The automotive retail sales for May 2020 degrew by a whopping 88.87%, with the passenger vehicles segment alone declinind by 86.97% due to lack of demand and poor consumer sentiments, said the Federation of Automobile Dealers Associations (FADA) on Thursday. The apex auto dealers’ body does not expect sales to recover anytime soon despite lockdown curbs being eased. In a release here, FADA said the overall vehicle registration for May has plummetted by 88.87% to 202,697 units (18,21,650 units) as the country continues to battle with Covid-19 and a nationwide lockdown. On a y-o-y basis, all vehicle categories register unprecedented degrowth. While the two-wheeler segment degrew by 88.8% to 159,039 units (14,19,842 units), three-wheelers by 96.34% to 1,881 units (51,430 units). Commercial vehicles declined by a whopping 96.63% to 2,711 units (80,392 units), and the PV segment declined by 86.97% to 30,749 units (235,933 units). Tractors registrations declined by 75.58% to 8,317 units (34,053 units).
Commenting on the May sales performance, FADA president Ashish Harsharaj Kale said, “For the first time in history, 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. At the end of May, out of 26,500 outlets about 60% showrooms and 80% workshops were operational across the country. May registrations were hence not indicative of the demand situation as the lockdown still continued in many parts.”
According to him, “The first 10 days of June witnessesd extremely low demand despite most dealerships which now open for business. Weak consumer confidence, especially in urban areas, continues to haunt as customers stay away from concluding their purchases due to the threat of community spread and return of complete lockdown persisting. With 7.6% of GDP, a workforce of several million 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 a return to normalcy seems difficult till the festive season,” Kale pointed out. Mobility still being a necessity and not a luxury in a growing country like India, demand stimulus along with credit support can bring auto sales back in the positive zone in 30-60 days and help shore up consumer confidence, he added.
The demand trend in first 10 days of June shows extremely weak consumer sentiment. Fear of Covid-19 community spread and a second lockdown keeps customers away from purchases. There is no direct Covid-19 support for the dealership community as an MSME status still under consideration. FADA has appealed to the government to stimulate demand in the short term and support the auto industry, and the millions of jobs it provides. FADA further said that with an assumption of no further lockdown and continued reopening measures, there will be substantial pick-up in auto retails in June compared to May, but the overall outlook continues to be grim, with projected sales to witness a degrowth upwards of 25% y-o-y in June.
Urban demand will continue to face challenges with the Covid-19 uncertainty. On the flip side, the government’s push for infrastructure spending and the recent positive measures announced for the 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 a lesser degrowth compared to their urban colleagues.
The apex dealers’ body said a projected annual degrowth of 35% by SIAM on top of the 18% degrowth faced last year, the dealership community faces its toughest years ever as volumes are estimated to half in a span of 20 months. With no direct support as business community, except for the moratorium extension given to all businesses, the dealership community looks forward to an early recognition as an MSME to avail government support for the survival and for its 40 lakh workforce.
With cost-cutting having its limitations due to the nature of the business, FADA is strongly pursuing with all its principals to correct the long-pending anomaly of low sales margin and revise it upwards to 7% to get it at par at least at the lower band of global dealer margin which ranges from 7%-14%. FADA will strongly continue the campaign for higher business margins for the survival of its members in these uncertain times, as it will also help it in self-sustenance as many more disruptions will come in the future in a globally connected world.
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