Auto sales: It’s May-hem in auto, sales may fall 70-80% – The Economic Times

Clipped from: https://economictimes.indiatimes.com/industry/auto/auto-news/its-may-hem-in-auto-sales-may-fall-70-80/articleshow/82471748.cms

Synopsis–Vinkesh Gulati, president for Federation of Automotive Dealers Association, says customer walk-ins and bookings are negligible, which is not a good sign for the quarter as the industry is entering the lean season from June.

May will be one of the worst months for the auto sector. The second Covid wave and local lockdowns have forced 75% of auto retail stores—20,000 out of 26,500 outlets—to shut down. Stores that are open see few footfalls.

Results are grim. There’s immense pressure on the cash flows, and a potential revenue loss of Rs 20,000-25,000 crore at the retail level. Dealers across the country fear retail will fall 70-80% in May.

Vinkesh Gulati, president for Federation of Automotive Dealers Association, says customer walk-ins and bookings are negligible, which is not a good sign for the quarter as the industry is entering the lean season from June.

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“In the first wave, the central government supported with the moratorium, MSME sector status, etc, tenants got rent relaxation, vehicle makers extended incentives—nothing of that sort is available right now. It appears May will be a complete washout—our costs on manpower, rents, interest rates are being incurred with very little cash flows and we are getting into yet another tough phase,” added Gulati.

The retail billing at the dealer end, based on Vahaan data, was estimated to be Rs 34,000-38,000 crore in March 2021.

The dealers retailed 1.667 million vehicles in March 2021, out of which 72% were two-wheelers, 17% passenger cars, 4% tractors, and the rest belonged to other segments.

Total vehicle registration averaged at 1.657 million vehicles in the second half of FY21 compared to 888,000 in the first half of last financial year.

Passenger vehicle dealers are relatively better placed with lower inventory and higher bookings. The major stress is for two-wheelers and commercial vehicle dealers, which are sitting on huge inventory, says FADA.

Gulati said due to drying up of cash flows, workers’ salaries may have to be deferred. FADA on its part will be negotiating with banks on extending repayment cycles and offering interest subvention.

Shashank Srivastava, ED, sales and marketing at Maruti Suzuki, says about 2,000 of the company’s 3,140 outlets are closed.

“In the Covid second wave already 22 states are on complete lockdown and others are partially so. These 22 states account for almost 75% of the industry retails. So obviously retail under such a situation will be adversely affected. If the lockdown continues for a long time, it will affect the sentiment severely,” added Srivastava.

The retail situation has led factories advancing maintenance shutdown by several weeks to curtail production, to prevent inventory pile up.

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