Gold Silver Reports (GSR) – In an indication that vehicle sales may remain subdued in the upcoming festival season, Maruti Suzuki India ltd – the country’s largest passenger vehicle manufacturer- will not push inventories at dealerships.
This comes as most dealer partners are financially stressed and as the overall slowdown in the economy continues keep customers away from showrooms.
“There is no point pushing the stocks in the dealerships when there is no demand in the market. We will take a call regarding production after taking a look at the market situation. We have an inventory of a little vet a month with our dealers since retail sales is under pressure,” said R.S. Kalsi, senior executive director, sales and marketing, Maruti Suzuki India Ltd, in a conference call with analysts.
Manufacturers of four- and two-wheeler segment traditionally start pushing inventory to dealerships from August in anticipation of higher sales during the festival season which starts with Onam in August and ends with Diwali in November.
Vehicle manufacturers generate at least a third of their overall retail sales in a fiscal during the festival season.
The decision of not pushing stocks at dealerships is a prudent approach since most dealers have been struggling due to low retail sales and lack of credit availability from banks and other financial institutions like non-banking financial companies.
Typically companies maintain an inventory of 30 days, and during festival months it increases to 40-45 days. Last year, in the aftermath of the crisis in IL&FS, dealerships were left saddled with high inventory at the time when credit availability had dried up as sales during Navratri and Diwali were lower than expected.
Most manufactures then had to offer higher discounts to clear stocks and undertake double-digit production cut to align wholesales with retail demand.
Maruti Suzuki has cut production over the past five consecutive months. Hence, this year the company has taken cautious approach on pushing inventory at dealers before the festival season.
The company on Friday reported its sharpest fall in net profit since the fourth quarter of FY14, in a fresh sign of a general slowdown in the overall economy.
Total passenger vehicle sales in the domestic market in the April-June quarter witnessed its sharpest decline since the third quarter of 2000-01.