look news india
3,00,000 cars missing: India and its stories – always different. In the case of women and clothes disappearing from the country or things disappearing from homes and offices, now a strange case of disappearance of 3 lakh cars from the automobile sector of India has come to light. Both the organizations handling the market of the auto sector have fallen face to face in this matter and are blaming each other by showing books.
A conflict broke out between Fada and Shivam over the stock issue
India's car manufacturers and their dealers are battling each other over inventory levels amid sluggish demand. Now there is a dispute between FADA and Shivam over stock. The Federation of Automobile Dealers Association (FADA), an organization of auto dealers across the country, says that its members have stock equivalent to more than two months of sales, which means about 7,30,000 units are in stock. On the other hand, SIAM i.e. Car Manufacturers Association is arguing that they have about half of this suggested stock of 4,00,000-4,10,000 units.
Dealers currently have 55-60 days of inventory
Passenger vehicle sales in India, the world's third-largest auto market, fell for the first time in two years in July. Slow demand led to inventory build-up at dealerships and forced carmakers to reduce dispatches (counted as sales) across their channels. Sales fell 2.5 per cent year-on-year to 3,41,000 units in July. “Smoke is not possible without fire. Dealers currently have 55-60 days of inventory. The very high level of discounts being offered in the market is an indication that the stock has run out,” Crisil said in a note.
Inventory valued at around Rs. 73,000 crore
FADA President Manish Raj Singhania wrote in a letter that 'We have applied to OEMs to offer more attractive schemes to match supply with demand so as to help dealers reduce inventory and bring down inventory to 30 days. According to us, the inventory in sales channels on July 31 was 67-72 days or 7,30,000 units. With an average unit selling price of Rs. 10 lakh, the value of this inventory is around Rs. 73,000 crore.
According to dealers, Maruti Suzuki has 37-38 days of stock, followed by Tata Motors (35-40), Mahindra & Mahindra (35) and Hyundai Motor (30-32).
FADA expressed displeasure over imposing stock on dealers
FADA has expressed its displeasure by writing to the Society of Indian Automobile Manufacturers (SIAM) twice in less than two months against imposing stock on dealers. SIAM President Vinod Agarwal said that when dealers are raising concerns, there should be direct communication with the companies. This is a matter between the dealers and the manufacturers who have excess inventory. If FADA wants to intervene in this matter, it should write to the CEO of the auto company instead of writing to SIAM.
Aggarwal said that it is in the interest of car companies to keep their dealers happy. There is no dispute that if the dealers fail, the manufacturers will suffer losses, but FADA is blowing the whole issue out of proportion.
The dealer lobby said vehicle manufacturers need to make major cuts in dispatches in response to weak demand. FADA said in a fresh second letter to SIAM that despite concerns over inventory build-up in a letter sent in the first week of July, the stockpile has increased from 90 days in June to 70 days in July.
On the other hand, automakers are alleging that dealerships are exaggerating inventory concerns. An official of Maruti Suzuki India, the country's largest carmaker, said that the stock of our network is close to 38 days, which is not very high. It is acceptable that some dealers have more stock.
Why the discrepancy?
Automakers said dealers survey the stock of a handful of dealers to arrive at an average estimate of inventory levels in the market, while carmakers use the chassis number or vehicle identification number (VIN), a unique code that identifies a motor vehicle.
“The method of accounting by dealers is non-scientific. A survey of the stock available with a few dealers gives an indication of the number for the entire industry. Auto companies record the inventory stock in the channel by accounting for each vehicle based on the chassis number. As per our estimate, the industry stock in the network is in the range of 4,00,000-4,05,000 units,” an official said.
FADA, on the other hand, rejected these arguments and said that dealers do not report inventory based on surveys. Singhania said, 'Stock data is based on hard data. We report the stock available in the channel based on wholesale data of vehicle manufacturers, registration data from the Vahan portal of the Ministry of Road, Transport and Highways, except retail sales in Telangana.
The conclusion of the allegations and counter-allegations of these two organizations has become necessary because there is a difference of not 5-10 thousand but 3 lakh vehicles in the system. If this inventory stock does not match, then many dealers and many companies can be affected. However, the biggest loss among all these is of the banks, because if the number of loans given by the banks keeps fluctuating?
A SIAM representative said the figure for loans given by banks and financial institutions to dealers to hold inventory also added that the finance figure does not match the amount of stock in the channel they were debating.
Banks have given a total loan of Rs. 42,000-45,000 crore for inventory funding. Even considering some institutional selling, there is actually a huge difference between the claimed Rs. 73,000 crore stock level and inventory funding. Then the question arises that if there is stock then where did the remaining loan of Rs. 28,000 crore come from to carry the stock?
