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Unsold auto inventories pile up

autos Updated: Jun 19, 2012 22:49 IST
Sumant Banerji

Straddled with an unsold stock of over 300,000 cars, the domestic automotive industry is witnessing a squeeze not seen since 2008-09 as customers stay away from showrooms battered by high interest rates, inflation and spiralling fuel prices. Carmakers are forced to dole out heavy discounts particularly on out-of-favour petrol models while cutting production to contain the damage.

While petrol cars lead the pile up with around 200,000 units of unsold stock, even diesel cars are finding fewer takers in the first signs that it may be the end of the purple patch. Talk of the double-digit growth of 11-13% as projected at the start of the fiscal now resembles a dream.

“Mere inventory does not project the real picture but it is true that times are very tough for the industry,” said Arvind Saxena, director, marekting and sales, Hyundai Motor India Ltd. “There is no hope of a turnaround atleast in the next two-three months till the time festive season kicks in. Clocking a double-digit growth is very unlikely and would be possible only if festive months are exceptionally good.”

Traditionally, the industry maintains an inventory of 20 days at its dealerships but the figure has ballooned in some cases to over 50 days with manufacturers struggling in the wake of bearish consumer sentiment. Clearing this stock would mean more discounts and freebies.

"High inventory is always bad news for business and is always followed by high discounts and clearance sale," said a senior industry official. "Already discounts are high across some segments. Companies would be forced to dig even deeper."