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Informist, Wednesday, Feb. 11, 2026

 

By Anand JC

 

NEW DELHI – Showrooms selling cars made by major Indian automobile companies are currently running with a very lean inventory, primarily due to supply and capacity constraints amid a surge in demand. Inventory levels have reduced to a little over 30 days, down from around 55 days in October as customers made a beeline for cars, even after conclusion of the festival season, to reap the benefits of lower car prices.

 

"Other than the network stock, we are operating at 10 days' network stock, out of which 6 to 7 days are the vehicle in transit," Maruti Suzuki India Ltd.'s Senior Executive Officer Marketing and Sales Partho Banerjee told reporters in a press conference earlier this month. This is a far cry from the situation in late 2024 when automakers and dealers were at loggerheads as inventory levels shot up to 80 days, prompting corrective efforts from the factory-end.

 

Mahindra & Mahindra Ltd., Tata Motors Passenger Vehicles Ltd., and Hyundai Motor India Ltd. also have seen their inventory levels plummet in recent months as they face production constraints at their plants. Banerjee expects the production constraints to continue for a few more months.

 

Maruti Suzuki, Tata Motors PV, M&M, and Hyundai Motor together sold 440,905 cars to dealerships in January, up 18% both on year and on month. "Retail momentum is holding up post-festive season, reflected in healthy enquiries for entry segments, where OEMs like Maruti Suzuki and Tata Motors continue to benefit," Nirmal Bang Institutional Equities said in a report last week.

 

Growth in sales of passenger vehicles was muted in Apr-Aug. However, it picked in the December quarter after the cut in goods and services tax became effective Sept. 22. Companies sweetened the deal by offering additional discounts on top of the GST cut which reduced prices of select car models even further.

 

Tata Motors PV's inventory levels have been reduced to less than 15 days now after the sharp surge in retail sales. "We are working on production now, not on demand, because demand is there," Tata Motors PV's Managing Director and Chief Executive Officer Shailesh Chandra told reporters in a post-earnings call. "We are pretty much working at near-full capacity in most of our plants, there are efforts to unleash more capacity," Chandra said.

 

The Federation of Automobile Dealers Associations recommends a 21-day stock norm in order to ensure dealers can rotate working capital efficiently without facing the burden of interest costs. Inventory at passenger vehicle dealerships had risen to 53-55 days in October and fell down to 37-39 days as of December end and softened to 32-34 days as of January-end, according to FADA. Data from the auto dealers body are an industry-wide average. "Crucially, PV inventory levels continued to soften to 32–34 days, which is a constructive indicator of healthier channel discipline and improved working-capital efficiency across the network," FADA President C.S. Vigneshwar said on Wednesday.

 

India's biggest sport utility vehicle seller M&M said inventory levels for the company are currently trending at 15-20 days, below the normal level of 25-30 days. "We have a very wide variety of products with versions (variants). When you look at the average stock, it is also based on how much variety your product portfolio is offering," the company told reporters in a post-earnings press meet. "So typically, we would expect our dealer stock to be close to 30 days, it is (currently) lower than that," the company said, adding that it is working on bringing its stock level higher to normative levels.

 

Inventory levels at Hyundai dealerships are relatively healthier. Stock level at its dealerships at the end of December was 2-3 weeks, which has now increased but still remains below four weeks, its management told analysts in a post-earnings conference call. "At the end of January, inventory (usually) goes up to 5 weeks, but we are working on less than 4 weeks' inventory (now). So, these are good signs for the future," Hyundai Motor's Managing Director and Chief Executive Officer Tarun Garg had said earlier this week.

 

Inventory levels tumbling to the levels seen currently is not a normal phenomenon and the situation is expected to revert to historically normal levels in the next two to three months, analysts said. "This happens very rarely, unless there is some external trigger," Aditya Khetan, lead analyst at SMIFS Ltd., said. Dealership inventories have seen sharp drawdowns on a few occasions in recent years, most notably when pent-up demand after the COVID-19 pandemic drove a surge in sales, and during the semiconductor chip shortage in late 2021 that pushed stocks of high-demand passenger vehicle models into single-digit territory.

