The Hindu Business Line : Auto dealers put brakes on despatches from companies

New Delhi, Dec. 4 As retail auto sales nosedive and stock levels keep rising, many of the automobile dealers are asking companies to halt their despatches temporarily.

Due to a slowing economy, over the last two-three months, commercial vehicle dealers have been witness to mounting inventory at their end. The steep fall in lending by banks has put car dealers also in the same situation, making it difficult for them to absorb any further stockpiling.

“Till recently, commercial vehicles were the worst hit. Now, even car dealers are suffering an inventory build-up of 60 days. So, many of the dealers are no longer taking stocks,” said Mr S.P. Shah, President, Federation of Automobile Dealers Association.

A dealer for Tata Motors, located in the western region of the country, said, “Stock levels are building up to 60 days and for some of the dealers, they have gone up to 75 days. Further, with banks not lending adequately even on working capital, where is the money to buy more stocks?”

Car sales plunged to a new low last month. This has led to build-up of stocks of utility vehicles and cars. The most impacted are Mahindra’s sedan Logan, Honda Civic and Accord and Ford Ikon and Fiesta at the dealers’ end. For instance, Accord used to sell 800 units a month, which has come down to 200 now. Civic’s case is even worse, for demand has fallen to less than 500 units from the 1,000 plus it logged earlier.

“Retail sales have gone down drastically. At the same time, our cost of holding inventory has gone up. This is because interest rates have gone up from the 9-11 per cent range in September to 15-18 per cent currently,” said a Mahindra & Mahindra dealer..

Even in the case of two-wheelers, industry sources point out that some of the dealers for Bajaj are facing inventory up to 70 days and for Hero Honda, up to 40-50 days.

Companies, on their part, have now started taking into consideration the situation on the ground and begun to cut production. “Our dealers have an inventory up to 25-30 days which is normal. However, there are situations when some of the dealers may have excess stocks because of which they may not be able to take despatches for that month. There is no abnormality in such a situation,” said Mr Rajesh Jejurikar, Chief Operating Officer, M&M.

Similarly, a Honda Siel official confirmed, “Retail sales have hit rock-bottom. Except for the City, all our other models are suffering.”