Mahindra, Tata, Toyota have Started a PRICE WAR as Buyers are Done Overpaying !!
Summary
TLDRIndia's car dealerships are currently flooded with 7,30,000 unsold cars, valued at 73,000 crores, leading to a desperate situation where manufacturers are offering unprecedented discounts to clear inventory. With an average inventory period of 60-72 days, dealerships are struggling to sell vehicles and are urging car makers to reduce production. Discounts are soaring, with brands like Mahindra, MG, and Jeep offering discounts up to 17,00,000 rupees. This shift in market dynamics empowers customers, who are now in a position to negotiate better deals and expect significant discounts on high-end luxury cars.
Takeaways
- 🚗 India's car dealerships are currently facing a significant backlog with 7,30,000 unsold cars worth 73,000 crores.
- 📉 Car sales have seen a 2.5% decline year-on-year, with an increase in unsold inventory from 6.3 lakh cars in July to more in August.
- 📈 The Federation of Automobile Dealership Association (FADA) reports indicate a rise in the inventory period, signaling oversupply and potential discounts.
- 🏢 High inventory periods, such as the 55-60 days in 2018-19 and 100 days during COVID-19, have historically been challenging for the Indian car industry.
- 💹 Post-COVID, a surge in the stock market and real estate led to increased car demand, causing a shortage and price hikes by manufacturers.
- 📉 The average inventory period has risen to concerning levels, with some dealerships facing 100 days of unsold stock.
- 💸 The financial burden on dealerships is increasing due to longer inventory periods and high working capital finance rates.
- 🛍️ Major car manufacturers are offering substantial discounts to clear inventory, with some discounts reaching up to 17,00,000 rupees.
- 🔍 Customers are advised to shop around and negotiate for the best deals as the market dynamics have shifted in their favor.
- 🚀 The video predicts that the discounts will further increase, especially for mid-segment luxury cars, potentially offering significant savings for buyers.
Q & A
How many unsold cars are currently in India's dealership yards?
-There are 7,30,000 unsold cars in India's dealership yards.
What is the combined value of the unsold cars in dealership yards?
-The combined value of the unsold cars is 73,000 crores.
Why are car dealerships in India unable to sell all the cars in the next two months?
-Car dealerships are unable to sell all the cars in the next two months due to the overwhelming number of unsold vehicles and possibly due to economic factors affecting consumer purchasing power.
What actions have car makers taken in response to the high inventory?
-Car makers have started panicking and offering significant discounts on their cars to move the inventory.
What discounts are being offered by some car brands?
-Kyoto is offering a discount of 10,00,000 rupees, MG is offering 6,00,000 rupees, and Jeep is offering 17,00,000 rupees on their cars.
How has the Indian car industry's control shifted in the recent years?
-For the last three years, the control was with car makers and dealerships, but now it's shifting towards customers as discounts are being offered.
What does the inventory period metric indicate about the car industry?
-The inventory period metric indicates the health of the car industry by showing the balance between supply and demand, and the need for discounts.
What was the average inventory period for car dealerships in India in Feb 2020?
-In Feb 2020, the average inventory period was 100 days due to the COVID lockdowns.
Why was there a car shortage in India in Feb 2021?
-There was a car shortage in Feb 2021 due to reduced production during COVID and a global chip shortage affecting car manufacturing.
What is the current average inventory period for car dealerships in India?
-As of the information provided, the average inventory period is between 62-67 days, indicating an oversupply of cars.
How are car dealerships financially impacted by the high inventory?
-Car dealerships are financially impacted by having to pay interest on working capital for the unsold cars parked in their yards, which reduces their profit margins.
What advice is given to potential car buyers in the current market situation?
-Potential car buyers are advised to wait and shop around for the best discounts, as the market is currently favoring buyers with high discounts being offered.
