After the Indian automobile industry witnessed its worst sales slump the last financial year, 2020 was expected to show signs of revival. But due to the coronavirus lockdown all across India, the impact from it was unforeseen at the end of the fiscal as well as the beginning of the new financial year. On April 12, the Federation of Automobile Dealers Association sent a letter to the Prime Minister’s Office addressed to Narendra Modi. The letter highlights the challenges faced by the automotive dealers at such a time, as well as requesting measures that it should take into consideration to soften the blow from the COVID-19 lockdown and help secure the future of the industry and jobs which could be at stake.
The Federation of Automobile Dealers Association represents over 15,000 automotive dealers who hold 25,000 dealerships across India. The federation in the letter to the PMO, signed by Ashish Harsharaj Kale, President, FADA stated that after the lockdown is lifted, a new normal growth rate for the automobile industry will be set which SIAM projects to drop by up to 35% for some segments on top of the 18% drop in the 2020 financial year.
In the letter to the PMO, FADA has stated that it requires the government’s support in this situation else many dealerships will be forced to shut shop and will impact the lively hood of thousands of people employed by the industry. FADA has recommended a temporary reduction of GST and also requested that the automotive sector be provided with a Priority Sector Tag, working capital support along with a grant MSME extension to auto retail. The FADA has also pushed for an incentive-based scrappage policy that has been in works for some time.
The Letter further suggests that “Salary of Employees for the Lockdown Period Should be Paid through ESIC as this is a Health Pandemic and Salary Liabilities Should be Covered under the Same by ESI.”
Auto sales in the 2019-2020 financial year fell drastically with SIAM reporting the overall domestic volumes saw a drop of 18% while passenger vehicles segment sales alone dropped by 17.8%. The largest hit was taken by the domestic heavy and medium commercial vehicle segment that registered a drop in sales by a massive 42.4%. Overall production was down by 14.7%, while overall automotive exports saw a marginal growth of around 3%.
As the automotive industry was also transitioning from BS4 to BS6 emission norms from April 1, FADA had earlier stated a significant amount of inventory was still left unsold before the deadline. But due to the nation-wide lockdown in the final weeks of March 2020, not only was the sales of old BS4 stocks affected, the domestic sales for the industry were impacted significantly as well. The overall industry registered major degrowth of 33.61% in March 2020 while domestic passenger vehicle sales halved as it dropped by 51%.
Prior to the lockdown, many automakers had also planned on new product launches, some of which have been pushed back due to the coronavirus lockdown. With the delay in new models arriving, leaving BS4 models discontinued awaiting on new BS6 compliant models to arrive in the meantime will also create a dent in sales.
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