwar said despite the onset of festivals such as Ganesh Chaturthi and Onam, dealers have reported that the performance has been largely stagnant.

He said given the critical festive season around the corner, FADA urged automakers to take immediate corrective measures to avoid a financial setback.

“This suggests that overall market sentiment during these festive periods has been underwhelming, with a trend leaning towards flat or negative growth,” FADA noted.

Passenger vehicle sales declined 19 per cent on year to 2,75,681 units last month from 3,39,543 units in the year-ago period.

Vigneshwar said this is the final opportunity for PV makers to recalibrate and support market recovery before it is too late.

Two-wheeler retail sales dipped 8 per cent on-year to 12,04,259 units due to low consumer sentiment, poor inquiries, and reduced walk-ins, FADA said.

Shraddh period and heavy rains further impacted demand, resulting in delayed purchases and a subdued market environment, it pointed out.