Two Wheeler Dealers are Facing Highest Level of Inventory in Two Years

According to news reported by livemint.com, two wheeler dealers across the country facing the situation of heavy inventory pile up due to sluggish demand from past few months. Although, two wheeler companies are dispatching more units and showing positive growth in their monthly sales number, the retail sales is actually in negative from past couple of months, specially for motorcycle segment. Due to the slowdown in demand, dealers have highest level of inventory in the past two years.

The inventory level is so high that some of the dealers do not have space to park the two wheelers. The reason for the stock pile up is because companies are continuously increasing production in spite of slowdown in sales at retail level. For example Hero Motocorp which is continuously dispatching more than 5 lakhs units and Honda Motor scooters & India ltd are continuously increasing capacity in spite of slowdown in sales at retail level. The inventory level is highest among Hero Motocorp and HMSI.  It is to be noted that companies sales account on the basis of vehicle dispatched to dealer, while retail sales is the sales which is made by dealers to customer.

Hero Motocorp and HMSI are reporting double digit growth in their sales number; however Bajaj Auto and TVS Motors are reporting flat sales. This is because Bajaj Auto and TVS Motors are producing as per the retail demand their by keeping inventory level in check. Further, Bajaj Auto produces as per the concept of production to chase demand which is widely acceptable and profitable too. Inventory level of these two manufacturers is low compared to Hero Motocorp and HMSI.

K Srinivas, president, motorcycles, Bajaj Auto, said “Retail sales have been slowing since October but Bajaj has managed to keep inventory in check and has been aligning despatches as per demand. If all the manufacturers had been billing as per actual sales, the sales would have been in the negative terrain during the last two months.”

The retail sale is dampening due to high petrol prices and softening rural demand. Further, last two years industry has shown growth of 18-20% which is expected to come down due to higher base of previous year. It is expected the growth in two wheeler industry may come down to single digit in upcoming days