Indian car dealers worry about offering deeper discounts as sales slow By Reuters

By Nandan Mandayam

BENGALURU (Reuters) – Hampered by leftover inventories and uncertain about consumer spending, Indian car dealers are worried they need to cut more to boost demand in the upcoming festive season, a dealer body official said on Thursday.

The double whammy of higher inventory costs and higher discounts are a nightmare for car dealers as it directly impacts their profit margins.

“With our inventory already at record levels, buyers are expecting even higher discounts,” said Manish Raj Singhania, who is the president of the Federation of Automobile Dealers Associations.

The comments came after sales of unsold cars from the car market no. 3 in the world rose to a record 70-75 days in August, valued at 778 billion rupees ($9.27 billion). Discounts are also at their maximum.

Singhania hopes inventory levels will drop in October, during the Navratri and Deepavali festive seasons, where Indians typically tend to make big purchases.

Many buyers postponed their purchases until October in the hope of greater discounts, FADA noted, adding that the heatwaves in the summer months and the ensuing heavy rains in various parts of the country affected showroom visits and delayed purchase decisions.

Indeed, dealership car sales fell 4.5% in August, the third decline so far in the financial year that began in April.

The decline in car purchases by retail buyers contrasts with a rise in overall consumer spending, which hit a seven-quarter high in April-June.

Car sales are seen as a key indicator of private consumption in the country. India’s auto industry makes up 7% of the country’s GDP, according to government data.

While newly launched models, especially SUVs, continue to sell at a steady pace, dealers are unable to sell older models, including SUVs, Singhania said.

“Manufacturers must work to reduce sales to dealers and not charge more than retail sales,” he said.

($1 = 83.9640 INR)