FADA Raises Concern Over High Inventory Levels, Plans Talks with SIAM

The Federation of Automobile Dealers Association (FADA) has expressed concerns over the rising inventory levels within the automobile sector, signaling a potential challenge for dealers across India. During the third edition of the Finance and Insurance Summit 2024, FADA President Manish Singhania highlighted the critical situation and announced plans to engage with the Society of Indian Automobile Manufacturers (SIAM) to address these concerns.

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Reflecting on the difficulties faced in 2018-19, when approximately 280 dealerships ceased operations, Singhania emphasized the importance of maintaining manageable inventory levels to prevent a recurrence of such a scenario. He pointed out that inventory periods extending beyond 30 days could significantly impact dealership operations, noting an unsettling trend where Original Equipment Manufacturers (OEMs) have begun extending repayment periods from 60 to 90 days. This practice, according to Singhania, burdens dealers with excess stock, complicating financial and operational planning.

Despite successful efforts last year to reduce inventory levels from a high of 65 days through collaboration with SIAM and market support, Singhania voiced apprehension about reaching and surpassing those levels again. The current inventory status is described as being at a peak, with further increases anticipated in June, prompting potential discussions with SIAM to seek solutions.

In addition to inventory concerns, Singhania outlined FADA's budget expectations from the new government. A key demand is the continuation of infrastructure development efforts. Singhania also addressed the stagnation in the entry-level vehicle segment over the past four years, contrasting it with robust sales in higher segments. He advocated for a reduction in the Goods and Services Tax (GST) on entry-level passenger cars and two-wheelers from the current rate of 28 percent to make vehicles more accessible to a broader segment of the population.

Furthermore, Singhania called for ongoing support for electric vehicles through the continuation of the FAME-3 policy and requested an interim package until July 31. He also urged finance and insurance companies to enhance their support for dealerships by providing training and upskilling opportunities for finance and insurance personnel, aiming to boost their effectiveness and contribute to overall dealership success.

This proactive stance by FADA underscores the critical challenges facing automobile dealerships in India today. By addressing these issues head-on with SIAM and seeking government intervention on policy matters, FADA aims to safeguard the interests of dealers and ensure sustainable growth in the sector.