India’s Car Dealerships Facing Record Inventory as Sales Momentum Slows

India’s passenger vehicle sector is dealing with a growing inventory pile-up, with unsold vehicles at dealerships now valued at a record ₹51,000–52,000 crore. The gap between wholesale dispatches and actual retail demand is widening, putting pressure on dealerships already managing tight margins and cash flow.

Current estimates suggest stock levels are between 34 to 38 days — translating to around 4.4 lakh units — as of May 2025. While that’s below last festive season’s peak of 40–45 days, the inventory value is much higher due to rising vehicle prices and an ongoing build-up. The Federation of Automobile Dealers Associations (FADA) estimates inventory to be even higher, at around 52 to 53 days, further highlighting dealership concerns.

Retail sales in May dropped 3.14% year-on-year to 3,02,214 units — the lowest monthly figure of 2025 so far and the weakest growth in eight months. Cars are now sitting unsold in stockyards for over 50 days — more than double the ideal 21-day cycle — a trend that’s been consistent for over a year.

Despite this, automakers appear unfazed. Hyundai Motor India claims its network is operating within normal inventory ranges of four weeks. Maruti Suzuki also reports improved inventory management this year, maintaining a stock of roughly 35 days.

Some models still enjoy strong demand. Select variants of Maruti’s Brezza and Ertiga, Mahindra’s Thar, Thar Roxx, and Scorpio-N, as well as Toyota’s Hyryder and HyCross, continue to have waiting periods ranging from 4 to 10 weeks — especially for specific colours or trims.

Luxury Segment Feels the Heat

Luxury car sales, on the other hand, are showing a noticeable slowdown — driven not just by broader market sentiment, but also by brand-specific issues. A lack of compelling new products, limited local adaptation, and excessive waiting periods — sometimes exceeding six months — are causing customer fatigue. Brands that once thrived on exclusivity are now struggling with overpromising and underdelivering.

Consumers in this segment are more informed and expect faster delivery and better tech — something many luxury OEMs have failed to adapt to in the Indian context. As a result, many potential buyers are holding back, waiting for the next big launch or even switching to premium offerings from mainstream brands that offer quicker availability.

Outlook: Hope in the Second Half

Hyundai’s COO Tarun Garg acknowledged the domestic headwinds but remains cautiously optimistic. With recent interest rate cuts and income tax relief measures in place, the second half of FY25 could see improved affordability and financing support, easing the pressure on both buyers and dealers.

Analysts agree that these macroeconomic factors might help revive the market, though any real impact will likely only show up later this year. Adding to the uncertainty is China’s export restriction on rare earth magnets — a key component in both electric and conventional vehicles — which could disrupt supply chains further.

Still, Nomura remains positive on the long-term outlook, forecasting a 5% growth in India’s passenger vehicle market for FY26, driven by gradual recovery, supportive policies, and better financial liquidity.

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