Wholesale, Not Retail Sales Is Indicator Of Auto Sector's Health, Says SIAM President
That couldn’t be farther from the truth as dealerships are saddled with more than 7 lakh unsold cars that carmakers dispatched to them, irrespective of dwindling demand on the showroom floor.
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Wholesales, and not retail sales, is the real indicator of the health of India’s auto sector, the president of an industry lobby representing carmakers said, rejecting the idea there’s a growing demand-supply mismatch in the world’s third largest automotive market.
“The retail sales (as put out by FADA and VAHAN website) do not have data of one-two states. That makes it difficult to reconcile the wholesale and retail data,” Vinod Aggarwal, president of the Society of Indian Automobile Manufacturers, told NDTV Profit on the sidelines of a media scrum in New Delhi on Friday.
“There should be no concern over the mismatch in wholesale and retails. But if there is a gap, the company would resolve it in a month or two,” he said. “One must look at the wholesale data, as that is the real indicator for the health of the industry.”
That couldn’t be farther from the truth.
Wholesales are merely dispatches from a factory to a dealership. Dealers pay upfront for the stock they pick up, irrespective of sales that may or may not happen at the showroom floor. That keeps a carmaker’s bottom line and operational profitability afloat in the balance sheet. Retail sales, meanwhile, is an indicator of actual sale to a customer. It is calculated using the vehicle registration data available on the government’s VAHAN website.
A mismatch here leads to a buildup of inventory.
In June 2024, wholesales rose 3% year-on-year to 3,37,757 units even as retail sales fell 6.77% year-on-year to 2,81,566 units, according to data from SIAM and FADA. That’s a gap of more than half-a-lakh in one month alone. Overall, the auto industry is sitting on a stockpile of more than 7 lakh cars, worth more than Rs 70,000 crore. Inventory level is at 65-70 days, nearly double of what is normal for this time of the year.
Dealers are now calling for carmakers to check their production capacity amid muted sales.
“OEMs (original equipment manufacturers) will definitely act wherever the inventory is high. I don’t think any OEM likes to live with high inventory. They will take action,” Aggarwal said. “If need be, Indian OEMs can also choose to correct their production volumes. They will take the right action, one which is good for them.”
At the end of the day, the health of the dealership is also very important. So, anywhere the inventory is high, OEMs will make the right decision, he said.
On June 14, FADA President, Manish Raj Singhania, had hinted at approaching SIAM over the inventory issue, if it inflated further.
“Last year, when the inventory had gone up to 65 days…we collaborated with SIAM, and subsequently, were able to bring it down, and the market also supported well,” Singhania had said then. “This time we are already at the peak. If it increases further, we will approach SIAM.”
But Aggarwal said SIAM, as an industry lobby, doesn’t control inventory.
“Inventory is a matter of individual companies. Dealers will have to talk to the individual OEMs. Wherever inventory is high, any concerted action by the association will help,” he said. “If any dealer is having high inventory, they should talk to their principal. It’s an individual one-to-one matter, not an association matter.”