August Auto Sales Review: FADA President On Rising Inventory, Festive Season & The Fame III Roll Out
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00:00The one thing that I want to start with, Mr. Singhania, in this conversation, and welcome,
00:03great to speak with you on NDTV Profit, are the concerns that
00:09FADA has put out on inventory levels and cash flows.
00:15Yes, good morning, everyone. FDA has been raising the red flag in terms of inventory
00:22for the past few months. I think even though we are preparing for the festive season and
00:29the outlook looks decent for the festive season, the inventory level continues to increase on a
00:34month-to-month basis. The wholesales are always higher than the retails, and that is what is
00:42troubling the dealers quite a lot. I do hope the anticipation of the October month, wherein
00:53we have the Navratra as well as the Bauddhi festival falling in one single month, falls in
00:59place and we do have certain inventory corrections, or else dealers would be in a bad state
01:06holding heavy inventory after the festivals. Manish, the fact is that OEMs have been reducing
01:14their dispatches last two months to deal with this inventory level. They've done it in August,
01:18they've done it in July as well. Don't you think that will ease some pressure?
01:24While the OEMs talk about on-the-year YOY dispatches, but if you look at month-to-month
01:30dispatches compared to the retails, in fact, we have added 30,000 vehicles in stock
01:37additional in the month of July and August. So, comparison cannot be made on a YOY basis. It has
01:44to happen month-on-month and the wholesale has to align with the retails. Say, if a particular
01:50OEM is retailing 20,000 vehicles and for them the dispatches is 22,000 or 23,000 vehicles,
01:56obviously, it will add to the inventory. So, that is the situation. They need to
02:00understand, realize where they stand in the market and accordingly plan for dispatches.
02:07So, Mr. Singhania, what is noteworthy is that when we hear from CIM or we hear from OEMs,
02:14the picture is slightly different and when we're hearing from you, we're hearing what's
02:18happening on ground in that sense. Do you expect this inventory mismatch to ease because of festive
02:26season? Are you seeing enough initial inquiries? So, see, please understand when FADA quotes an
02:36inventory of say two-wheeler industry, we are putting an inventory of 15 to 20 days.
02:40Nobody questions that inventory or when we were putting an inventory of 40 days for passenger
02:46with car vehicles in the month of February, March, nobody questions this data. But as soon as the
02:51inventory level goes higher and we are putting this is the real situation of the industry,
02:56then why these questions arises, I fail to understand. We are tracking historical data
03:01in terms of Vahan Retails and Wholesales, which are declared by CIM itself and we have complete
03:06data on basis of data, we declare the inventory figures. So, I don't see there is any doubt or
03:12questions on the inventory. It is a problem with the industry, but the OEMs should understand and
03:18take action. If the health of the dealership is not good, obviously the dealership would be
03:23in bad shape. As for the upcoming festival season, we do expect a good festival. All the things are
03:30positive, except for the rainfalls that have been above normal by almost 16%. And if you see the
03:40rural two-wheeler sentiments, it has drastically affected the rural sentiments in there. And we
03:45are seeing a sales decline from the rural sector in terms of two-wheeler retails. So, that's a
03:54point that is worrying to us. For the month of September also, IMB has predicted above normal
04:00rainfall. All this will not be good for the cropping season. And hence, the rural economy,
04:06that is what is expected that additional retails will be coming from the rural sector this time.
04:10If the rural economy or rural sector gets affected, then the growth will be very difficult
04:16to come by. Mr. Singhania, I just want to understand, what is the current inventory
04:21levels you are holding for two-wheelers and for passenger vehicles?
04:25So, for passenger vehicles, it is 70 to 75 days and two-wheelers, it is 18 to 20 days.
04:31Okay. Two-wheeler dealers are in fact striving for stocks. They really want few OEM dealers.
04:37They just don't have adequate stock levels to go by and are not enough prepared for the
04:44festival season. Mr. Raja, it's also Samina joining in. There's so much of talk around
04:48the EV space. You want to tell our viewers, what are the current demand trends in the EV space?
04:54So, EV penetration, we did see some tick there. And two-wheeler has reached a penetration of
05:04almost 7% now after a long time. And we had some confusion regarding the EMVS extension
05:12that is now in place. And we are also expecting FAME 3 rolling out. Passenger car penetration
05:21continues to hold around 2%, so not much of action there. But the good thing is that
05:28two-wheeler EV has started seeing some touch. Also, have you seen any impact on sales as the
05:36government plans to roll out new emission norms? Has there been any significant noticeable impact?
05:44Come again? I said, with the government looking to roll out new emission norms,
05:47have you seen any impact on sales already? Not now. Right now, no.
05:53Are you anticipating that there could be an impact, a material impact?
05:58New emission norms, you are talking in terms of BS7?
06:00Yes. So, that's a long way to go right now.
06:05Considering BS7 emission norms, the details are not getting affected or impacted, right?
06:12Mr. Singhania, you have also said in your note today, when you put the numbers out
06:17this morning, that FADA is urging banks and NBFCs to control funding to dealers
06:22with excessive inventory. Can you tell us why? Can you explain this, please?
06:28See, whenever a dealer goes bust, the biggest loser is obviously the dealership itself.
06:35And the financing, whichever bank or NBFC, they have invested a hell of a lot of money in the
06:42dealership business, they also tend to lose. Obviously, the OEM also tend to lose because
06:46setting up a new dealership, it's a long-term process. So, nobody wants a dealership going bust
06:52because of financial constraints. And due to wholesale pressure, there are sometimes
07:01pressure from the OEM to build or extend funding facility to the dealership so that the building
07:08can happen more. What we'll be writing to banks and NBFCs is that it should be the choice of the
07:14dealer to disburse the fund or extend the fund for the festive season. They should not get
07:20pressurized by the OEM and build extra or extend the limits of credit facilities to the dealer so
07:27that the dealer can... Additionally, already the dealer is at a very high rate of stock.
07:33Additional stock will only add with the inventory. So, we want financial prudence there from the
07:40banks, from the NBFCs, as well as dealership. And we are also asking OEMs to have financial
07:46prudence so that dealer remains profitable even after the season.
07:51Last point, Mr. Singhania. Now, you've talked about the festive season. You're hoping things
07:55pick up. Are there big discounts on the horizon? What are you hearing from OEMs?
08:01So, yes. See, whenever inventories are there, OEMs are also worried about the high inventory
08:09levels at the dealership. We are seeing a lot of price cuts happening in various
08:14models and a lot of OEMs have come forward with price cuts. Discounts have increased
08:19to an all-time high. And I mean, it's a very attractive time for consumers to buy.
08:26But still, I think somewhere looking at to the retail figures, consumer...
08:30You're saying discounts have increased to all-time high. Which companies are offering which discounts?
08:35So, I don't want to be specific, but definitely,
08:39average discount is now hovering around 10% of the vehicle value.
08:43Thank you so much. That is the FADA President, Manishat Singhania,
08:48talking about the numbers for August.