(This story originally appeared in on Dec 22, 2020)

Chennai: A reduced inventory with car dealers due to maintenance shutdowns by auto companies has resulted in little or no discounts this December. Traditionally, December is one of the best months for picking up a bargain. However, this year, incentives are down 67% in SUVs, 61% in sedans and 28% in hatchbacks. The only segment where they are up are MPVs, where incentive count increased by 11%, data from Jato, a firm that tracks auto sector prices, showed. Average SUV discounts and incentives have crashed from Rs 57,569 in December 2019 to Rs 19,075 in December 2020, Jato data showed. In sedans, the average benefit package is down from Rs 53,154 to Rs 20,546, while in hatchbacks it is down from Rs 31,840 to Rs 22,906.

Dealers say the pick in festival retail means the stock pipeline is not overloaded and many manufacturers are still struggling to hit peak capacity. “Most OEMs (original equipment manufacturers) have gone for maintenance shutdowns this month for inventory correction after the festival season. While some inventory build-up has happened after the festival season, it is definitely not as high as it used to be so there are supply-side constraints,” said Nikunj Sanghi of JS Fourwheel Motor, a Mahindra dealership. Inventory levels are the lowest for in-demand compact SUVs followed by sedans and hatchbacks, he added. According to dealer sources, December inventory levels typically range from 4-6 weeks. The slowdown prompted a sharp stock correction in December 2019 but even then inventory level at dealerships was between 25 and 35 days. Currently, it is less than 3 weeks. “For 2-3 months, our retail sales have been up to 25% higher than wholesale, which has led to dealer stocks being much lighter this December,” said Naveen Soni, SVP, sales and services, Toyota Kirloskar Motor. As a result, the company has not rolled out its usual ‘Remember December’ sales promotion scheme to liquidate year-end stock.

The other factor that is compounding the supply crunch is the low availability of diesel models. “There is a definite demand supply mismatch because in passenger vehicles, most of the diesel models are not available. The festive season saw better passenger vehicle sales as compared to last year. The year-end discounts are always based on availability of stocks, which are unusually low. In fact, dealers are losing sales because passenger vehicles are seeing retail demand in December too,” said Vinkesh Gulati, president, Federation of Automobile Dealers Associations (FADA). The reason for the diesel skew is a parts supply issue. “Diesel components have a limited number of vendors and the biggest among them is Bosch, which has production constraints because of the second round of lockdown in Europe, where some of their manufacturing units are located,” said Sanghi.The upshot of all this is that dealers are not being able to service the backorders for models, which are in high demand. “Manufacturers don’t have stocks and dealers are carrying very little stock. There are back orders but for want of vehicles dealerships have not been able to retail,” said a Bengaluru-based Honda dealer.

Already companies like Maruti, Honda, Mahindra and BMW have announced price hikes in January 2021, citing rise in raw material costs.

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