Auto dealers sitting at record high inventory levels; seek support package from OEMs and govt

Auto sales for the month of April have been disappointing and the picture is looking gloomy at least for the next couple of months.

Sai Giridhar, Dealer Principal of Saisha Motors, and Nikunj Sanghi, Chairman, ASDC spoke to CNBC-TV18 to assess the impact of localised lockdown.

Sanghi said, “From all indications, it looks like the retail numbers will be worse than the wholesale numbers. Till about third week of last month, about 7,000 dealerships were impacted by lockdowns and that number has gone up to almost 10,000-11,000, which pretty much is more than 50 percent in terms of volumes.”

On government support, Sanghi said, “Manufacturers were playing wait and watch story one because the lockdowns were not national. It happened only in 7 states to begin with and it is difficult to announce some packages for some states and not for others. But the way lockdowns are continuing, we would definitely recommend and this time we will need that backup much more than the last time. OEMs will need to come out with some kind of a support package for dealers otherwise it is tough going ahead.”

“Similarly, I think the Reserve Bank will need to come out and do something about interest cost because those are huge.”

On inventories, Giridhar said, “As far as inventories are concerned dealers are at all-time high inventory and there is reason to it. April being festival months so all the dealers had stocked with them. Since this lockdown has happened I believe everyone is stuck with huge inventories. For two-wheeler, the inventories are somewhere between 60-90 days and for four-wheelers, the inventory is above 30 days.”

He added, “This time I guess, we will be more impacted with lockdowns than last year because there was a lot of support from the central government, it was national lockdown, there were moratoriums and relaxations given to the dealers. This time around it is a kind of wait and watch the situation.