Worried about rising inventory levels, the Federation of Automobile Dealers Association (FADA) is planning to hold meetings with the Society of Indian Automobile Manufactures (SIAM) to bring down the stockpile.

The association also plans to speak to the financiers of auto dealers in a bid to find options that will help bring down inventories swiftly.

businessline had earlier reported that passenger vehicle inventory touched up to 60 days in May.

“We are cautious about the inventory levels because anything above 30 days starts hitting the dealerships. We follow a cycle where the dealer takes funds from banks, which are paid back with interest in 60 days. But the Original Equipment Manufacturers (OEM) are increasing this period from 60 to 90 days. While the dealers are getting one month extra, this allows the OEMs to dump more stocks at the dealership, which is a worry for us,” said Manish Raj Singhania, President of FADA.

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Last year, the inventory had gone up to 65 days; if the inventory keeps on going, it is a big worry for dealerships. This comes even as passenger vehicle retail sales witnessed a 9.48 per cent month-on-month decline with a one per cent year-on-year dip in May.

“Last year we collaborated with SIAM, and we were able to bring down inventory, and the market supported well. We are already at the peak; if it increases further in June, we will approach SIAM. We do not want to go back to inventory levels that were touched in 2018-2019. We need to discuss this openly with financiers,” Singhania said.

Talking on the impact on demand at the entry-level segment, FADA urged the new government to reduce GST, “The entry-level segment is not going well; the GST is 28 per cent on entry-level passenger cars or two-wheelers. People have to move from point A to point B. We have made a representation for the reduction to GST. We also want continuity of FAME 3 as electric vehicles are doing well and have an interim package till July 31,” he added.