Sales fell sequentially as well as year-on-year (YoY) compared to May 2019, shows the monthly registration (retail) data released by the Federation of Automobile Dealers Association (FADA). The month is not comparable to last year’s May due to the nationwide lockdown that came into force on March 22 and lasted till May 18.
The localised lockdown contained the damage for dealerships to some extent. But the second wave has scarred lives. There is a worrisome trend of cancellation emerging at car dealerships, said Vinkesh Gulati, president, FADA. “We sell happiness and car buying is a celebratory occasion,” he said. People are still mourning the demise of their loved ones. Many households won’t celebrate any festival for a year, he said.
The total vehicle retails for May fell 54.79 per cent month-on-month and 70.69 per cent when compared to May 2019. On an MoM basis, sales across all categories, including two- and three-wheelers passenger vehicles, tractors, and commercial vehicles fell by up to 66 per cent, said FADA. “If one leaves aside April and May of 2020, the registration is the worst ever,” said Gulati.
With the number of Covid-19 cases declining and states opening up in a graded way, auto retailers are seeing a gradual recovery. “The first nine days of June saw a better start than expected due to pent-up demand. At this pace, June may result in almost equivalent sales when compared to the year-ago month,” FADA said in the statement. It expects overall demand recovery to be slow as rural markets continue to struggle with post-Covid effects. Therefore, an expectation of a V-shaped recovery is likely to remain elusive, it said.
The apex body representing the dealers have appealed for relief from all vehicle makers, who are yet to announce a financial package like last year. Only a handful of OEMs (Tata Motors – CV, Renault, Bharat Benz, and HMSI) have announced financial help to their channel partners, others are yet to do so. “FADA humbly requests all those OEMs that have still not announced any financial assistance to kindly do it urgently.”
According to Mitul Shah, the head of research at Reliance Securities, the lower retail or registration numbers indicate inventory built up as wholesale volume was higher in the month. “The second wave-led disruptions and local lockdowns impacted retail sales during the first half of the month. There are clear signs of a momentary slowdown in the rural economy at present. Moreover, PV segment volumes are impacted by supply constraints of key components,” said Shah.
Higher Covid cases and the fear of the third wave continue to impact consumer sentiment and automobile sales. However, the economic situation started to improve at the beginning of June. He expects a strong bounce back from the second quarter on the back of favourable monsoon and healthy agriculture output.
FADA has appealed to the Reserve Bank to grant a moratorium for dealers and release guidelines for relaxation of loan repayment equivalent to the number of days of lockdown each state has been declaring.
The dealer body has cautioned of defaults in the absence of extension of loan moratorium. “Since the current lockdown has already lasted well over 30-45 days and is continuing in South India, revenue for most of the dealers is negligible as there were minimal sales. Due to this, dealers will not be able to repay their loan tranche payment. This will ultimately lead towards default,” FADA said in the statement. Since there are no guidelines, the extension of the tranche is considered as restructuring of the loan. This will ultimately hurt the dealers’ credit score as their CIBIL rating will get impacted, it said.