'Help or we will die': Auto dealers send SOS to PM Modi amid coronavirus lockdown

KEY HIGHLIGHTS:

• Wish-list includes a wide range of measure to revive the sector
• Many players are small scale family run businesses with no financial sustenance
• SIAM has predicted an over 20 per cent decline in sales this fiscal
• Dealer community already reeling under the changeover from BS IV to BS VI

Automobile dealers have written to Prime Minister Narendra Modi seeking his intervention to support the industry, which is in dire straits due to the coronavirus pandemic.

The wish-list includes resetting the clock for the period of lockdown for working capital limits, extension of 4 per cent interest subvention for 9 months after the end of lockdown, provision for 20 per cent additional overdraft over credit limit for 6 months, reduction on GST on vehicle to spur demand and a priority sector tag for the automobile industry to ease retail and wholesale financing woes.

"The current situation can lead to an existential situation for many of our members and their employees. Majority of them are small scale family run businesses with no financial sustenance for such a crisis after already having gone through a tough period in past 15 months," Ashish Harshraj Kale, the president of Federation of Automobile Dealers Federation, wrote in the letter. 

"Over the years auto dealership business model has come under severe strain with increasing costs and low operating margins thereby reducing our sustenance towards any such shocks as this current corona situation and its after effects. The immediate situation is extremely bleak if not supported."

Sale of automobiles declined by over 18 per cent in fiscal 2020, the worst ever in a year in over two decades. Industry body Society of Indian Automobile Manufacturers (SIAM) has predicted an over 20 per cent decline in sales this fiscal in the worst case scenario of the GDP growing at less than 1 per cent during the year. This will put added pressure on the dealer community already reeling under the changeover from BS IV to BS VI emission norms that has led to significant losses on inventory stocks.

"COVID-19 has come as a shock to all of us as the Indian Auto Industry was preparing for recovery in sales growth after 15 months of a downturn.  A new normal growth rate is going to be set, post the COVID-19 which is projected to be far lower than the normal, under which we have been operating in recent times," Kale said in the letter.

"SIAM has projected that the country will witness a huge drop in auto sales which could be as high as 35 percent for some segments. This is over and above the 18 percent de-growth of FY20. For the last 15 months, the auto industry has already been under an unexpected severe slow down. More than 275 dealerships had to shut down during this period and thousands of jobs were lost in the process. The suggestions that we have made if acted upon immediately, will help us remain afloat in these unprecedented times and also help save lakhs of jobs in the process," Kale added. 

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