The Federation of Automobile Dealers Associations (FADA), the apex body of authorised automobile dealers, has issued a statement that the dealer fraternity supports the government’s move to demonetise Rs 500 and Rs 1,000 currency notes, the decision has had an immediate and adverse impact on the market due to a cash crunch and the resultant slowdown.
Since the government’s announcement on November 8, FADA says it has proactively contacted automobile dealers across brands, categories and sizes of business to take stock of the situation. The dealer body now says, “The situation of retails is much more alarming than the dealer community could anticipate. The entire auto retail trade has come under severe stress.”
According to FADA, while the current situation is transitional and will ultimately normalise, the fact of the matter is that dealerships across the country are saddled with stocks and near-zero retail. Importantly, the association says, “the situation is unlikely to see much improvement till the financial year end (March 2017). As a consequence, it seems unlikely that a majority of dealerships would be in a position to honour their commitments to banks and financial institutions.”
Urgent need to reduce inventory levels
Commenting on the crisis-like situation at present, FADA president John Paul has urged vehicle manufacturers in India to provide support by reducing inventory at the dealerships and to make available enhanced credits from banks to the dealers. He added that FADA has also taken up the issue with all banks and financial institutions, urging them to take a favourable stand so that the auto market emerges unscathed.
Paul has further suggested that banks should also come forward to increase vehicle/personal loan limits for customers, including 100 percent on-road funding for vehicle purchases. Likewise, the government should take steps to reduce the service charge levied by the banks for credit card transactions, which will go a long way in minimising cash transactions.
FADA represents over 11,000 authorised automobile dealers engaged in the sale, service and spares of all categories of motor vehicles, including passenger vehicles, buses, trucks, two- and three-wheelers and tractors. These dealers account for more than 90 percent of the automotive retail trade and service industry in India.