Explained: Why This Festive Season Is Critical For India's Auto Sector Recovery Amid Dealers' Rs 79,000 Crore Inventory Struggle

India’s automobile manufacturers are pinning their hopes on the festive season to revive sales after a sluggish market period.

Rising inventory levels, caused by weakening demand and signs of a market slowdown, have made car makers increasingly reliant on a seasonal increase in consumer spending to reduce stock and drive growth.

Leading car manufacturers have rolled out discounts as high as Rs 2 lakh on their popular models in recent months to increase sales, but this has not resulted in the expected uptick in sales.

The end of the Shraddh period on 2 October is being seen as a hopeful signal for the Indian car industry.

Shraddh, spanning 16 days this year from 17 September to 2 October, is traditionally seen as an inauspicious period in the Hindu calendar, during which new purchases are generally avoided.

Despite this, Indian automakers sold 3,53,990 units during Shraddh last year.

With the period now concluded and larger discounts in place, manufacturers are optimistic about improved sales in the coming weeks.

The onset of Onam and Ganesh Chaturthi, which traditionally marks the beginning of India's annual festive season, has not revived sales as expected.

However, with Navratri and Diwali falling in the same month, there remains optimism among carmakers for a significant uptick in sales.

According to the Federation of Automobile Dealers Associations' (FADA) latest retail sale data, the passenger vehicle segment continues to face challenges, with sales declining for the third consecutive month, contributing to record-high inventory levels across dealerships.

Passenger vehicle retail sales dropped to 275,681 units, registering an 18.81 per cent year-on-year decline from the 339,543 units sold in September last year.

September sales also fell below the 309,053 units recorded in August.

As sales continued to decline, dealers are now left with historically high inventory levels, averaging between 80-85 days, or roughly 790,000 vehicles, valued at Rs 79,000 crore, according to FADA.

"In the PV [Passenger Vehicle] category, sales plummeted by 10.8 per cent MoM and 18.81 per cent YoY, signalling an alarming trend of declining consumer demand and deteriorating market sentiment. Seasonal factors such as Shraddh and Pitrapaksha, coupled with heavy rainfall and a sluggish economy, have exacerbated the situation, leaving Dealers with historically high inventory levels of 80-85 days—equivalent to 7.9 lakh vehicles worth ₹79,000 crore," FADA president C S Vigneshwar said in a statement.

Given the critical festive season around the corner, FADA has urged the carmakers to take immediate corrective measures to avoid a financial setback.

FADA also called on the Reserve Bank of India to issue an advisory to banks, mandating stricter channel funding policies based only on dealer consent and on actual collateral, to prevent dealers from facing additional financial pressure due to unsold stock.

"This is the final opportunity for PV OEMs to recalibrate and support market recovery before it's too late!," the FADA chief said.

"While dealers and OEMs are betting on robust festive sales, especially in rural markets where positive cash flow and better agricultural conditions are expected to spur demand, the outcome remains uncertain. A successful October is essential to clear out excess inventory and set a positive growth trajectory for the remainder of FY25," the FADA chief added.

"With rising inquiries and optimistic dealer sentiments, the outlook leans towards optimism, but high stakes and dependency on October’s performance warrant a cautious approach. If the anticipated sales do not materialize, it could shift the outlook to pessimistic, putting dealers as well as OEMs in a difficult position heading into the new year," he added.

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