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Early monsoon raises hopes of auto sales

Stuck in reverse gear, auto dealers plead to PM for moratorium.

MUMBAI, June 10 (The CONNECT) – Auto Retail for the month witnessed bloodbath as sales fell by -55% on month-on-month. Similarly, sales of all categories of vehicles fell by a huge degree - 2 wheelers falling by -53%, 3W by -76%, passenger vehicles by     -59%, tractors by -57% and CV by -66% respectively.

“Auto Retail fraternity is in dire need of support,” said Federation of Automobile Dealers Associations (FADA). While a handful of OEMs such Tata Motors – CV, Renault, Bharat Benz and HMSI have announced financial help to their channel partners, others are yet to do so. Hence, FADA humbly requests all those OEMs which have still not announced any financial assistance to kindly do it urgently.

FADA also appealed to the Prime Minister that instead of restructuring, banks should allow a moratorium of 90 days to all categories of dealers without keeping a turnover limit. This is required as Auto Retail Trade works on the principle where dealers get funded from Financial Institutes in terms of inventory funding for a period of 30-45 days (depending from bank to bank) to purchase vehicles from Auto OEMs.

Since the current lockdown has already lasted well over 30-45 days and is still continuing in South India, revenue for most of the dealers are negligible as there was minimal sales. Dealers will, therefore, not be able to repay their loan tranche payment which is getting due. This will ultimately lead towards default. Since there are no guidelines, extension of tranche is considered as restructuring of loan. This will ultimately have a negative impact on Dealers credit score as their CIBIL rating will get impacted, FADA pointed out.

FADA President Vinkesh Gulati said, “The 2nd wave of covid has left the entire country devastated as there may not be a single household which did not get affected. Apart from urban markets, this time, even rural areas were badly hit. May saw continued lockdown in most of the states.”

The 1st 9 days of June has seen better than expected retails due to pent up demand which was there in the system when states started implementing lockdown. If the trend continues, we may see almost similar sales when compared to June’20 last year.

The monsoons arrived in India almost on time. If Met predictions are to be believed, normal and evenly spread rains may bring an early respite for the rural economy thus pushing demand for vehicles faster than expected.

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