India's Auto Dealers Hit Hard by Excess Inventory and Discount Demands

India's auto dealers are increasingly anxious about the possibility of needing to offer additional discounts to stimulate demand this festive season due to surplus inventory and unpredictable consumer spending, according to a spokesperson for the dealers' association on Thursday.

The strain of managing high inventory costs combined with the need for deeper discounts is creating significant pressure on dealers' profit margins."With our inventory already at record levels, buyers are expecting even higher discounts," stated Manish Raj Singhania, President of the Federation of Automobile Dealers Associations (FADA).

This concern follows a record increase in unsold car inventory in August, which now stands at 70-75 days' worth, amounting to 778 billion rupees ($9.27 billion). Discounts are also at historic highs.

Singhania is optimistic that inventory levels will improve in October with the onset of the Navratri and Deepavali festivals, which traditionally see a spike in big-ticket purchases.

FADA noted that many consumers have postponed their purchases until October in anticipation of greater discounts. Additionally, recent heat waves and subsequent heavy rains have negatively impacted showroom traffic and delayed buying decisions.

India's leading car manufacturers—Maruti Suzuki, Hyundai, and Tata Motors—have reported declines in dealer sales to customers by 8.5%, 12.9%, and 2.7% respectively, reflecting a similar drop in their sales to dealers. The carmakers had previously announced plans to reduce production to manage the high inventory, but they have not yet commented further.

While newly launched models, especially SUVs, are performing well, dealers are struggling to move older models, including older SUVs, Singhania noted. He urged manufacturers to limit sales to dealers to align more closely with retail demand.