Working Capital Management in the Indian Automobile Sector: What Drives Cash Pressure and What Firms Can Do

Abstract Working capital management (WCM) decides how fast sales become cash. In India’s automobile ecosystem, cash pressure rises when volumes jump, exports swing, or the vehicle mix shifts toward higher-value models. This paper combines (i) SIAM time-series on domestic sales, production, and exports, (ii) ACMA indicators for the auto-component sector, and (iii) published firm-level evidence on cash conversion cycle (CCC), liquidity ratios, and distress signals. A consistent message appears across studies: longer CCC (higher inventory days and receivable days) is usually linked with weaker profitability, while tighter cycle control supports returns. Negative working capital can be a valid strategy for strong firms, but it becomes risky when demand slows or inventories rise in the channel. The paper ends with a short set of practical levers for OEMs, suppliers, and smaller firms. Keywords: Working capital; Cash conversion cycle; DIO; DSO; DPO; Liquidity; Indian automobile industry.