Auto industry gears up for a grand festive season as supply bottleneck clears


New Delhi: Consumers waiting to drive home their dream vehicles may get some reprieve from long waiting period in the coming months with automakers looking at scaling up production as supply chain bottlenecks have started clearing.

The demand-supply mismatch in the industry, which has hit most companies hard, due to the global shortage of semiconductors is likely to ease out in the next six months, reducing the waiting period significantly, industry executives said.

“Production has already moved up meaningfully in recent months, so the deliveries are likely to be healthy in the festive season,” said Tarun Garg, director (sales, marketing and service) at Hyundai Motor India.

“Going ahead, it will be all about ensuring flexible management, be it on production front or the sales point to deal with any deviations,” he said at the fourth Auto Retail Conclave of Federation of Automobile Dealers’ Association (FADA) on Tuesday. Industry estimates put pending bookings at about 750,000 units at present.

With the improved supplies and ramped up production, inventory at dealerships is fast moving towards a normal level just ahead of the key festive period of Dussehra and Diwali.

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Inventory in the channel stand at about 30-35 days for passenger vehicles, up from about 15-20 days at the beginning of the year.

Almost a million vehicles are expected to be dispatched in the fiscal second quarter ending this month with the demand momentum continuing to remain robust, industry insiders said.

Stakeholders are optimistic of demand momentum remaining strong in the months ahead on the back of healthy macroeconomics parameters.

“Festive sales should be good this year, if automakers can produce vehicles in line with underlying customer demand pattern,” said Shashank Srivastava, senior executive director (marketing and sales) at Maruti Suzuki.

He said the country’s largest carmaker is utilising 94-95% of its domestic capacity at present as most supply side bottlenecks have been cleared.

Ashutosh Varma, national sales head at Hero MotoCorp, said demand outlook has improved in the two-wheeler segment, too, this financial year. “If you look at the way demand has manifested, last quarter was big in rural markets due to the marriage season,” he said. “Now with schools and colleges opening up after a gap of two years, demand is increasing in urban markets.”

But while the mood in the market remains optimistic, automobile dealers remain cautious and have sought protection from loss in case of sudden exits of foreign automakers from the country.

“We have had few exits of OEMs such as General Motors and Ford from India, and dealers were in a position to lose a lot of money,” said Manish Raj Singhania, president of FADA. “Dealers are stuck with vehicle stocks, spare parts stocks. We take term loans, we take funding from the bank, all that gets stuck up (if) it’s a sudden exit.”

Dealers have also sought an equitable say in the running of the business through the launch of a model dealer agreement. “If there is any kind of issue in the industry or in the business, both should be able to get adequate compensation or adequate settlement, it should not be one sided,” Singhania said.

The model dealer agreement is intended to provide a level-playing field to both the dealer partner and OEMs in addition to giving them a significant amount of confidence towards a long-term association and an exciting future, FADA said.


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