Dealership shutdowns: 28% decline in April; May will be worse, says FADA's Vinkesh Gulati

Vehicle registrations in the financial year 2020-2021 were at their lowest levels in eight years, due to the sweeping impact of COVID-19 on demand, production, and the entire automotive value chain.

According to data released by the Federation of Automobile Dealers Association (FADA), the number of vehicle registrations in FY21 fell to 30 percent on a yearly basis, to plunge below FY12-13 levels.

Tractors, which have been on a stellar run in the last year, form an exception to the decline, with registrations in the farm equipment segment growing 16 percent.

Last year, a nationwide total lockdown and related disruptions in supply and movement of people had severely impacted auto sales. Even as the passenger car market staged a handsome and steady recovery, most pronounced during the festive season, production constraints and long waiting periods led to a significant loss in sales too.

But for all other segments of the market, FY21 closed with steep double-digit declines. Two-wheeler registrations were down 32 percent, three-wheeler sales and commercial vehicle sales shrunk by 64 percent and 49 percent respectively, whereas passenger vehicles saw a moderate decline of 14 percent.

FADA estimates it will take at least two years before the market can recover from the lows of FY21 and attain peak levels of FY19.

April sees 28 percent decline, May to be worse off

Registrations for the month of April declined 28 percent on a sequential basis, compared to March. The downward trend was evident across all categories - with two-wheelers, three-wheelers, passenger vehicles, tractors, and commercial vehicles falling by 28 percent, 43 percent, 25 percent, 45 percent, and 24 percent respectively.

But that isn't the end of it. While April's sales suffered due to states imposing partial or complete lockdowns, with almost 70 percent -75 percent of auto showrooms shut by the end of the month, in May the effect will be more pronounced, Vinkesh Gulati, President, FADA, told CNBC-TV18.

Gulati said the market that's currently open for business includes only 30 percent of dealerships on average, and even these aren't able to do business fully. Because many dealers are located in containment zones or in cities where lockdown restrictions are imposed and are facing one or the other COVID-related disruption, retail sales are unlikely to exceed 15- 20 percent volumes in a typical May.

The decline may be worse if the estimates of the virus peaking off in the middle of the month do not pan out as expected.

In fact, FADA says it is already seeing inquiries drop with each passing day even as customers look to delay their plans to buy a new vehicle. As sentiment weakens and concerns around safety loom large, walk-ins to showrooms have been significantly compromised as well.

Dealers have asked state governments to permit them to open showrooms for the delivery of vehicles required in essential operations and operate two-man emergency operations to cater to this minuscule demand.

FADA has said inventory levels remain elevated at 15-17 days for passenger vehicles and 30-35 days on average for two-wheelers.