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India auto dealers see sales plunge off the cliff on pandemic-driven lockdown

14, Apr. 2020

By Atul Ranjan

NEW DELHI, NNA- Hit by an unprecedented double whammy of economic slowdown and pandemic-driven lockdown, automotive dealers in India have sent an SOS to the government seeking financial support, among other things, to stay afloat during these trying times.

The Federation of Automobile Dealers Associations (FADA), the apex body of automobile retail in India, said the economic impact of the ongoing nation-wide lockdown to curb the spread of coronavirus outbreak will further add to the woes of the retailers already suffering from low demand since late 2018.

“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…,” FADA wrote in a letter sent to India’s Prime Minister Narendra Modi on Sunday.

Any recovery after the coronavirus crisis would still be grim and "is projected to be far lower than the normal," warned the federation, adding that many auto dealers will go bust if they do not receive help.

FADA noted that the Society of Indian Automobile Manufacturers (SIAM), the apex national body which represents all major vehicle manufacturers, had given a damning outlook, forecasting a steep decline in auto sales by as much as 35 percent for some segments.

This is almost double the negative growth of 18 percent the passenger car industry had been struggling with in the domestic market in the last fiscal year that ended on March 31, 2020.

The crisis brought about by COVID-19, the respiratory disease caused by the novel coronavirus "has come as a shock to all of us,” FADA said.

The association represents over 15,000 automobile dealers which run 25,000 dealerships across the country.

A file photo taken in July 2019 shows a Volkswagen AG dealership in the northern Indian city of Gurugram. (NNA)
A file photo taken in July 2019 shows a Volkswagen AG dealership in the northern Indian city of Gurugram. (NNA)

Some automakers have already stepped forward to help dealer partners tide over the current crisis. One of them is the country’s second largest two-wheeler manufacturer Honda Motorcycle and Scooter India Pvt. Ltd. (HMSI), a subsidiary of Honda Motor Co.

Last week, HMSI announced a slew of measures including advance payment of incentives and reimbursements as well as buy-back of unsold inventory of polluting Bharat Stage 4 (BS-IV) compliant vehicles.

Electric vehicle dealers have also reported that 10 to 15 percent of the 1,400 dealerships in the country were either stressed or on the verge of closure, according to the Society of Manufacturers of Electric Vehicles (SMEV).

Struggling dealerships "may go out of business as sales of EVs are likely to continue to face headwinds even post-COVID-19 as people may not immediately flock to showrooms to buy EVs,” Sohinder Gill, director general of SMEV told NNA in a phone interview last Saturday.

“In the absence of any external support, they won’t be able to survive,” he said, adding that the country’s electric vehicle industry is still at a nascent stage. Its potential attracted many startups which have now found it difficult to support themselves and their sales network, he said.

One EV startup, Benling India Energy & Technology Pvt. Ltd., a unit of China’s EV maker Dongguan Benling Vehicle Technology Co., is currently facing financial issues, according to a senior executive. Benling started selling its electric scooters in the country only last year.

“Among the other issues, the uncertainty surrounding COVID-19 has made our investors very cautious. We don’t know how this EV market is going to pan out in the country,” the Benling executive told NNA.

He said its manufacturing plant at Manesar in the northern Indian state of Haryana has temporarily suspended operation.

According to the World Bank’s report issued on April 12, India’s gross domestic product (GDP) growth for the last fiscal year ending March 31 fell to 5 percent, from 6.1 percent of the previous year.

The global economic fallout triggered by the pandemic is expected to knock down GDP to between 1.5 and 2.8 percent for the current year.

Meanwhile, India has extended its three-week lockdown by more than two weeks till May 3. Its total number of confirmed COVID-19 cases hit 10,363 with 339 reported deaths as of Tuesday morning, according to the government.