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Auto off the pace: Number of unsold cars soars, new bookings decline

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Inventory of unsold cars with dealers has touched a four-year high and pace of fresh bookings has started to slow down, signaling an easing of demand. Most carmakers maintain that the inventory levels are reasonable and not an area of concern as of now. Unsold stock in car dealer network is likely to reach around 300,000 units (worth $2.5 billion) by the end of March 2023 – the highest since September 2019, as per industry estimates.

Also, the rate of cancellation which used to be an average 10% of the total bookings till a few months back, has increased to 15-20%. There are an estimated 800,000 outstanding orders in the market. The softening trend comes as the pent-up demand that boosted sales in the last two years is dissipating with normalisation of production.

“The booking and enquiry trends have been robust in the last few quarters. Though now we do see some moderation due to the price hikes and the higher interest rates,” Shashank Srivastava, executive director, at Maruti Suzuki. The car market leader has been helped by the launch of two new SUVs – the Fronx and the Jimny, which have seen almost 40,000 bookings, he said. At Nomura’s Virtual India Corporate day on March 13, Tata Motors management stated the stress on demand has started to reflect in the passenger vehicle segment.

Auto Off the Pace: Number of Unsold Cars Soars, New Bookings Decline

Inventories have started to build at dealers’ end, the company’s management noted. Tata Motors expects to see some demand softening in the first half of the calendar year with a recovery expected in the second half. The system inventories in the market have been rising for the four months in a row after it touched their lowest around 100,000 units in December 2022.

According to estimates, the passenger car market is likely to dispatch 320,000 units in March. “Retail remains strong and fresh bookings and enquiries for a particular model and some specific variants are robust. But at an aggregate level, bookings are down by almost 15%,” said Vinkesh Gulati, chairman research and academy at Federation of Automobile Dealers Associations (FADA).

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