As per automobile industry estimates, the unsold stock of cars touched around 4,21,000 units by end of August as compared to 4,10,000 units in end July and about 3,00,000 units at the start of the fiscal year. Mobile phone tracker Counterpoint Research has estimated channel inventory for smartphones is at about ten weeks in end August as compared to the usual 4-5 weeks.
“There will be aggressive offers by the brands during the festive season as it is a crucial period to drive sales with the one month alone contributing over 20% of annual sales for most brands,” said Counterpoint’s director for research Tarun Pathak.
The festive season, which starts with Onam and ends with Diwali covering Navratri, Durga Puja and Dussehra, is the largest consumption period in India accounting for 20-30% of annual sales for most categories.
An executive with a large e-commerce platform said the sellers are negotiating with the brands for higher discounts and also launch a large portfolio of exclusive models. He said the focus is on clearing up inventory so offers will be lucrative this festive season coupled with additional bank discounts.
Flipkart’s Big Billion Days and Amazon’s Great Indian Festival sales are expected to begin a week before Navratri around September 25-26. An Amazon India spokesperson said it expects this festive season to be its biggest ever shopping event in India. Flipkart did not respond for comments.
Automakers have already started calibrating production to rationalise stocks at dealers, with wholesale volumes falling for two straight months – by 2.5% in July and by up to 3% in August. The industry is gearing up to offer the highest discount of the year during the festive season.
Nikunj Sanghi, past president at Federation of Automobile Dealers Association said, “Discounts are high across segments. SUVs are showing some growth but they account for about 60% of sales in the market. But entry-level cars, sedans, vans are under pressure. So inventory has been piling up.” Dealers peg stock levels higher at over 7,00,000 units.
Sanghi said the festive season this year should be better than last year because good monsoons tend to have a positive rub-off. “But even then given this high level of inventory, it is unlikely it will help correct stocks at dealerships”, he said.
On Monday, India's largest car maker Maruti Suzuki further reduced prices of small cars Alto K10 and S-Presso.
Godrej Appliances business head Kamal Nandi said premium models continue to drive growth till now. “Though slightly better than last year, volume sales are still under pressure growing at single digit pace only,” he said.
Still, electronic and apparel companies are continuing with their festive production plan with focus on the premium models. Executives said they may cut production after Diwali after taking in account the unsold inventory in case there is a sudden pick-up in demand as happened this summer when supplies failed to meet demand for air-conditioners due to the heatwave.
Apparel company Arvind Fashions managing director Shailesh Chaturvedi told analysts last month that markets have been difficult for a couple of quarters and may remain subdued in the short run, though slightly better than they have been last year. “It's tough to predict (festive demand)…” he said.
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