Car sales in India have seen a sharp downturn this Diwali season, leading to a significant inventory buildup valued at around Rs 79,000 crore ($9.5 billion). Dealers are currently holding 7.9 lakh unsold vehicles, equating to an 80-85 day stockpile, the highest in recent years, according to the Federation of Automobile Dealers Associations (FADA). The causes of this situation are layered: car sales declined by 18.8% year-on-year, and supply chain dynamics saw manufacturers dispatching vehicles in anticipation of a festive season boost that has not materialised. Heavy rains during monsoon and an unusually hot summer earlier in the year are also seen as key deterrents that prompted many buyers to defer their purchases.
Additionally, consumer interest in new models like the Maruti Suzuki Fronx and Tata Curvv has somewhat shielded these vehicles from the demand lull. Top brands, including Maruti Suzuki and Hyundai, face the largest unsold inventories, with other manufacturers such as Nissan and Citroen also impacted. The current high stock levels have led FADA to call for immediate corrective actions from carmakers, as prolonged inventory holds could lead to significant financial stress on dealers. Despite extensive promotional offers and discounts, these incentives have not been sufficient to spur consumer demand at expected levels.
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Interestingly, the slowdown is not limited to budget models but extends to mid-range vehicles in the ₹10-25 lakh price bracket, which had previously been a strong growth segment post-pandemic. Analysts also highlight that buyers’ interest in upcoming models, combined with the continued presence of large discount offers, may be encouraging some to hold off on purchasing. There is cautious optimism that demand could see a modest recovery as Diwali progresses, although FADA and market experts remain concerned about the broader economic impact if sales continue to lag.
