Auto dealers seek stimuli, interest-free credit to beat slowdown

Sep 10 2013, 10:03 IST
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The major problem for dealers is the interest cost arising out of a huge inventory. Reuters The major problem for dealers is the interest cost arising out of a huge inventory. Reuters
SummaryFADA said dealers’ financial viability has been hit badly by downturn their survival depends on a stimulus package.

Federation of Automobile Dealers Associations (FADA), the apex body of automobile dealers engaged in the sale, service and spares of two- and three-wheelers, passenger cars and multi-utility vehicles, commercial vehicles (including buses and trucks) and tractors, said that dealers’ financial viability has been hit badly by the current downturn and the high inventory level, and their survival depends on a stimulus package and revival of growth momentum.

“While the Indian auto market has seen cyclical ups and downs, the current recession is the worst it has ever confronted and much worse than the 2008 global financial crisis,” said Gulshan Ahuja, secretary-general, FADA.

“There is a slowdown across segments and the sentiment is negative. The prolonged downturn has cast a gloom on the market. Automobile dealers, in particular, confronted by a host of challenges, are finding it difficult to stay afloat," he added.

Speaking to FE, he said: “The major problem for dealers is the interest cost arising out of a huge inventory. Against a normal inventory period of 15 days, the level has gone beyond a month. So, dealers have to keep the inventory with high interest cost borrowings. This apart, costs on warehousing, watch and ward, electricity/power consumption etc have further strained dealers’ margins substantially.”

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