Ease of Doing Business for MSMEs: The sales recovery this fiscal year is expected to be patchy at 10-15 per cent while chances of a third Covid wave, increase in fuel prices, and supply constraints of original equipment manufacturers (OEMs) are likely to be reasons that could slow the sector down.
Ease of Doing Business for MSMEs: Even as the government had recognised auto dealerships as micro, small and medium enterprises (MSMEs) in the Union Budget 2021-22, a large number of two-wheeler dealers are yet to register themselves as MSMEs, according to a survey by credit rating agency Crisil. 67 per cent of two-wheeler dealer respondents weren’t registered as MSMEs in comparison to 63 per cent and 72 per cent of passenger vehicle dealers and commercial vehicle dealers respectively who were registered as MSMEs.
Moreover, most of the dealers were not even aware of the different credit schemes available for MSMEs and had only availed moratorium extension so far. Not just 76 per cent of two-wheeler dealers but 54 per cent of passenger vehicle dealers also didn’t know about schemes that could enable them to access additional credit facilities. The survey noted, “The government’s tweaks in law permitted auto dealerships to register as MSMEs, which would help them get easy access to more credit avenues and various schemes; however, their awareness about the schemes is low.”
“On a regular basis, we engage with dealers on how the MSME registration is done but ultimately the registration has to be done by themselves only. There are a lot of dealers who are new into the segment, many keep entering and exiting the dealership market also and at times it becomes difficult to track them but we keep updating them on the process to be followed for MSME registration and schemes around MSMEs. There are around 30,000 dealerships (across India in the auto retail industry) and it might take some time for many of them to register as MSMEs,” Saharsh Damani, CEO, Federation of Automobile Dealers Associations (FADA) told Financial Express Online. FADA is the apex body of the automobile retail industry in India engaged in the sale, service, and spares of two and three-wheelers, passenger cars, utility vehicles, and commercial vehicles.
“The government has announced a slew of measures such as credit guarantee schemes, collateral-free loans, and interest subventions for the benefit of MSMEs. Although auto dealerships have started registering themselves under MSME, however, most have only availed loan moratorium till now and are not aware of other schemes applicable for MSMEs. Creating awareness of the schemes amongst the auto dealerships will enable them to access such credit facilities and secure them during such unprecedented times,” Bhushan Parekh, Director, Crisil SME Solutions told Financial Express Online.
While the lack of awareness and lower registration count is a challenge, importantly, the sales recovery this fiscal year is expected to be patchy at 10-15 per cent according to the two-wheelers, passenger vehicles, and commercial vehicles dealers, as per the survey of 123 dealers. However, chances of a third Covid wave, increase in fuel prices, and supply constraints of original equipment manufacturers (OEMs) are likely to be reasons that could slow the sector down.
The volume share of MSME borrowers in the auto and auto components industry, which had close to 1.29 lakh borrowers as of June 2020, stood at 90.55 per cent as of June 2020. Amid Covid, this had increased marginally from 89.51 per cent during the year-ago period and 88.88 per cent as of June 2018, according to the data from SIDBI and credit bureau CRIF’s report in January this year.
This story was updated with Crisil’s statement later.