The apex body of Indian automobile dealers, the Federation of Automobile Dealers Association (FADA) has appealed to the Indian Prime Minister that instead of restructuring, banks should allow a moratorium of 90 days to all categories of dealers without keeping a turnover limit.
With 80% of the Indian auto market gripped under a pandemic-induced lockdown, automobile dealerships could only sell a handful of vehicles from piled-up inventory in May 2021.
According to data released by FADA, total vehicle retails for the month of May fell by -54.79% MoM and -70.69% YoY. MoM retails across all categories – 2Ws, 3Ws, PVs, tractors and CVs – saw bloodbath, as sales fell by -53%, -76%, -59%, -57% and -66% respectively.
As India was under complete lockdown in May 2020, all comparisons for the current month (May 2021) have been done with April 2021 (MoM) and two years back with May 2019.
Vinkesh Gulati, President, FADA said the second wave of COVID has left the entire country devastated, as there may not be a single household that did not get affected. “Apart from urban markets, this time, even rural areas were badly hit. May saw continued lockdown in most of the states,” he said.
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On an average, inventory for passenger vehicles in May 2021 ranges from 20-25 days, while that of two-wheelers ranges from 25-30 days.
Appeal for financial support
According to FADA, only a handful of OEMs including Tata Motors (CV), Renault, Bharat Benz and HMSI have announced financial help to their channel partners, while others are yet to do so.
The dealers’ association has appealed to all those OEMs that are yet to announce any financial assistance tale some measures urgently. FADA has also appealed to Prime Minister Narendra Modi that instead of restructuring, banks should allow a moratorium of 90 days to all categories of dealers without keeping a turnover limit.
In the current situation, this is required as auto retail trade works on the principle, where dealers get funded from financial institutes in terms of inventory funding for a period of 30-45 days (depending from bank to bank) to purchase vehicles from OEMs.
FADA indicated that the first nine days of June has seen better than expected retails due to pent up demand, which was there in the system, when states started implementing lockdown. If the trend continues, June retails may see almost similar sales as compared to June last year.
“The monsoons arrived in India almost on time. If met predictions are to be believed, normal and evenly spread rains may bring an early respite for the rural economy, thus pushing demand for vehicles faster than expected,” it said in the press statement.
It may be prudent to say that India may not witness a V-shaped recovery, unlike last time. FADA hence continues to remain guarded in its optimism on overall industry recovery for the fiscal FY22.