FADA Encourages OEMs to provide additional benefits to dealers

As a result, OEMs must add some scheme to liquidate a vehicle that has been in dealer inventory for around 60 days. Customers anticipate steep discounts on such old stock, which cannot be met just through the dealer's margin on a vehicle.

The Federation of Automobile Dealers Associations of India (FADA), released its Dealer Satisfaction Study (DSS) 2023 and has asked OEMs to provide more incentives to assist dealers in liquidating deadstock.

A vehicle that has been in a dealership's inventory for more than 60 days is termed deadstock. As a result, it limits the dealer's ability to use working capital to acquire and sell other products. In case, a vehicle sits in the stockyard for more than 30 days, a dealer starts losing money on it.

As a result, OEMs must add some scheme to liquidate a vehicle that has been in dealer inventory for around 60 days. Customers anticipate steep discounts on such old stock, which cannot be met just through the dealer's margin on a vehicle.

The vehicle as well as the working capital gets stuck, and that is where dealers need some support from OEMs, across categories like cars, two-wheelers, three-wheelers, or commercial vehicles. Another broader issue that dealers face is high amounts of unsold spare parts inventory, which contributes to a working capital bottleneck.

Collaboration and mutual assistance are important in the automotive sector. The FADA petition emphasizes the necessity of maintaining positive ties between dealers and OEMs. OEMs may demonstrate their commitment to the success of their partners while also contributing to the industry's general resiliency by providing additional benefits for deadstock liquidation.

Upcoming Festive Season

The FADA president also claimed that most vehicle dealers around the country are optimistic about the upcoming holiday season, which promises robust client demand due to the market's favourable outlook.

Dealers have been filling up warehouses in preparation for the predicted high demand for new vehicles during the forthcoming Diwali and Navratra festivals, which is reflected in the drastically rising wholesale numbers from vehicle manufacturers.

In early October, India Auto Inc. is expected to release very strong September 2023 wholesale and retail results.

Also Read: Tata Motors Announces 3% Price Hike for Commercial Vehicles from October Onwards

Capital blocked in Spare Parts

As per the senior officials of FADA, Nearly 95% of OEMs do not have a policy to buy back spare parts. While OEMs try to map spare parts requirements based on market demand, sometimes spares are randomly billed and a lot of capital is blocked in spares.

If a part does not sell for 12 months, an OEM should buy it back from a dealer at a negotiated price and transfer it to another outlet in a different geography where the demand for that part is much higher in comparison.

Working capital is a significant constraint for automobile dealers, and it becomes trapped in these areas. While technology will assist dealerships in better monitoring spare parts, if the part is not moving, the OEM should have a stated buyback policy.

FADA's request that OEMs provide additional advantages for deadstock disposal demonstrates the automobile industry's resilience and compassion. Dealers and OEMs can negotiate the ever-changing terrain and emerge stronger by working together and supporting one another, paving the way for a brighter future for the entire automotive ecosystem.