Informist, Wednesday, Sep 6, 2023

By Kiran Murali

NEW DELHI – Passenger vehicle makers in India are eyeing the best-ever festival season sales this year as they continue to push inventory further to dealers. Record dispatches from factories in August also indicate automakers' optimism around blockbuster sales.

Festival season, which traditionally starts with Onam in Kerala and runs till Diwali, accounts for around 25% of the annual passenger vehicle sales in the country. This year's festival season started with Onam in the second half of August and will extend till mid-November.

"The festival season in India has kicked-off on a positive note with strong Onam sales in Kerala market and this is an indication of the festive fervor in other parts of the country in the coming months," Hyundai Motor India Chief Operating Officer Tarun Garg said.

Automakers ramped up dispatches in anticipation of robust festival season sales as well as on strong demand for recently launched models and better availability of semiconductors. Passenger vehicle dispatches were around 360,000 units in August, which represents a growth of around 10% from a year ago, as per estimates of brokerages, carmakers and dealers.

"This is the highest ever monthly sales not just for August, but for any month in any year in the industry. The last highest was 355,400 units, which was in September 2022," Shashank Srivastava, executive director of Maruti Suzuki India Ltd, said in a recent media interaction.

With rural markets showing signs of revival in the last couple of months, automakers are betting big on this festival season with a slew of new models and increasing production on the back of improvement in chip supply.

Srivastava expects passenger vehicle sales in the industry to surpass the 1 mln unit mark for the first time during this festival season.

Passenger vehicle retail sales picked up in the last week of August at 77,000 units and was at a 9-week high, ICICI Securities said in a report.

"Festive season, which started with Onam in Kerala, has seen a very positive retail growth of 25% in Kerala. So, that is a very good number and the demand parameters like bookings, enquiries, etc. have been high," Srivastava said.

The semiconductor supply crunch, which took a heavy toll on the automotive industry in terms of curtailed production and supplies, is now mostly behind.

RECORD INVENTORY LEVELS

Automakers have built a considerable inventory at dealerships as passenger vehicle dispatches from factories continued to outpace retail sales for the eighth consecutive month in August. Inventory at dealerships is currently at an all-time high.

"Significantly, inventory levels for passenger vehicles have surpassed the 60-day threshold, establishing an all-time high even before the onset of the 42-day festive period," the Federation of Automobile Dealers Associations said.

The average inventory of passenger vehicles currently ranges from 58-63 days, as per a survey by the Federation of Automobile Dealers Associations. In the year-ago period, the average inventory was between 30-35 days, while in July the inventory ranged from 50-55 days.

"Overall, we believe the festive season should be strong this year for passenger vehicles. Healthy inventory, with a much higher supply for sports utility vehicles, will support this. Our dealer survey also points towards a good pick-up in festive bookings," brokerage Nomura said.

However, dealers are concerned about higher inventory at a time when the industry has a strong order book. "It is alarming that inventory levels have exceeded a 60-day supply for the first time, even before the onset of the Navratri-Diwali festivities—a trend that necessitates vigilant monitoring by PV OEMs," said Manish Singhania, president of the Federation of Automobile Dealers Associations.

The fact that wholesale sales outstripped retail sales for eight months at a time when the pending bookings are pretty high shows that inventory build-up is being done mostly of low-demand vehicles, particularly mini and hatchbacks.

Automakers could be looking to cash in fresh demand for small cars expected in the festival season.

"Typically in the festive season, these models (small cars) do well because the seasonal effect of festivals in the smaller places seems to be higher than the larger cities, and the percentage of sales of hatches in those smaller places is higher," Shashank said.

End

Edited by Maheswaran Parameswaran

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