While sales gradually picked up in May and June, the 1st month of the new financial year (April) saw all auto dealers drawing a blank due to national lockdown
Guwahati: The COVID-19 pandemic disrupted the Indian economy and completely tipped the scales for all sectors of Indian Industries signaling towards a deep recession. As the country saw the end of its first quarter of the fiscal year, the current pandemic seems to have magnified pre-existing risks to India’s economic outlook.
Among the worst-hit industries happened to be the country’s automobile sector. The sector is further in for a huge loss, with a revenue decline of a sharp 40% with an aggregate drop of Rs 75,000 crore worth of business nationwide, according to an ET Intelligence Group report.
Last year, the automobile sector across the globe witnessed massive lay-offs with the market dropping to levels of financial year 2016 towards the end of financial year 2020. This year, with the auto market washed out by the COVID-19 pandemic at the very beginning, the sector is projected to further drop to 2010 levels; bringing it to a new all-time low in the financial year 2021.
Now, in the context of Guwahati in Assam, the first month of the new financial year (April) saw all automobile dealers drawing a blank in sales due to the nationwide lockdown.
Rajdeep Ojha, owner of Ojha and Saraighat Hyundai, Guwahati
In these last two to three days, Ojha said that there has been a retraction in customers because most people decided against traveling all the way to Guwahati to take delivery of cars. The cause for this retraction can be attributed to the fear of COVID-19 and the rapid increase in the number of patients infected by the disease.
Further, the industry is currently facing a huge problem due to a fallback in the supply of vehicles. With a massive decline in production and manufacturing of cars and factories working at a lesser capacity, car dealerships across the country seem to be facing a severe shortage in supply.
“There is a demand for, say, a certain model, but because of the problems in the supply chain, we’re not able to keep up with the demand. Hyundai is roughly at a stock that will help us sustain for not more than a month. We usually have a stock of cars for up to two months,” added Ojha.
Another reason why dealers fear stocking up of vehicles is due to the uncertainty around whether people will be willing to buy cars given the current situation where their incomes have been slashed and where people have been sacked out of their jobs. Stocking up cars would also mean a higher expense for dealers.
“Keeping extra cars means there is an interest cost for us and as far as production is concerned, Hyundai must be producing around 40 to 45% right now. They usually produce about 45,000 to 50,000 cars a month but now they have brought that number down to 15,000-20,000 cars only,” said Ojha, explaining the scenario of production of manufacturers producing a majority of small segment vehicles like Hyundai.
He also explained that among the little demand that they had seen for cars in the first quarter of the fiscal year, was for such cars which were smaller in ticket size.
People are looking to buy small cars because of the social distancing norms. They now prefer to avoid public transport and buy a small car or two-wheeler; that is the trend. It is due to this change in consumer behavior that companies like Hyundai or Maruti have performed relatively better than premium brands like Mercedes, BMW, or Audi according to the Hyundai car dealer.
The same could be assessed by speaking with another automobile dealer from Guwahati who deals in Jeep cars.
“The situation is pathetic; people are not willing to step inside showrooms due to fear of catching the infection. Our dealership caters to the entire Northeast region and not just Guwahati, so that has made it all the more difficult for us. It is just not possible for customers to come to Guwahati right now and there are no walk-ins. There have been close to 90% drop in total sales and we deal in luxury cars,” said Sahil Agarwal, owner of Mahesh Motors.
Another automobile dealer from Guwahati, who deals in Mahindra & Mahindra vehicles, explained the scenario of a sale of SUVs, Pickups, and Small commercial vehicles which were also hit like others by the demand and supply gap apart from the usual fall in demand of the vehicle itself.
“We started operations in Guwahati on the 4th of May. We did only a fraction of our sales volume in May 2020,” said Akshay Poddar, CEO of Poddar Autocorp Private Limited, a dealership of Mahindra & Mahindra Ltd in Guwahati.
“A moderate recovery was expected and seen across all the segments in the Auto-sector in June 2020,’’ he added.
However, the improvement seems to be very minimal just yet. ‘’Normally dealers have an average inventory of about 40 to 45 days, but right now they are operating with an inventory of close to 15 days only,” said a reliable source closely associated with automobile dealerships in Guwahati.
“Maruti Suzuki had done a retail business of around 25% in the passenger vehicle segment in comparison to May 2019. Maruti dealerships too have been operating with an inventory of 30 days only as opposed to about 50 days inventory that they usually hold. People have automatically begun purchasing entry-level vehicles like alto; there is a huge demand for alto and also an acute shortage of the product in Guwahati,” he added.
With easing of lockdown and the value chain slowly limping back to normalcy, constraints afflicting the supply side are expected to be resolved gradually. The street remains hopeful that demand too will catch up soon.