India’s automobile sector is currently grappling with a significant mismatch between factory dispatches and actual retail demand. Car dealerships across the country are burdened with unsold inventory valued at an unprecedented ₹52,000 crore — the highest ever recorded in value terms. Despite relatively steady retail demand over the past year, manufacturers have continued to push vehicle stock into the market, further aggravating the situation. www.moneycontrol.com
As of May 2025, vehicle inventory has surged to approximately 4.4 lakh units, representing 34–38 days of stock. While this is slightly lower than the 40–45 days recorded ahead of the Diwali festival in 2024, the overall value has escalated due to rising vehicle prices and accumulated inventory over time. According to the Federation of Automobile Dealers Associations (FADA), the situation is even more severe, with inventory levels estimated at 52–53 days.
CS Vigneshwar, President of FADA, voiced his concerns over the growing working capital pressure faced by dealerships. “We have been consistently informing manufacturers about how serious the situation is. While some have taken corrective steps and reduced dispatches, others have yet to respond,” he said.
After a record-breaking start to 2025, manufacturers have begun to scale back dispatches to dealers. In May, wholesale dispatches stood at approximately 3.51 lakh units, reflecting only marginal year-on-year growth and marking the lowest monthly volume recorded so far this calendar year. In contrast, retail sales fell behind at 3.02 lakh units, representing a 3.14% decline compared to the same period last year.
The prolonged slowdown in demand has led to vehicles remaining unsold at dealerships for over 50 days — well above the industry norm of 21 days — a trend that has persisted for the past 14 months. Dealers across various regions have raised red flags about the rising inventory levels and their resulting financial strain. However, brands like Hyundai and Maruti Suzuki have managed to maintain their inventory positions at healthy levels.
Tarun Garg, Chief Operating Officer at Hyundai, stated that the company is maintaining an inventory level of four weeks across its dealership network, which has remained consistent over the past twelve months. Partho Banerjee, Head of Sales and Marketing at Maruti Suzuki, reported that their current inventory stands at approximately 35 days.
Despite the overall slowdown, certain models continue to witness strong demand. These include the Maruti Brezza and Ertiga, as well as Mahindra’s Thar, Thar ROXX, and Scorpio-N. According to Nomura, specific variants and color options of Toyota’s Hyryder and Innova Hycross are also facing waitlists ranging from four to ten weeks.
Tarun Garg Acknowleged that domestic market conditions remain challenging. However he expressed cautions optimism ,citing strong fundamentals and recent macroeconomic measures. He belives that the Reserve Bank of India’s recent interest rate cuts and income tax relief measures could revive consumer sentiment. “ Lower Loan rates and CRR ( Cash Reserve Ratio ) cut will also help to reduce inventory cost for dealers.” He added.
However, analysts caution that the impact of these policy measures may only become apparent in the second half of the financial year. Kapil Singh of Nomura Global Market Research noted in a recent report, “We expect factors such as lower income taxes and reduced interest rates to support demand, but the positive effects are likely to be visible only in the second half of calendar year 2025.”
An additional concern facing the automobile industry is China’s recent export restrictions on rare-earth magnets, which are critical components for both electric vehicles and internal combustion engine cars. This decision could potentially disrupt production lines in the coming months
Despite these challenges, Nomura continues to maintain a 5% year-on-year growth forecast for India’s passenger vehicle segment in FY26, reflecting cautious optimism in the face of ongoing breeze direction.
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