SUV Price War Comes To India Auto Amid Record-High Inventory
Tata Motors and Mahindra have slashed prices of their luxury SUVs by at least Rs 2 lakh. Maruti Suzuki, Toyota hybrid SUVs get tax reprieve in Uttar Pradesh.
The outsized demand for oversized cars has collapsed, despite over-the-top discounts.
The result: An inventory build-up of more than two months. An unsold stock worth Rs 70,000 crore. More than 700,000 cars in the stockyard.
“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).”
That sentiment was echoed by FADA Chairman Manish Raj Singhania.
“Inventory levels have reached an all-time high, ranging from 62 to 67 days,” he said in a statement on June 5. “Despite improved product availability and substantial discounts aimed at stimulating demand, market sentiment remains subdued.”
“Dealer feedback highlights challenges such as low customer inquiries and postponed purchase decisions.”
A price cut, then, was only a matter of time. That Uttar Pradesh has waived road tax on strong and plug-in hybrid cars only expedited the move.
On Tuesday, Tata Motors slashed the starting price of its Harrier and Safari SUVs to Rs 14.99 lakh and Rs 15.49 lakh, respectively. While Nexon saw a price revision following the launch of Mahhindra & Mahindra Ltd.’s XUV 3XO a couple of months ago, its EV variant is now cheaper by Rs 1.3 lakh. Similarly, the Punch EV is cheaper by Rs 30,000.
M&M—in what can be seen as a knee-jerk reaction—revised prices of the top-end variants of XUV 7OO. The AXL variants of the best-selling SUV are now priced at less than Rs 20 lakh, but still pricier than the rival offerings by Tata Motors, Maruti Suzuki India Ltd. and Toyota Kirloskar Motor India Pvt. Ltd.
“Mahindra is stuck in a unique situation,” Gulati said. “While its AX7 variants remain unsold, the AX5 (mid-spec variant) is in short-supply. The company needs to sort out its production strategy to minimise such demand-supply mismatch.”
To be sure, the demand-supply mismatch is an industry-wide phenomenon. OEMs 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’s Singhania said. “Effective inventory management strategies are essential to mitigate financial strain of high interest costs. FADA strongly urges PV OEMs to implement prudent inventory control and engage proactively with the market.”
