FADA seeks relief measures to cover auto dealers during Covid-19 crisis

Founded in 1964, FADA India represents over 15,000 automobile dealers having 25,000 dealerships, including 30 associations of automobile dealers at the regional, state and city levels, accounting for 90% of automobile sales and service in India.

By:April 14, 2020 10:22 AM


The Federation of Automobile Dealers Associations (FADA), the apex body of automobile retail in India, has sought a number of relief measures, including working capital support, grant of MSME extension to auto retail, reduction of GST or direct benefit transfter, priority sector tag for the industry, among others. Covid-19 has come as a shock to all of us as the Indian auto industry was preparing for recovery in sales, it said. In a letter to the prime minister with a copy to other union ministers, FADA president Ashish Harsharaj Kale said, “A new normal growth rate is going to be set post Covid-19 which is projected to be far lower than the normal, under which we have been operating in recent times. SIAM, the automotive apex body, has projected that the country will witness a huge drop in auto sales which could be as high as 35% for some segments. This is over and above the 18% degrowth of FY20. If not supported in such a scenario, many auto dealers will go out of business and along with them the livelihood of hundreds of thousands which we employ.”

He pointed out that the auto dealers business ranges from `10 crore to `1,000 crore, but majority of the auto dealerships are family run small scale businesses spread across every nook and corner of the country. Each dealership on an average employs 70-150 people. Majority of the employment is hired locally thus not displacing them from their home locations. “For the last 15+ months, the auto industry has already been under an unexpected severe slowdown. More than 275 dealerships had to shut down during this period and thousands of jobs were lost in the process,” Kale mentioned in his letter.

Founded in 1964, FADA India represents over 15,000 automobile dealers having 25,000 dealerships, including 30 associations of automobile dealers at the regional, state and city levels, accounting for 90% of automobile sales and service in India. “Together, we employ over 40 lakh employees in the country at dealerships and service centres with 25 lakh direct employees and another 15 lakh are indirectly dependent on dealerships for their livelihood,” Kale said.

“Hence, the PM should, in the short term help the industry with working capital support, including reset the clock for the period of the lockdown for auto dealers on all working capital limits, complete waiver of interest on all category of loans from banks and NBFCs for the period, extending 4% interest subvention/subsidy for working capital/loan requirements to companies for a period of 9 months post lockdown and allowing 20% additional overdraft on sanctioned credit limits for a period of 6 months post opening to support salary disbursements and other fixed expenses cash.”

Kale said the 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. Also, grant of MSME extension to auto retail is the need of the hour as the subsidies and incentives received under the MSME division will provide much-needed relief to automobile dealerships which provide direct and indirect employment to lakhs.

Kale in his letter further said that the post Covid-19 scenario is expected to dent the consumer sentiment further and till a complete cure is not found, confidence on spending will be low with the fear of another lockdown hanging out there. “Hence, the government should announce demand boosters such as reduction of GST or direct benefit transfer (a reduction in GST for a temporary period will lower the cost of acquisition and will be a good incentive towards stimulating demand), extending depreciation benefits for FY21 and include individual buyers (to boost vehicle demand further, we request that corporate depreciation scheme which was valid till March 31, 2020, be extended till FY21,” Kale said in the letter.

He added: “Apart from this, we also propose that similar benefits be allowed to individuals for FY21 at an effective rate of 25% (WDV), attractive incentive-based scrappage policy should be introduced immediately for all vehicles which are running on road prior to 2010. The ‘cash for clunkers’ programmes in the US and EU should be looked into as they were implemented successfully), priority sector tag for auto industry (the industry should be included in priority sector lending so that both retail and wholesale financing can be made available easily).”

Kale further said that the current situation can lead to an existential situation for many of the members and their employees. Majority are small scale, family-run businesses with no financial sustenance for such a crisis after already having gone through a tough period in past 15 months. Hence, the prime minister should consider the above relief measures as sought by the Federation to overcome the crisis in both short and long-terms, Kale added.

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