The lower demand for new cars will not only push other carmakers to cut down production but it could even lead to lucrative discounts and price cuts this festive season
Maruti Suzuki India Ltd (MSIL) is reportedly ‘adjusting’ the production owing to slower-than-expected demand for cars. Basically, sales of new cars has been lower than expected in the first quarter of the ongoing fiscal. This revelation of sorts comes from Suzuki Motor Corporation, who reported this adjustment to analysts. The information was then published by Business Standard.
Huge Inventory Pileup Due to Lower Demand
“We are currently adjusting production to reduce market stock and are closely monitoring demand trends. India will be in a critical period with the upcoming festival season; so we will closely monitor demand trends,” said Suzuki Motor Corporation. It must be noted that in the Q1 FY25, Maruti Suzuki produced 496,000 vehicles, which corresponds to a 7.4 percent increase over the same time in the previous financial year. Meanwhile, the sales grew by only 1.2 percent to 427,000. This has resulted into inventory pileup at the dealers. The slowdown in car sales across all carmakers, along with the inventory pileup, worries dealerships.
The Federation of Automobile Dealers Associations (FADA) has even written to the Society of Indian Automobile Manufacturers (SIAM) on two occasions to express these concerns. FADA says its dealer members hold a cumulative inventory of almost 730,000 unsold vehicles. This is said to be enough to cover over 2 months of sales. SIAM, on the other hand, has a more conservative number of around 400,000 units.
SMC reportedly told analysts, “The Indian market is usually a bit slower in the first quarter than the rest of the year, but this year (demand) has been slower than expected, especially due to the (Lok Sabha) election and adverse weather, including heavy rain and heat waves. As inventories have increased, we are making adjustments…This year, the festival season starts in late August, a little earlier than the previous year, and the higher the demand, the volume for the whole period becomes bigger.”
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Bigger Discounts for Indian Car Buyers?
The lower-than-anticipated-demand has led to a pretty large inventory pileup. While the below-average demand during the festive season could have eased the pressure on the dealerships a bit, we don’t see any early signs of recovery. If anything, sales of new cars could remain lower than the earlier estimates. To attract more buyers, dealerships as well as carmakers are likely to resort to lucrative discounts and price cuts. So, in all likelihood, the car buyers will reep benefits of this sales slowdown.
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