Why 7.7 Lakh unit of cars worth of 77,800 crores are piled up in inventory across India?

Day - 1, Slowdown in Automobile Sector?

Since COVID-19, India has seen a major boom in the automobile sector with many new brands like KIA Motors, MG & now BYD entering the Indian market and gaining a significant market share. But, now suddenly, The automobile sector is seeing a decline of 9.26% which is a horrible number for many car manufacturers. As there is an increase of 7.4% year-on-year production, In 2020 24 Lakh units of cars were been sold and in 2023 that number rose to 41 Lakh, Forcing many Car companies to enter Indian Market.

But now that number has started seeing a decline as Production is going up but sales are significantly declining according to FADA PV sales fell by 3.46% M-o-M and 4.53% Y-o-Y in August. Even with the arrival of the festive season, the market remains under significant strain due to delayed customer purchases, poor consumer sentiment, and persistent heavy rains. Inventory levels have reached alarming levels of 77,800 crores.

The macro reasons for this decline have been given to Shraddh and Excessive rainfall from June to September but here the twist is all car manufacturers are forcing inventory on car dealers to show sales in their books without doing the actual sales resulting in a pile-up of 7.7 Lakh unit of cars standing in the inventory of dealerships across the India. Thank you!