In its Vehicle Registration Data for April, Federation of Automobile Dealers Associations (FADA) has highlighted negative sentiments plaguing the auto retail sector. In its report, FADA has pointed out that several dealerships have closed down in recent times and still more are facing problems associated with high inventory and lack of adequate working capital. FADA has also outlined its plans to help dealerships navigate through the tough times.
As per Vehicle Registration Data for April sourced from 1,171 RTOs across the country, the slump in auto retail can be seen across the spectrum. YoY losses amounted to -16% for commercial vehicles (CV), -13% for 3-wheelers (3W), -9% for two-wheelers (2W) and -2% for passenger vehicles (PV). MoM data is also negative, with the exception of CV sales that have registered growth of 2%.
FADA President, Mr Ashish Harsharaj Kale has stated that negative sentiments in auto retail can continue over the next 8-12 weeks. He also added that a quick turnaround can be possible if certain conditions are met such as a stable government at the centre, good monsoons, and easing of liquidity by Reserve Bank of India (RBI).
Among the biggest problems faced by dealerships is high inventory levels that is creating additional financial stress. With uncertainly in market, weak consumer sentiment and de-growth in auto sales, FADA will be recommending dealer inventory of 21 days (15 days inventory + 7 days of in-transit inventory). This will reduce the cost burden for dealerships and help them survive the challenging times.
For long-term solutions to problems faced by auto dealers, FADA will be communicating with policy makers in the new government and RBI. FADA’s primary demands will be to give separate recognition to auto retail and create special policies to meet the sector’s funding requirements.
Despite the current problems, FADA states that long-term outlook remains to be strong for auto retail. Mr Ashish said that auto dealerships will continue to be one of the biggest employment generators and tax collectors in the country. He added that auto retail has a significant role to play as India progresses towards achieving the title of a global leader.
