Car buyers have started to cancel bookings which they made in anticipation that they would be able to take deliveries during the festive days as manufacturers continue to struggle to align supplies with demand.
Automotive dealers have seen a spike in the number of booking cancellations in the run up to Diwali in the past few weeks. While booking cancellations are normal in the automotive retail business, the level of cancellations this year is unusually high, say dealers.
“Enquiry levels and demand is very strong for passenger vehicles but along with that cancellations are also increasing because we are not able to commit the delivery date. People wait for the auspicious occasion and when deliveries don’t happen on those dates, they tend to cancel rather than extend the period,” Vinkesh Gulati, President, Federation of Automobile Dealer Association (FADA) speaking to Moneycontrol.
With stock levels with dealers hitting all-time low of just 15-20 days as against 35-40 days, manufacturers are struggling to supply as required because of shortage in availability of semiconductors. This has led the industry to achieve production of only half of the required numbers in October. On November 2 FADA claimed that the current festive period is the worst in a decade despite the passenger vehicle industry sitting on pending orders of more than 350,000 units.
“Cancellations have doubled than normal. We normally have 5-10 percent cancellations but now it’s 20-25 percent. If a person does not get a vehicle in four months, his interest in the purchase wanes, his requirement for investment in any other field gets fired up. Thus, the money kept for buying a car gets more likely to be spent elsewhere since it is lying unused,” Gulati added.
Car market leader Maruti Suzuki said that its pending bookings have crossed 250,000 units but admitted that cancellations have been slightly higher than usual. The Delhi-based company slashed output by 40 percent in October and managed to sell just 66 percent of its typical monthly sales total.
Shashank Srivastava, executive director, Maruti Suzuki India said, “Cancellations are slightly above the long-term average but not so different that I will call it unusual. Cancellations are roughly similar to last year’s level in week three and week four of October. Week three was a little higher than last year. Cancellations are 4.6-5 percent higher than last year.”
New models like the MG Astor, Volkswagen Taigun and Tata Punch have a waiting period of three months to four months. Other new, in-demand models like the Mahindra XUV700 have a waiting period of nine months. Other regular models like the Hyundai Creta, Kia Seltos and Maruti Suzuki Ertiga (CNG) have a waiting period of anywhere between four to six months.
“There are lots of buyers who just go for an impromptu purchase and those are not the ones who wait for 3 or six months for deliveries. These customers buy a vehicle in 1-2 visits and finalise a deal within a week. And this happens every festive season and these are the customers that we have lost,” Gulati added.
Talking to the media in the Q2FY22 earnings call PB Balaji CFO, Tata Motors, said, “We do not like the fact that we are making the customer wait for so much for the delivery. We have not seen any cancellation of bookings so far and demand remains robust for Tata Motors.”