sufiyankhan0714
KF Rookie
After months of record car sales, the sales for May are expected to report a moderate decline.
And believe it or not, a reason for the slowdown in sales is the rising summer temperature.
You’re thinking, “But what’s the heat got to do with car sales?” Right?
Heatwaves are making waves across the country. This has reduced the footfall at car dealers as consumers cancel their showroom visits and test drives. To motivate consumers, dealers are offering attractive discounts of 15-20% and home test drives as new cars from automakers are piling up their inventory.
India has been one of the fastest-growing automotive markets over the last three years as rising income has boosted car sales. Not only the volumes but also the value of the cars surged. Indians are buying higher-range SUVs instead of entry-level hatchbacks, increasing the average selling price (ASP) of passenger vehicles to ₹11 lakh from ₹8 lakh before the pandemic.
However, the number of passenger vehicle registrations is expected to fall by 5% in May as consumers are not willing to step out in this scorching heat to buy a car, as per media reports. While the heat was the major reason, the end of the wedding season and election-related uncertainties also pulled back demand.
But while demand was falling on the one hand, automakers maintained their supply momentum on the other, and car dealers aren’t too happy about it.
With high production comes high inventory for dealers
May–September is generally a slow season for car sales, and most automakers plan their production accordingly. However, the overall base sales surged post-pandemic, with the industry selling 350,000 units a month on average in FY24, compared to 281,000 units in FY19. Based on this, automakers dispatched an estimated 340,000-350,000 vehicles to dealers in May, up 4-4.5% from a year earlier.
On an average, dealers keep 14-21 days of inventory. But the mismatch in demand and supply may now leave car dealers with a record inventory of 400,000 vehicles by the end of May, equivalent to 45 days of sales. Taking an average selling price (ASP) of ₹11 lakh, this inventory is worth ₹44,000 crores!
And for those consumers who are ready to brave the heat, it could be a good bargain.
It’s raining offers for consumers
In a typical situation where supply overtakes demand, the waiting time reduces and dealers are more inclined to give discounts to consumers to sell off their inventory. Due to this, dealers may offer 15-20% more discounts and schemes in June than in May.
And believe it or not, a reason for the slowdown in sales is the rising summer temperature.
You’re thinking, “But what’s the heat got to do with car sales?” Right?
Heatwaves are making waves across the country. This has reduced the footfall at car dealers as consumers cancel their showroom visits and test drives. To motivate consumers, dealers are offering attractive discounts of 15-20% and home test drives as new cars from automakers are piling up their inventory.
India has been one of the fastest-growing automotive markets over the last three years as rising income has boosted car sales. Not only the volumes but also the value of the cars surged. Indians are buying higher-range SUVs instead of entry-level hatchbacks, increasing the average selling price (ASP) of passenger vehicles to ₹11 lakh from ₹8 lakh before the pandemic.
However, the number of passenger vehicle registrations is expected to fall by 5% in May as consumers are not willing to step out in this scorching heat to buy a car, as per media reports. While the heat was the major reason, the end of the wedding season and election-related uncertainties also pulled back demand.
But while demand was falling on the one hand, automakers maintained their supply momentum on the other, and car dealers aren’t too happy about it.
With high production comes high inventory for dealers
May–September is generally a slow season for car sales, and most automakers plan their production accordingly. However, the overall base sales surged post-pandemic, with the industry selling 350,000 units a month on average in FY24, compared to 281,000 units in FY19. Based on this, automakers dispatched an estimated 340,000-350,000 vehicles to dealers in May, up 4-4.5% from a year earlier.
On an average, dealers keep 14-21 days of inventory. But the mismatch in demand and supply may now leave car dealers with a record inventory of 400,000 vehicles by the end of May, equivalent to 45 days of sales. Taking an average selling price (ASP) of ₹11 lakh, this inventory is worth ₹44,000 crores!
And for those consumers who are ready to brave the heat, it could be a good bargain.
It’s raining offers for consumers
In a typical situation where supply overtakes demand, the waiting time reduces and dealers are more inclined to give discounts to consumers to sell off their inventory. Due to this, dealers may offer 15-20% more discounts and schemes in June than in May.
