Festive Surge Key To Drive Down Elevated PV Inventory: Icra

Led by steady production by the automobile manufacturers, the wholesale volumes remained stable in the first five months of the current financial year (5M FY25). A recent report on the passenger vehicles (PV) by Icra stated that the festive season surge is expected to drive down the elevated inventory in the segment.

The domestic PV market is estimated to record modest growth of around 3 to 6 per cent in FY25, on an all-time high base of 4.2 million units in the previous financial year. However, even though demand drivers remain supportive, the volume growth for the segment is expected to moderate due to the waning pen-up replacement demand and heightened inventory across dealerships, as per the report.

Drive by the stable demand and the discounts being offered by the original equipment manufacturers (OEMs), retail sales remain steady. However, despite heavy discounts from OEMs, the inventory at dealer levels rose to an all-time high of 70-75 days at August-end, as per Icra who expects the upcoming festival period to be critical as far as the liquidation of inventory is concerned.

Led by a series of new model introductions and a shift in consumer preferences, the utility vehicles (UV) segment is consistently expanding its share in the overall industry sales.

As far as the capital expenditure is concerned, the capex outlay for OEMs has been projected to remain on the higher side at Rs 250 to Rs 300 billion per annum over the next few fiscals, as per the Icra report. This is being driven towards new product development, enhancement of capabilities, platforms for electric vehicles by the OEMs.

Aided by improved profitability, low leverage, healthy liquidity along with strong parentage, Icra has stated that the credit profile of PV OEMs is expected to remain healthy. The OEMs are expected to maintain healthy margins due to softening commodity prices along with healthy operating leverage.