M&M Made More SUVs Than It Sold In June 2024 In Growing Signs Of Mismatch

The gap between production and sales of Mahindra sport utility vehicles has widened in the past year, underscoring the growing demand-supply mismatch seen in the wider industry.

Mahindra & Mahindra Ltd. produced 42,206 SUVs in June and clocked retail sales of 34,958 units, according to an exchange filing and data sourced from the Federation of Automobile Dealers Associations (FADA). That’s a gap of 7,248 units.

The gulf was narrower a year ago. The Scorpio maker produced 33,960 SUVs in June 2023 but clocked retail sales of 31,398 units—a gap of 2,562 units.

While M&M has stepped up production, retail sales aren't matching up. NDTV Profit’s conversations with dealerships revealed that while there is no lack of interest for the vehicles, the variants in demand are in short-supply while those out of favour are languishing in stockyards.

That translates into longer waiting periods and inflated inventory, at the same time.

For example, after M&M launched the ‘XUV 7OO AX5 Select’ variant in May with additional features, the demand for the higher-spec AX7 variant fell, so much so that a discount had to be offered. M&M claims the revision is aimed at price rationalisation to drive growth, and has nothing to do with unsold inventory.

“The demand for the XUV 7OO continues to be robust, and we have increased our manufacturing capacity in line with the demand,” M&M said in the exchange filing. “Our new XUV 7OO bookings in June were 23% higher than May and there is no concern of unsold inventory as reported in the media.”

The SUV maker continues to clock 48,000 monthly bookings. Its order book is still at more than 2 lakh units.

The state of affairs at M&M is noteworthy, for it comes at a time when demand for oversized cars has collapsed in the world’s third-largest automotive industry.

According to industry watchers, the five-million-unit industry is sitting on an inventory of 700,000 units valued in excess of Rs 70,000 crore. Dealerships are saddled with unsold stock running into 65-70 days.

“This is essentially festive-season level of stocking,” Vinkesh Gulati, chairman (research and academy) at the Federation of Automobile Dealers Associations, told NDTV Profit over the phone on Tuesday. “June is anyway a seasonally weak month for auto sales; such inventory only adds to the pressure (on dealers).”

To be sure, the demand-supply mismatch is an industry-wide phenomenon. OEMs, or original equipment makers, continue to produce more amid dwindling sales. In June, wholesales—or dispatches to dealerships from the factory floor—rose by 1-2% but retail auto sales dwindled by 7-8%, according to data released by carmakers and FADA.

“With the festive season still some time away, it’s crucial for carmakers to exercise caution,” FADA President Manish Raj Singhania said in a statement earlier this month. “Effective inventory management strategies are essential to mitigate financial strain of high interest costs. FADA strongly urges PV (passenger vehicle) OEMs to implement prudent inventory control and engage proactively with the market.”