Auto Inventory Jumps Sevenfold In August As Two-Wheeler Makers Seek To Boost Festive Sales

Inventory levels at dealerships rose nearly sevenfold in August as two-wheeler makers pushed stocks to showrooms ahead of the festive season as the automobile sector looks to overcome its worst slowdown in 22 years.

The automobile industry’s net inventory rose to 2.21 lakh units in the month compared with 37,507 in July.

Inventory levels are calculated based on the difference of wholesale numbers released by Society for Indian Automobile Manufacturers and retail sales vehicle registrations across the country and disclosed by the Ministry of Roads, Transport and Highways.

Wholesales—units moving out of the factory gate—for cars, scooters, motorbikes and trucks declined 23.53 percent year-on-year in August, according to the data collated from the SIAM. Wholesales of passenger vehicles which include cars, utility cars and multi-purpose vehicles fell 31.57 percent in the month whereas for two-wheelers it fell 22.2 percent.

The wholesales-to-retail volumes ratio for the two-wheeler category jumped in August after it fell in July. The ratio rose to 1.22 in August from 1.08 in July. Companies like Honda Motors told BloombergQuint that it continues to maintain 45 days of inventory ahead of the festive season. The auto industry is looking for a revival in this festive season but lack of clarity over whether the government will reduce goods and services tax on automobiles has meant sales have been lacklustre so far.

A ratio above one denotes that companies pushed higher sales to dealers compared with dealers sales to customers.

Inventory of passenger vehicles rose marginally in August despite a 31.57 percent fall in wholesales numbers. Passenger vehicles’ wholesales dipped below the 2-lakh mark, for the first time since April 2017, according to SIAM data.

Inventory level for passenger vehicles continued to be lower than industry level, staying below one—implying factory-gate sales are lower than retail sales. And that’s because of production cuts.

Commercial vehicles continue to be the worst hit in the current slowdown. While medium and heavy commercial vehicle volumes fell 54.3 percent, total commercial vehicles wholesale numbers fell 38.7 percent in August according to SIAM. The three-wheeler category fell nearly 7 percent year-on-year, the industry body said.

Inventory levels continued to be below industry level for the commercial vehicles and remained below 1 for the second straight month. Commercial vehicle makers have been the first to correct inventory levels since the beginning of slowdown. Volumes of three-wheelers, on the other hand, witnessed volume push at the factory gate level, which pushed the wholesale-to-retail sales ratio to above one in August.