Mahindra, Tata, Toyota have Started a PRICE WAR as Buyers are Done Overpaying !!

Summary

India'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

00:00

🚗 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.

05:03

📉 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.

10:30

🛍️ 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.

Keywords

💡Inventory Period

The inventory period refers to the length of time that a vehicle remains unsold in a dealership's inventory before it is sold. In the context of the video, a longer inventory period indicates an oversupply of cars and potential discounts, as dealerships try to reduce their stock. The script mentions that an inventory period of 15 days signifies a shortage of cars, while 30 days indicates a balanced market. A period exceeding 60 days is seen as alarming, as it suggests dealerships are struggling to sell their vehicles, which is a key issue discussed in the video.

💡Discounts

Discounts are reductions in the price of a product, in this case, cars, offered by manufacturers or dealerships to attract buyers. The video discusses significant discounts being offered by various car brands in India, such as Mahindra, MG, and Jeep, as a response to the high unsold inventory. The discounts are used as a strategy to stimulate sales and clear the backlog of unsold vehicles, which is a central theme of the video.

💡Working Capital

Working capital is the money used by a company to pay its current operational expenses. In the video, it is mentioned that car dealerships finance their working capital from banks, and if cars remain unsold for a long time, they have to pay interest on this capital, which can eat into their profit margins. This concept is crucial as it explains the financial pressure on dealerships to sell their inventory quickly, which is why discounts are being offered.

💡Oversupply

Oversupply occurs when the quantity of a product available in the market exceeds the demand. In the script, oversupply is discussed in relation to the car industry in India, where dealerships have an excess of unsold cars. This oversupply is leading to increased inventory periods and the need for discounts to attract buyers, which is a major point of discussion in the video.

💡Capital Appreciation

Capital appreciation refers to an increase in the value of an asset, such as stocks or real estate. The video mentions a boom in capital appreciation post-COVID, leading people to consider themselves wealthier and thus more willing to spend on luxury items like cars. This concept is used to explain the initial surge in demand for cars that has since shifted due to high prices and interest rates.

💡Semiconductor Shortage

A semiconductor shortage refers to a scarcity of microchips, which are essential components in modern cars for various electronic systems. The video discusses how this global shortage affected car production, leading to a temporary shortage of cars and increased prices. This shortage is contrasted with the current oversupply situation to highlight the fluctuating dynamics of the car market.

💡FADA

FADA stands for the Federation of Automobile Dealership Associations in India. It is mentioned in the video as the organization that publishes the India Vehicle Sales Report, providing data on car sales, discounts, and inventory periods. FADA's role is to provide insights into the health of the car industry, which is a key factor in understanding the current challenges faced by car dealerships.

💡Pent Up Demand

Pent up demand refers to a buildup of consumer demand that has been restrained by various factors and is expected to be released once these constraints are removed. The video discusses how the pent up demand during COVID was satisfied as production increased, but new customers are now hesitant due to high prices, leading to an oversupply of cars in dealerships.

💡Interest Rates

Interest rates are the cost of borrowing money, and they can significantly impact consumer purchasing decisions. The video mentions that high interest rates have contributed to the decline in new car purchases, as potential buyers are deterred by the increased cost of financing. This is a critical factor in the current oversupply situation in the Indian car market.

💡Car Makers

Car makers are the manufacturers of automobiles. In the video, car makers are discussed in the context of their response to the fluctuating car market. Initially, they increased production and prices, but now they are offering significant discounts to clear the oversupply of cars. The actions of car makers are central to understanding the shifts in the car market dynamics discussed in the video.

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.