SUV Price War Hits India Amid Record-High Inventory Levels

The Indian automobile industry is witnessing an unprecedented price war as demand for SUVs plummets, despite significant discounts. This has resulted in an inventory build-up of more than two months, with unsold stock valued at Rs 70,000 crore and over 700,000 cars languishing in stockyards. Vinkesh Gulati, chairman of the Federation of Automobile Dealers Associations (FADA), highlighted that June, a typically slow month for auto sales, is now burdened with festive-season level stocking.

FADA Chairman Manish Raj Singhania echoed this sentiment, noting that inventory levels have reached an all-time high of 62 to 67 days. Despite better product availability and substantial discounts, market sentiment remains weak, with low customer inquiries and delayed purchase decisions reported by dealers.

In response, a price reduction was inevitable, further accelerated by Uttar Pradesh’s road tax waiver on strong and plug-in hybrid cars. Tata Motors recently slashed the starting prices of its Harrier and Safari SUVs to Rs 14.99 lakh and Rs 15.49 lakh, respectively. The Nexon EV variant saw a Rs 1.3 lakh price cut, and the Punch EV is now cheaper by Rs 30,000. Mahindra & Mahindra Ltd. (M&M) also reduced prices for the top-end variants of the XUV 7OO, with the AXL variants now priced below Rs 20 lakh, though still higher than competitors from Tata Motors, Maruti Suzuki, and Toyota Kirloskar Motor India Pvt. Ltd.

Gulati pointed out Mahindra’s unique predicament, where the AX7 variants remain unsold while the mid-spec AX5 is in short supply, necessitating a revised production strategy to address the demand-supply mismatch. This issue is pervasive across the industry, with OEMs continuing to produce more cars despite dwindling sales. In June, wholesales rose by 1-2%, but retail auto sales dropped by 7-8%, according to FADA data.

Singhania emphasized the need for carmakers to exercise caution with the festive season still some time away. Effective inventory management strategies are crucial to mitigate the financial strain of high-interest costs. FADA strongly urges PV OEMs to implement prudent inventory control and engage proactively with the market to address this ongoing challenge.

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