With monthly auto registrations falling by 55% and by a whopping 71% over May 2019, the Federation of Automobile Dealers Associations (FADA) requested prime minister (PM) Narendra Modi to instruct Reserve Bank of India (RBI) to grant moratorium for auto-dealers and release guidelines for relaxation of loan repayment equivalent to number of days of lock-down each state has been declaring. India was under complete lock-down in May 2020, so the data is not comparable on yearly basis, FADA clarifies.
Terming the auto registrations in May as 'bloodbath', Vinkesh Gulati, president of FADA, says, "Apart from urban markets, this time, even rural areas were badly hit. May saw continued lockdown in most of the states. Not surprisingly, auto retail for the month witnessed bloodbath as sales fell by 55% on monthly basis. Similarly, all categories of vehicles fell by a huge degree with two-wheelers (2W) falling by 53%, three-wheelers (3W) by 76%, passenger vehicles (PVs) by 59%, tractors by 57% and commercial vehicles (CVs) by 66%."
Auto retail fraternity is in dire need of support, the apex body of automobile retail industry in India says, adding, "While a handful of original equipment manufacturers (OEMs) like Tata Motors – CV, Renault, Bharat Benz and HMSI have announced financial help to their channel partners, others are yet to do so. Hence, FADA humbly requests all those OEMs which have still not announced any financial assistance to kindly do it urgently."
FADA also appealed to the PM that instead of restructuring, banks should allow a moratorium of 90 days to all categories of dealers without keeping a turnover limit. "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 Auto OEMs," it added.
"Since the current lockdown has already lasted well over 30-45 days and is still continuing in South India, revenue for most of the dealers are negligible as there was minimal sales. Due to this, dealers will not be able to repay their loan tranche payment which is getting due. This will ultimately lead towards default," the apex body of automobile retail industry says, adding, "Since there are no guidelines, extension of tranche is considered as restructuring of loan. This will ultimately have a negative impact on dealers' credit rating."
Data shared by FADA, shows that, on a monthly basis, (May 2020 had not sales so the data cannot be compared on yearly basis), registration of 2W, 3W, PVs and CVs unrelentingly fell in May 2021 by 53%, 76%, 59% and 66%, respectively.
Commenting on the near-term outlook, FADA says, first nine days of June has seen better-than-expected retail sales due to pent-up demand which was there in the system when states started implementing lockdown. "If the trend continues, we may see almost similar sales when compared to June last year," it added.
The monsoons arrived in India almost on time. If predictions by the IMD 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 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 FY21-22," the apex body of automobile retail industry says.
As on end May, dealer inventory days as PV and 2W inventory remained in the range of 20-25 and 25-30 days, respectively.