Is fes­tive sales bump a myth for cars?

Hindustan Times (Noida) - - READ - Malya­ban Ghosh malya­[email protected]

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.

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