Outlines
🚗 Overstock and Discounts in India's Car Industry
India's car dealerships are facing a massive overstock with 7,30,000 cars unsold, valued at 73,000 crores. This surplus is so significant that it's unlikely to be sold within two months, prompting car manufacturers to panic and offer substantial discounts. Brands like Kyoto, MG, and Jeep are slashing prices by up to 17,00,000 rupees to clear inventory. The video suggests that potential car buyers could greatly benefit from these discounts, as the industry shifts from seller-controlled to buyer-controlled. The script also discusses the inventory period metric, which indicates the health of the car industry; a period of 15 days signifies a shortage, while 50 days or more suggests an oversupply and the need for discounts. The situation is compared to previous years, highlighting how the COVID pandemic and chip shortage affected car production and sales, leading to the current overstock.
📉 Financial Strain on Car Dealerships
Car dealerships in India are under financial strain due to the high inventory period, which has increased to 60 days on average. This means dealerships must finance the cars for longer, incurring interest at rates between 12-24%. The script uses a Honda dealership as an example, explaining how the cost of financing can erode profit margins significantly. Dealerships are urging car manufacturers to reduce production to help them sell existing stock. However, manufacturers are extending the inventory cycle to 90 days to ease the financial burden on dealerships and maintain investor optimism. The video also discusses how dealerships are now more desperate, offering discounts and better customer service to move inventory. It mentions specific discounts offered by brands like Mahindra, Toyota, MG, and Maruti, with some cars seeing discounts of up to 2.5 lakh rupees.
🛍️ Empowerment of Car Buyers and Future Market Predictions
The script concludes by emphasizing the current empowerment of car buyers due to the overstock situation. It advises potential buyers to leverage this by visiting multiple dealerships to secure the best discounts. The video suggests that the current discounts are just the beginning and predicts even greater discounts, especially on mid-segment luxury cars. It anticipates that cars priced between 15 lakhs to 1 crore will see the maximum discounts, while more affordable cars under 15 lakhs will maintain stable or increasing demand. The video ends with a call to action for viewers to like, share, and subscribe, and to share the video with anyone considering purchasing a new car.
Mindmap
Keywords
💡Inventory Period
💡Discounts
💡Working Capital
💡Oversupply
💡Capital Appreciation
💡Semiconductor Shortage
💡FADA
💡Pent Up Demand
💡Interest Rates
💡Car Makers
Highlights
India has 7,30,000 unsold cars in dealership yards with a combined value of 73,000 crores.
Car dealerships in India may not sell all cars in the next two months.
Car makers are offering significant discounts to reduce inventory.
Kyoto is offering a discount of 10,00,000 rupees on its cars.
MG is offering a discount of 6,00,000 rupees, and Jeep up to 17,00,000 rupees.
Discounts are expected to increase in the coming months.
Car sales fell 2.5% compared to last year, indicating a slowdown.
FADA publishes monthly India Vehicle Sales Reports, reflecting the health of the car industry.
Inventory period is a key metric for understanding the car industry's supply and demand dynamics.
In 2018-19, the average inventory period was 55-60 days, a sign of oversupply.
COVID-19 led to a sudden drop in demand and an inventory period of 100 days.
Post-lockdown, the inventory period dropped to 10-15 days due to a car shortage.
The chip shortage and increased demand led to price increases by car makers.
By Feb 2023, the average inventory period was 35-37 days, indicating a balanced market.
By Feb 2024, the average inventory period increased to 40-55 days, signaling potential oversupply.
Dealerships with cars unsold for over 100 days are facing financial strain.
Car companies are extending the inventory cycle to 90 days to ease dealerships' financial pressure.
Mahindra has reduced the price of its XUV700 by up to 2.2 lakh rupees.
Toyota is offering discounts up to 13 lakh rupees on certain models.
MG is offering discounts over 2 lakh rupees on each of its cars in India.
Maruti is providing significant discounts on its Grand Vitara, up to 1.3 lakh rupees.
Mahindra Thar is now available with discounts of up to 1.5 lakh rupees.
Jeep is offering discounts up to 17 lakh rupees on the Grand Cherokee.
