Price cut imminent as vehicle stocks cross four lakh units

Mumbai: Piling up stocks is likely to make the road bumpy for automobile makers in India. Data show that the industry which has been running at top gear for the past couple of years may lose pace in the coming months.

It is estimated that as of May 31, a staggering 4 lakh vehicles valued at Rs44,00 crore are awaiting customers, but they are being sold at a slow pace, few and far between.

Industry sources say the aggressive marketing over the past few years has nearly saturated the market, and consequently, it is experiencing a slow decline in demand.

They would like to attribute the imminent recession in demand to the heat wave being experienced in the major markets in the North, the completion of the marriage season, and the uncertainty of poll outcome.

While the industry laments that stocks are very high, it hopes that a copious monsoon, the expected rate cut by later this year, and the tamed inflation will help the industry pick up speed.

Silver lining

Though the industry sees a silver lining, they are worried about a network inventory of over 4 lakh vehicles this month which is the highest absolute level on record.

“It even surpasses the months preceding the festive season when manufacturers bulk up stock,’’ said the marketing head of a company.  

The research wing of the Federation of Automobile Dealers Association anticipates that due to elevated industry levels, discounts and consumer incentives in June will rise by 15 to 20 per cent compared to May. Earlier this month, a section of car manufacturers cautioned about decelerating sales and increasing inventory levels during investor calls.