The Society of Indian Automobile Manufacturers (Siam) is set to address the escalating inventory levels in the passenger vehicle (PV) segment during its next executive committee meeting, following rising concerns from the Federation of Automobile Dealers Associations (Fada).
As inventory levels have surged to a high of 67-72 days, equating to Rs 73,000 crore worth of stock, the situation is raising alarms about the financial stability and sustainability of dealerships.
Last month, Fada initiated discussions with Siam to address these inventory concerns. Fada will be writing to Siam again on the rising inventory levels.
“Fada will be writing to them again on the current status of inventory,” said Saharsh Damani, chief executive officer of Fada.
The current inventory situation reflects a significant increase from July 2023, when inventory levels were at 50-55 days, equating to Rs 49,833 crore in stock. In July 2024, inventory levels were between 67-72 days, amounting to Rs 73,000 crore in stock.
Fada has been vocal about the financial strain that high inventory levels place on dealerships, citing the additional interest costs incurred due to extended holding periods.
“Anything above 30 days (of inventory) starts draining the dealership,” said Manish Singhania on rising inventory levels at the sidelines of the Finance and Insurance Summit 2024 last month.
In 2018-19, when inventory days approached 70 days, it led to the closure of around 282 passenger vehicle dealerships.
In response to Fada’s concerns, the Siam president acknowledged that inventory at the dealership level is managed directly between dealers and their respective principals. However, it was assured that Siam would bring up the issue in their next executive committee meeting.
Last year, dealerships managed to reduce inventory levels from a peak of 62 to 65 days through collaboration with Siam and favourable market conditions. However, with the current inventory levels already high, repeating this feat appears necessary.
First Published: Aug 07 2024 | 7:07 PM IST