The power dynamic has shifted towards customers, with dealerships becoming more customer-friendly.
The Indian car market is expected to see maximum discounts on mid-segment luxury cars.
Transcripts
India currently has 7,30,000 cars in dealership yards as
unsold vehicles whose combined value is 73,000 crores which
is such a huge number that all the car dealerships in India
will not be able to sell these cars in the next two months
due to which car
makers have started panicking and have started offering
discounts on cars and those cars have been discounted which
was also waiting for 2-2 years a few months ago and the
discount is not like that, friends it is coming for 5,000
or 10,000
Kyoto is offering a discount of 10,00,000 rupees on its
cars MG is offering a discount of 6,00,000 rupees on its car
Jeep is offering a discount of 17,00,000 rupees on its car
and these discounts are going to increase in the coming time
So I am just telling you that if you are thinking of
purchasing a car in the next few months then watch this
video, you are going to benefit a lot because for the last
3 years, the entire automobile industry's control was with
car makers and car dealerships
and finally we are going to come to the customers and we
will use it fully
To Motown where the number of unsold cars with dealers have
risen substantially ahead of the festive season Car sales
fell 2.5% compared to last year
The first drop in more lakh cars were unsold in the dealer
network in August compared to 6.3 lakh unsold cars in July
In which there is a Federation of Automobiles Dealership
Association in India which is affectionately called FADA
which publishes an India Vehicle Sales Report every month
by collecting data points from all car dealerships in India
that how much sales
have been done, how much discount have they offered and how
much their inventory period has increased to show how
India's car dealerships are performing and this inventory
period metric tells a lot about India's car industry
because if this inventory
period is around 15 days which means there is a shortage of
cars in India there is a lot of demand and there is a lot
of supply that's why car makers can increase the price of
their cars if this average inventory period is around 30
days then it is quite
good which means the number of cars that are being sold is
the same in the dealership lot there is neither excessive
supply nor excessive demand so the system is running very
well if this average inventory period is around 50 days
which means there is
a lot of supply and there is a lot of demand and
dealerships have to offer big discounts and if this
inventory period is more than 60 days then we are finished,
we are doomed and if you see, 2018-19 was very bad for the
Indian car industry that's why
in Feb 2019, the average inventory period of car
dealerships in India was between 55-60 days which is quite
high and this is considered to be a bad phase in the Indian
car industry and then next year or Feb 2020, there was
COVID in India so the demand
was suddenly over and the inventory period was 100 days
which is very high because people were not able to leave
their homes who bought the car and then after a few months,
India's lockdowns were released and people started going
out and shopping but
because the factories were still closed and car companies
had reduced their production a little that's why by next
year or Feb 2021 the average inventory period in India was
only between 10-15 days which means there was a shortage of
cars and there were
mainly two reasons for this shortage the first reason was
that the commodities used in the car for example, metal,
copper or electronic components they had a very high scale
shortage because the factories had reduced their production
a lot so that they
could meet the demand and also there was a worldwide scale
chip shortage in which the semiconductors made in Taiwan or
China and which are used in the electronic components of
the cars in their workings they were not being made on such
a high scale so
obviously, they were not able to put all those parts in the
cars and the cars were not being made and the cars were not
being made less but suddenly the buyers were also
increasing because suddenly after COVID, there was a boom
in the stock market and
there was a boom in real estate people's capital
appreciation started increasing suddenly people started
considering themselves rich so they had to spend money
somewhere so they were not able to travel so obviously,
there is only one place to spend money
and that is cars suddenly, the demand was a bit high the
supply was a bit less so the car makers started increasing
their prices a lot they started increasing it so much that
in a year, the car makers increased their prices by 10-15%
that's why if you
see, till a year later or till Feb 2022 the average
inventory period in India was 12-15 days after this, the
production started increasing the semiconductors started
getting easily so that's why till next year or till Feb
2023 the average inventory period
in India was between 35-37 days which is absolutely
