Auto dealer volumes to improve by 10-15% in FY22: CRISIL

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In FY22, automobile dealers volumes are expected to go up by 10-15%, due to the festive season sales and pent-up demand coupled with new launches, according to a survey by credit ratings agency CRISIL. However, CRISIL said that factors like, a potential third Covid wave, rise in fuel prices and supply constraints of Original Equipments Manufacturers (OEMs) could slow down the sector on Monday.  Adding to that the credit ratings agency said that the performance of the automobile dealers varies sharply from region to region with the dealerships in north India being impacted the most.

In the last fiscal, the festive season saw a demand uptick but that did not sustain, with two-wheeler dealers being the most impacted. Sales across segments are yet to reach the pre-pandemic levels in this fiscal too, it said.

East and west expect higher sales in two wheeler segment

Compared to the last fiscal, regional performance is expected to show sharp variation, the survey highlighted.

In the passenger and commercial vehicle segment, 44% of passenger vehicle dealers in the north and 40% of commercial vehicle dealers in the south expect a decline, though  majority of dealers in the segment expect sales to improve across regions

Last fiscal, as many as 45% of the commercial vehicle dealers surveyed in the north and 67% in the west witnessed over 20% YoY decline in sales. Overall, two-wheeler dealers are optimistic about sales this fiscal, CRISIL said. At the same time, dealers in the east and west expect higher sales, while 20% in the south and 33% in the north are not as hopeful.

According to the ratings agency, Last fiscal, around 60% of the two-wheeler dealers surveyed in the north and south reported over 20% YoY decline in sales

CRISIL also said that low inventory levels will help in quicker recovery and also reduce the holding cost. About 75% of the dealers reported vehicle inventory of less than 45 days due to better management.  While lockdowns in April this fiscal, had liquidated inventory in March.

Staff rationalisation and cost control measures initiated have softened the impact on dealers’ financials in the last fiscal, it added. Majority of the survey respondents do not expect any material retrenchment or attrition of staff, or dealership exits this fiscal, it said.

The survey, carried over 123 dealers of two-wheelers, and passenger and commercial vehicles with a fair mix across regions and OEMs, was aimed at gauging dealer sentiment and expectations and drawing a comparison with the findings of the poll conducted previous year’s poll, CRISIL said.