Fresh restrictions imposed in Maharashtra may impact festive season auto sales: ICRA

Mumbai: The fresh restrictions imposed in Maharashtra to contain the second wave of COVID-19 are likely to impact the festive season auto sales, as Navaratri and Gudi Padwa are falling in April, according to rating agency ICRA.

These two festivals account for a sizeable chunk of the annual vehicle sales across the country, especially in Maharashtra, it said. Gudi Padwa, which is a major festival of Maharashtra, will be celebrated on April 13, while Navrarati will also begin on the same day.

The Maharashtra government earlier this week announced a slew of restrictions, including night curfews and weekend lockdowns to curtail the rapid spread of the pandemic.

The state government has imposed stricter restrictions to curb the rapid spread of COVID-19 infections. Automobile dealerships, which are also covered under Shops & Establishment Act might have to remain shut till April 30, ICRA vice president Ashish Modani said in a statement on Friday.

“Festive periods like Navratri and Gudi-Padwa falling due in April account for a fair share of annual vehicle sales across the country and especially in Maharashtra. Accordingly, lockdown restrictions will impact vehicle sales and thereby the financial performance of auto dealers, who have struggled during the past one year,” he said.

Restriction on dealership operations could have a short-term impact on liquidity, as most dealerships rely on inventory funding facilities, which have a pre-defined payment period and they may require refinancing to tide over the possible deficit in cash flows, according to Modani.

Support from OEMs as well as financiers thus remains critical for Maharashtra-based automobile dealerships in the interim period, he added.