Auto retail sales decline 55% in May, passenger vehicle sales drop 59% on 2nd covid wave: FADA

Automobile retail sales in the country declined by 55% in May as compared to April this year as lockdowns across states amid the second wave of Covid-19 hit vehicle registrations, automobile dealers’ body FADA said on Thursday.

Total registration of vehicles in May 2021 fell 54.79% to 5,35,855 units as opposed to 11,85,374 units in April 2021, as per data released by the Federation of Automobile Dealers Associations (FADA).  Two-wheeler sales in May decreased by 53% as compared to 8,65,134 units in April, while three-wheeler sales declined by 76%. Passenger vehicle registrations declined by 59% and tractor registrations fell 57%, MoM (month-on-month), commercial vehicle sales too declined 66%.

“The second wave of covid 19 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,” said FADA president, Vinkesh Gulati.

Auto dealers’ pain

FADA said that the auto retail fraternity is in dire need of support. A few auto companies including Tata Motors-CV, Renault, Bharat Benz, and Honda Motorcycle & Scooter India have announced financial support for channel partners. Other companies are yet to do the same. FADA has appealed to them also to make such an announcement at the earliest.

FADA has also appealed to Prime Minister Narendra Modi to allow 90 days moratorium for auto dealers without any turnover limit instead of loan restructuring.

“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 were minimal sales. Due to this, dealers will not be able to repay their loan tranche payment which is getting due. This will ultimately lead towards default. Since there are no guidelines, an extension of the 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,” Gulati said.

The average inventory for passenger vehicles at the end of May 2021 ranged from 20-25 days while that of two-wheelers was 25-30 days.

Near term outlook:
The first nine days of June saw a better start than expected due to pent-up demand. If the demand continues to grow at the same pace,  then June 2021 may result in almost equivalent sales when compared to June 2020.

The monsoons arrived in India almost on time. As per predictions, normal and evenly spread rains may bring an early respite for the rural economy thus pushing demand for vehicles faster than expected, FADA added.

“It may be prudent to say that India may not witness a V-shaped recovery, unlike last time. FADA hence continues to remain guarded in its optimism on overall industry recovery for the fiscal FY21-22,” it said.