With the lockdown now eased across India, many car manufacturers have started production as well as sales / service activities at dealer level

If trend seen in first 2 days, after reopening the business is anything to go by, the Indian auto industry is in for one of the worst years. Car dealers in various parts of the country have resumed delivery of vehicles which were already paid for before the lockdown was enforced but new orders are hard to come by.

In fact, according to a ET AUTO report, the automotive dealers are facing large scale cancellation of bookings as customers are looking to minimizing their exposure to EMIs. With the pandemic still on the rise, there is a cloud of uncertainty over the nation’s economy and this naturally makes people become more conservative about spending.

There is a widespread lay-offs and pay cuts across different domains, forcing people to look at maximizing their savings and avoiding financial risks. It looks like the automotive industry would be one of the most affected ones. The fear of second wave of the pandemic, and the delay in vaccine are expected to prolong this slump in the market.

It is reported that over 70% of new car sales in India stem from attractive EMI schemes offered by OEM-supported financial institutions or banks with aggressive loan campaigns. So, the automotive dealers are fearing that sales will be extremely dull in the coming months.

It is to be noted that the Indian automobile market was already going through a rough patch before the pandemic. Customer sentiments were weak and the price hike brought about by the migration to BS-VI emission standards further dampened things.

The government has allowed sales and registration of BS-IV vehicles for a few days after the lifting of lockdown to ensure the old stock is depleted. It is being reported that customers are still showing considerable interest in BS-IV models as they are being promoted with significant discounts.

The order cancellations are expected to hurt the OEMs across the price segments. Car makers who have been sitting on massive order backlogs before the lockdown are expected to be the worst hit. Economic Times reports, Kia with over 50,000 bookings for its Seltos, MG and Hyundai with over 20,000 pending orders for their Hector and new Creta respectively are likely bear the brunt of widespread car booking cancellations.

Despite the challenging circumstances, Federation of Automobile Dealers’ Association (FADA) is confident that footfalls in the showrooms would increase once the lockdown 3.0 ends later this month. The quest for hygienic and sanitized means of transport is expected to make customers consider buying private vehicles. For OEMs and their dealer partners, 2020 is going to be all about surviving rather than reaping profit or registering sales growth.