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COVID-19 might force auto dealers to look for new biz models, some face 'existential crisis': FADA


Press Trust of India Mumbai
Automobile dealers might well be forced to look at new ways of doing business and some may face an "existential crisis" in case the coronavirus pandemic continues for a prolonged period, a top official of industry grouping FADA said.
While auto dealers are already working on contactless sales, the pandemic has accelerated implementation of such practices and priority is also on maintaining safety protocol.
As the auto industry continues to battle challenging times, FADA President Ashish Kale said auto dealership models would have to undergo changes.
The Federation of Automobile Dealers Association of India (FADA) represents over 15,000 automobile dealers having 25,000 dealerships,with 30 associations of automobile dealers at the regional, state and city levels, accounting for 90 per cent of automobile sales and service in the country.
"How long does this threat of coronavirus remain and is this going to be a way forward for us? If this is going to be a prolonged threat for customers, then it will affect the way we work also," he told PTI.
In such a scenario, Kale said probably dealership models would also have to be changed.
"We will also have to look at new ways of business, in which safety and health and social distancing protocols are maintained," he added.
Earlier this week, German automakers Volkswagen, BMW and Mercedes rolled out online sales initiatives in India in order to help customers book vehicles from the safety of their homes.
According to Kale, there would be some new methods for selling vehicles once the lockdown is lifted. The industry would also have to see what are the kind of threats from coronavirus infections in order to maintain safety protocols, he noted.
"We will develop new ways of selling a vehicle. Virtual drives could be one, besides new ways of deliveries and contacting a customer. In a way, methods which do not involve too much of a physical visit by the customer.
"So, new ways of selling a vehicle will definitely develop post COVID," he said.
The automobile industry is already in the process of coming out with these initiatives. The combined investment across automobile dealerships stands at around Rs 50,000 crore, as per Kale.
Regarding difficulties faced by dealerships, Kale noted that at this stage, it was difficult to say how many dealers would be in a tough spot.
"But both the demand and money supply are not going to be the same as it was before COVID-19. So, there will be dealers who would get affected by this. Yes, some may face an existential crisis as well," he warned.
Earlier this month, FADA said auto dealers' business ranges from Rs 10 crore to Rs 1,000 crore, with majority of them being family-run small scale businesses.
More than 275dealerships have already shut shop in the last 15 months due to demand slowdown, which also resulted in thousands of job losses.
Kale wondered what would happen to so many people associated with the industry if the demand does not pick up.
"Many dealers will be in distress if demand drops drastically and there is no abundance of liquidity in the auto companies. And there is also the possibility of some of them going out of business altogether.
"It will depend on dealer to dealer, how much leveraged he is, what is his cost structure. There are so many things which are unknown in this situation at the moment," Kale said.
The automobile dealership industry employs over 40 lakh people at dealerships and service centres. These include 25 lakh direct employees and another 15 lakh who are dependent on dealerships for their livelihood, as per FADA.
"So not only every dealer but every business will have to regulate his whole business plans based on the demand. I don't think in the immediate future there is any threat to jobs in the (dealerships) industry.
"But after opening up, if we don't see demand picking up or dropping very drastically, then there will be job losses," he said.
The grouping has sought a number of relief measures, including working capital support and reduction in GST, to help the industry post the lockdown.
The nationwide lockdown, which began on March 25 to curb spreading of coronavirus infections, is scheduled to end on May 3.

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First Published: Apr 30 2020 | 7:51 PM IST

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