It has been a month since more than 25,000 car dealerships in dilapidated parts of the country asked Prime Minister Narendra Modi to close, in hopes of stopping the spread of the coronavirus.
Merchants selling two-wheelers, cars, and heavy trucks were prohibited from practicing sales activities almost overnight, thereby interrupting all physical activities such as visiting the buyer at the dealership or delivering vehicles.
This has led to an unprecedented loss that affects millions of people who threaten viability, even though automakers are struggling to save their partner dealerships without the front end collapsing. Virtual.
According to a report by Anand Rathi’s broker, two out of five reservations made for five cars in March were canceled due to budgetary constraints, precarious employment, and rising costs. Several distributors are revising cost reductions, renegotiating rents, reducing staff, stocks, wages, and incentives to ensure business continuity.
Car dealerships range from 10 million to 1 trillion rupees, but most car dealerships are small, family-run businesses scattered across the country. According to the Federation of Automobile Dealer Associations (FADA), each car dealership has an average of 70 to 150 employees.
Dealers employ more than four million people in car dealerships, and service centers provide direct employment to 2.5 million people, and 1.5 million others are indirectly involved, according to FADA.
“We barely make a profit from (vehicle) sales. The margin is less than 2.5% per vehicle. Our profits come from closed service centers and the slowdown will force many car owners to postpone service”, a car dealer told Maruti Suzuki from southern.
Recently, several companies have started opening mini-showrooms, especially indoors, to take advantage of the interior of the country with minimal investment from retailers. These facilities, owned by small investors or large urban companies, generally house 2 to 3 vehicles.
“Our sales margin was 5 percent, but now it is now imperceptible. With the arrival of many other retailers and the advent of online sales, it will certainly no longer be profitable,” said another Maharashtra distributor who wants to keep anonymity.
In recent weeks, automakers have come forward to ease cost pressures on dealerships who are announcing budget offers. However, the closure of more than 300 retailers in the past year has become an indicator of community stress. The added challenge of complete closure will further examine financial viability.
The automakers have announced a number of measures to help their dealers. This includes direct cash support, the release of interest charges for inventory, including vehicles in physical inventory and transit inventory, the repayment of unused funds from the dealer that goes to the business that is passed on to the dealer, and the credited service claims to name a few.
YS Guleria, Director (Sales and Marketing) of Honda Motorcycle and Scooter India, said: “We have seen an unprecedented situation due to the coronavirus and none of us have ever seen anything like it before. It is too early to say how many traders will be affected. It depends on the training recovery plans of each automaker for the particular network. “”
However, the help package implemented by the manufacturers offers comfort only for the immediate period. The consequences of the COVID-19 pandemic will last several months and retailers and manufacturers fear.
Anand Rathi’s survey results show that car dealers expect losses of around three to four months after the blockade is lifted, which could prevent them from paying their wages from May.
“Most commercial vehicle dealers suffered significant losses in the prior year due to the downturn. Given the current situation, we expect that some traders will face a cash crisis from May / June unless the closure is lifted. However, the problem of weak retail sales would lead to sustained losses for nine months after the blockade was lifted, “added the report.
Some automakers have resumed production after certain states have given them permission. Given the imminent weak economic recovery, creating demand is more of a challenge for the industry than the recovery of production chains.
“The impact of the pandemic on demand seems to belong and the economic recovery can take more than 3 to 6 months. It depends on the economic package that the government plans to support the industry. All of this has contributed to the misery of the industry, “added Guleria.