Auto retail sales drop 55% in May as COVID puts break on vehicle registrations
Automobile retail sales in the country declined by 55 per cent in May as compared to April this year as lockdowns across various states amid second wave of the coronavirus pandemic hit vehicle registrations, automobile dealers' body FADA said on Thursday.
All the segments were hit last month as showrooms across various states were forced to down shutters amid the pandemic led restrictions. Total registrations across categories in May dropped to 5,35,855 units as compared to 11,85,374 units in April this year.
According to the Federation of Automobile Dealers Associations (FADA), which collected vehicle registration data from 1,294 out of the 1,497 regional transport offices (RTOs), passenger vehicle (PV) sales declined by 59 per cent in May as compared with 2,08,883 units in April this year.
Two-wheeler sales also witnessed a decline of 53 per cent at 4,10,757 units last month, as compared to 8,65,134 units in April.
Similarly, commercial vehicle sales dropped by 66 per cent to 17,534 units last month, as against 51,436 units in April.
Three-wheeler sales saw a decline of 76 per cent to 5,215 units last month, from 21,636 units in April this year while tractor sales witnessed a dip 57 per cent to 16,616 units last month, against 38,285 units in April.
'The second wave of COVID has left the entire country devastated as there may not be a single household which did not get affected. Apart from urban markets, this time, even rural areas were badly hit. May saw continued lockdown in most of the states,' FADA President Vinkesh Gulati noted.
He added that the auto retail fraternity is in dire need of support amidst business disruptions due to the coronavirus pandemic.
'While a handful of original equipment manufacturers (OEMs) -- Tata Motors (CV unit), Renault, Bharat Benz and HMSI have announced financial help to their channel partners, others are yet to do so. Hence, FADA humbly requests all those OEMs which have still not announced any financial assistance to kindly do it urgently,' Gulati said.
He also appealed to the government that instead of restructuring, banks should allow a moratorium of 90 days to all categories of dealers without keeping a turnover limit.
'This is required as auto retail trade works on the principle where dealers get funded from financial institutions in terms of inventory funding for a period of 30-45 days (depending from bank to bank) to purchase vehicles from auto OEMs,' Gulati noted.
He said that since the current lockdown has already lasted well over 30-45 days and is still continuing in South India, revenues of most of the dealers were hit due to minimal sales.
'Due to this, dealers will not be able to repay their loan tranche payment which is due. This will ultimately lead towards default. Since there are no guidelines, extension of tranche is considered as restructuring of loan. This will ultimately have a negative impact on dealers credit score as their CIBIL rating will get impacted,' Gulati said.
On sales outlook, he noted that FADA continues to remain guarded in its optimism on overall industry recovery in the current fiscal.
In the near term, normal and evenly spread rains may bring an early respite for the rural economy thus pushing demand for vehicles faster than expected, Gulati said.