appropriate that means there is neither too much excessive
inventory nor too less the more cars are coming, the more
it is being sold without any tension the car makers thought
that we will be able to
maintain it well around this level and we will keep
increasing the prices of our cars but friends, as you know,
capitalism works in the best way because the car makers
increased their production capacity a lot and also
increased the prices of their cars
a lot so the pent up demand or the pent up customers who
didn't buy cars during COVID they bought all the cars now
the new customers they had to buy the cars but they are not
able to buy because the prices of the cars have become so
high and also the
interest rates have become so high so that's why all these
new customers delayed their car purchase decision that's
why till next year or till Feb 2024 the average inventory
period in India was between 40-55 days everyone was
sounding a little alarming
that the cars are increasing a little but the car companies
were saying there is no problem, there is a lot of demand
we will sell the cars without any problem in the coming
month or till June 2024 the average inventory period went
from 62-67 days and
in July, the average inventory period went from 67-72 days
and any car dealerships whose cars are sold less they
already have 100 days of inventory which is a little
alarming situation because any car dealership if a car is
parked it has a working capital
and generally every car maker finances their working
capital from the bank and generally the working capital
finance rate in India is between 12-24% so we take 12% only
and in India, car dealerships on an average, their working
capital cycle is around
60 days which means after 60 days they have to pay for that
working capital so let's say there is a dealership for
example, there is a Honda dealership and he purchased a car
worth 10 lakhs and parked it in his dealership yard and
this 10 lakhs he financed
from the bank as working capital finance and let's say his
interest rate was 12% so the car maker has to pay 10,000
rupees to the bank as interest every month on this car
worth 10 lakhs till that car is parked now because in
India, the average inventory
period is around 60 days so this car will be parked near
this car dealership for around 2 months which means this
car dealership has to pay only 20,000 rupees to the bank to
keep this car in his stockyard in these 2 months because of
which his profit
margin will be almost half because in India, the average
profit margin of a car dealership is around 5-6% and that
too in higher end which means on a car worth 10 lakhs his
margin is around 50,000 rupees he has to pay 20,000 rupees
to the bank so his
margin is only 30,000 rupees from this 30,000 rupees he has
to take out the expenses of his employers and maintain his
dealership he has to pay the rent and he has to purchase
more cars and he has to offer discounts to the customers so
friends, if you
see the dealerships are right now in the last 3 years they
have cheated us a lot now friends, they are getting cooked
and these dealerships are so desperate that they have
started writing letters to all the car makers in India that
the cars are not being
sold you should reduce the production so that we can sell
the existing cars only then you can sell the new cars and
the car company which is totally chill they are saying that
there is no problem there is no over inventory and what
they have done very
smartly that the inventory cycle of 60 days has been
increased to 90 days so that the car dealerships can get
one more month to make their payments friends, what kind of
sense is this? friends, what kind of sense is this? tell me
I don't know what kind of things the car companies have
done and they have done this so that they can maintain
optimism in their investors and maintain their share price
and it shouldn't happen that the cars are not being sold
now reduce their share their
profits will be reduced no no no, our cars are selling very
well we don't have any problem very very nice finance
because of this, the car makers have started offering
discounts in India in which you will remember 2 months ago,
Mahindra has reduced the
price of its top end versions of XUV700 to 2.2 lakh rupees
which is a very high number along with that, Matata Motors
has reduced the price of its safari to 1.5 lakh rupees but
if this is also less then in the next month itself
Mahindra has reduced the price of its smaller variants in
XUV700 for example, AX3 or AX5 to around 60,000 rupees but
friends, this will seem very less because if you come in
the Toyota range then Toyota is offering a discount of 13
lakh rupees in its
Hilux in the X room price a brand new car comes in this
much and in its Legender they are offering a discount of
around 2 lakh rupees and in its Camry they are offering a
discount of 9 lakh rupees it's not like that friends that
they are enjoying offering
discounts and earning less profits they are not even
getting sales obviously, they will have to offer discounts
but friends, are you okay?
