The Federation of Automobile Dealers Associations (FADA) today released the monthly vehicle registration data for May 2020. The month saw gradual relaxation and opening of dealerships after the country witnessed lockdown for over 40 days, translating to around 202,697 vehicles across segments sold in the country, a year-on-year decline of 88.87 percent.
The sales in May 2020 comprised of 159,039 two-wheelers (-88.8% YoY), 1,881 three-wheelers (-96.34% YoY), 2,711 commercial vehicles (-96.63% YoY), 30,749 passenger vehicles (-86.97% YoY) and 8,317 tractors (-75.58% YoY).
FADA estimates by end-May, out of 26,500 outlets about 60 percent showrooms and 80 percent workshops were operational across the country. Commenting on the results, Ashish Harsharaj Kale, president, FADA said, “For the first time in history, the month of April witnessed zero retails. While lockdown was gradually relaxed beginning May, auto dealerships and workshops opened for the first time after 40 days in many cities. May registrations are hence not indicative of the demand situation as the lockdown continued in many parts. The first 10 days of June witnesses extremely low demand despite most dealerships which are now open for business. Weak consumer confidence especially in urban areas continue to haunt as customers stay away from concluding their purchase due to threat of community spread and return of complete lockdown persists.”
The FADA president says with 7.6 percent of GDP, a workforce of several millions and a multiplier effect for many supporting sectors, the auto industry can be the “driving force in boosting consumer confidence and improving sentiment, if supported with short term stimulus to revive demand as return to normalcy seems very difficult till the festive season.”
He says that mobility continues to a “necessity and not luxury in a growing country like India”, and a demand stimulus along with credit support can help bring auto sales back in the positive zone within 30-60 days and help shore up consumer confidence.
The auto retail body says with an assumption of no further lockdown and continued reopening measures, there will be substantial pick up in auto retails in comparison to May, but the overall outlook continues to be grim with projected sales to “witness a de-growth upwards of 25 percent YoY.”
Furthermore, it expects the urban demand will continue to face challenges with Covid-19 uncertainty. On the flipside, the government’s push for infrastructure spending and the recent positive measures announced for agriculture sector will help support rural demand. It will further strengthen with the normal spread of monsoon which will help tier-2 and tier-3 dealers face lesser de-growth compared to their urban colleagues.
Dealer community to face tough year
A projected annual de-growth of 35 percent by SIAM on top of the 18 percent de-growth faced last year, FADA says the dealership community faces its toughest years ever as volumes are estimated to half in a span of 20 months. It says with no direct support as business community, except for the moratorium extension given to all businesses, automotive dealers look forward to an early recognition as an MSME to avail government support for the survival and for its over 40 lakh workforce.
The auto retail body says with cost cutting having its limitations due to the nature of the business, FADA is strongly pursuing with all their principals to correct the long pending anomaly of low sales margin and revise it upwards to 7 percent to get it at par at least at the lower band of global dealer margin which ranges from 7 to 14 percent.
It says lakhs of jobs and hundreds of dealer survival is at stake if demand de-growth predictions hold true and operating economics remain unchanged. FADA says it will strongly continue the campaign for higher business margins for survival of its members in these uncertain times as it will help the industry in self sustenance as many more disruptions will come in future in a globally connected world.