Is festive sales bump a myth for cars?

NEW DELHI: The gap between wholesale dispatches by automakers and the number of vehicles actually sold by dealers in the run-up to Diwali has been widening steadily for five years, new data shows, exploding the myth that this year’s low sales are a one-off caused by rising crude prices and a liquidity crunch.

The data, published by the Society of Indian Automobile Manufacturers and Vahan, the vehicle registration website of the Union government, comes amid an outcry by dealers across the country about the substantial and continuous dumping of inventory by manufacturers even as retail sales decline.

The data indicates that the gap usually narrows after Diwali, in November and December, as manufacturers slow down production during the last month of the calendar year. The data, accessed by Mint, has allowed a comparison over a timeline because vehicle registration figures, previously held back by the centre, have now been released.

According to the data, during the two month period to Diwali in 2014 (August and September), actual registrations of vehicles at dealers were 67.9% and 61.7% of the total vehicles dispatched by manufacturers.

In 2015 the figure was 63.7% and 60.3% in September and October. In 2016, of the total wholesa- les only 64% and 55.2% were registered and in 2017 the difference stood at 57.7% and 54.6%. In 2018 the gap widened the most to 53.8% and 52.3% in the two months to Diwali. But when it comes to November and December, the gap narrows significantly to 90% or more.

The data indicates that automobile manufacturers may have failed to predict the extent of the impact of factors like crude price increases, hikes in vehicle loan rates and the stock market crash on auto sales and, as a result, continued to push inventories in expectation of healthy festive sales. According to the data, till October this year, vehicle registrations as a proportion of wholesale dispatches never crossed the 80% mark in any of the months. This was not the case the in the five years from 2014.

According to a senior industry executive, auto firms cannot be held responsible for the increasing inventory because production will be adjusted accordingly in the subsequent months if demand is lower than expected. “Piling up of inventories in the run-up to Diwali is not a very unusual situation since vehicle manufacturers expect almost a third of their sales during the festival period,” said the executive, requesting not to be named. He added that the liquidity crisis in recent months may have affected dealers’ ability to access loans in order to buy vehicles from auto companies.