Toyota is okay but the rest of the good companies in India
are getting good sales now come to MG
MG has 4-5 cars in India and in each car you are getting a
discount of more than 2 lakh rupees in which if you buy
MG Aster then you get a minimum of 2 lakh rupees and all
these things including all the benefits for example
cashback and all and then exchange bonus and all and if you
buy MG Hector which is the best selling car of this brand
then you are getting a discount
of 3 lakh rupees and if you buy MG Gloster then you are
getting a discount of 6 lakh rupees and in ZACB you are
getting a discount of 2.2 lakh rupees so this is too much 6
lakh rupees in the front is not much but some of you will
say but there is no discount
in Maruti
Maruti has a very good bakery if you see Maruti's Grand
Vitara at one time in the hybrid version it was a hybrid
and now in its hybrid version you are getting the highest
discount in this if you buy its mild hybrid version then
you are getting a discount
of 73 thousand and if you buy its full super hybrid version
then you are getting a discount of 1.3 lakh rupees which is
too much and if you buy Jimny then in its base model you
are getting a discount of 1.95 lakh rupees and if you buy a
little higher
version then you are getting a discount of 2.5 lakh rupees
in front go to dealership and you will get a good discount
your feet will be kissed this is the condition
Mahindra's xuv700 is still on sale and they were booking
50,000 and they are not getting a discount
Mahindra's xuv700 got a discount two months ago and it is
still continuing and it will continue and it will excel
Mahindra has a car called
Thar and you know how much demand this car had all
dealerships were asking for black color for this car and
two years
We will get you a car and a box of chocolates and sweets
for free.
If you buy the 4x2 version of Thar, you will get a discount
of 1.3 Lakhs.
And if you buy the 4x4 version of Thar, you will get a
discount of 1.5 Lakhs.
Many people will say that there is no discount on Scorpio
N, that is a very good car.
Mahindra is offering a silent discount on this car, in
which this brand has launched the ZX Select version.
In which you get the top end features of this car for 5-6
lakhs less.
So Mahindra is not saying that you are getting a discount,
but they are launching a cheaper version and people are
buying the same version.
You will get the car in front of you if you call all the
other versions.
And these are the prominent brands.
If you buy a brand with less sales, for example Jeep, then
you are getting a discount of 2.5 lakhs on Jeep Compass.
You are getting a discount of 2 lakhs on Meridian.
And if you buy the Grand Cherokee, then you are getting a
discount of up to 17 lakhs.
You are getting a discount of 2 lakhs on Skoda.
And Skoda has also listened to me and has launched a
Sportline version of their car, which is very cool.
So friends, I am telling you that the command is in our
hands.
Dealer ships and car companies have looted us a lot in the
past two years.
And we have heard a lot about them.
Now we have everything in our hands.
If you want to purchase any car, don't go to a single
dealership, go to multiple dealerships.
And you will feel that the car salesperson used to talk
very rudely and didn't call back.
Now all these car salespersons will call you back and ask
you for tea.
Because our time has come.
That's it, friends.
In today's video, you tell me what do you think, what
should be the discount on which car.
And I think that this discount is just starting.
This much discount should come now.
I mean, there should be a double discount.
Then the Indian car market will become a little value for
money.
And I think that the maximum discounts will be on cars
ranging from 15 lakhs to 1 crore.
The cars that will be less than 15 lakhs, their demand is
going to be very stable.
And in fact, I think it will increase.
So Maruti is going to benefit from this.
And the mid-segment luxury cars in India, for example,
Mercedes, Audi, Fortune, etc.
You are going to get maximum discounts in these.
If you get a 60 lakh Mercedes at a price of 50 lakhs in the
coming months, don't be shocked.
If you get a 5 lakh discount in Fortuna, don't be shocked.
Because this is going to happen.
The command is in our hands.
That's it, friends, in today's video.
If you liked it, then like, share and subscribe.
And share it with everyone who is thinking of buying a new
car.
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