 

Demand and inventory shortage at dealerships is only for select models and not broad-based, Khetan said. "OEMs (original equipment manufacturers) now have an incentive to manufacture more, they have the room to manufacture more as well," Khetan said. As carmakers push back inventory to healthier levels, retail sales might come down even as wholesale sales will go up in the coming months, Khetan said.

 

CAPACITY PUSH

Maruti Suzuki in January said it was fast-tracking the addition of 500,000-unit capacity across two new plants in Gujarat to meet the surge in car demand. "As soon as the GST reform was announced, our top management advised us to accelerate our capacity expansion plans," Rahul Bharti, executive officer of Maruti Suzuki's Corporate Affairs, told analysts in a post-earnings conference call late January. Maruti Suzuki, India's largest passenger vehicle manufacturer, has a production capacity of 2.6 million units per annum across four manufacturing sites.

 

In January, Maruti Suzuki just about surpassed its previous record to sell 182,172 passenger vehicles in India. The company prioritised the production of utility vehicles in January even as its despatches of compact cars fell. In December the company had done the reverse. Explaining the rationale behind this balancing act, Banerjee said: "Right now we have got a production constraint. We are trying to be flexible, trying to cater to the whole segment of customers so that the waiting period doesn't go high for any of the segments."

 

Combining unlisted entities, companies sold around 450,000 units in January, which is higher than the 325,000 units typically sold during the month. According to Tata Motors PV's Chandra, this creates a "as the water comes down, more rocks appear" kind of a situation for supply chains, explaining that the snags have evolved as demand for cars shot up.

 

Tata Motors PV has an installed capacity of 900,000 units per annum. The company is ramping up its capacity to meet demand. "Even before I talk about in-house ramp up, the first level problem is on the supply ramp-up from the suppliers itself," Chandra said. "At tier-1 to tier-3 supplier level, especially, let's say, for example, castings and all, we are seeing that there is general capacity constraint that is coming," Chandra said. The company is working on enhancing existing capacities in a bid to squeeze out more units, and is ramping up supplies from the suppliers.

 

GROWTH MAY SUSTAIN

At the beginning of FY26, the Society of Indian Automobile Manufacturers had forecast a sales growth of 1-4% on year for passenger vehicles. However, this was before the GST on cars was cut. Analysts and companies now expect FY26 sales growth to be much healthier.

 

Like in January, the passenger vehicle industry may continue to grow between 10-15% on year going forward, Ravi Gupta, automobile analyst at InCred Capital, said. Analysts expect new product launches, stronger value propositions, and robust dealer networks to help industry volumes grow 9-11% in the ongoing financial year. "With improving rural incomes, lower interest rates, and easier financing, the recovery appears structural rather than festive-led, marking a clear rebound from a softer H1FY26 (Apr-Sept)," Nirmal Bang said.

 

The passenger vehicle industry, including unlisted companies, grew around 14% on year in January, while despatches of Tata Motors PV grew 46% on year. Chandra of Tata Motors expects passenger vehicle sales to grow 14% on year in the March quarter while the company's domestic sales could grow around 40% on year. "We expect that for FY26, therefore, the industry would grow by about 8% to 9% rough estimate, I would say. Whereas for us, we should be somewhere in mid-teens," Chandra said.

 

Maruti Suzuki had initially predicted that the passenger vehicle industry would revert to compound annual growth rate of 6-7% going forward, typically seen during pre-COVID era. "However, seeing the commodity prices, which is right now shooting up very high, we need to wait and watch how the geopolitical scenario happens. Then maybe a better forecast can be given," Banerjee said.  End

 

Edited by Ashish Shirke

 

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