Retail automobile sales down 89% in May, extremely low demand in June so far

India's economy may be slowly getting back on its feet with lockdown restrictions being eased in most parts of the country but retail automobile sales for the month of May paints a very grim picture on the ground. After posting zero sales in April, overall sales declined by nearly 89 percent in May when dealerships were allowed to reopen all over the countries except those that fell under the containment zones.  

Sale of commercial vehicles witnessed the steepest fall at 96.6 percent as only 2,711 units could be delivered to customers during the month, shows data compiled by Federation of Automobile Dealers Association (FADA). Over 80,000 trucks and buses were delivered to customers in May 2019.

Two wheelers also saw a steep 88.8 percent drop at 159,039 units while passenger vehicle segment registered a 87 percent decline at 30,749 units.

"While lockdown was gradually relaxed beginning May, Auto Dealerships and workshops opened for the first time after 40 days in many cities. At the end of May, out of 26,500 outlets about 60% showrooms and 80% workshops were operational across the country. May registrations are hence not indicative of the demand situation as the Lockdown still continued in many parts," said Ashish Harsharaj Kale, president FADA.

Kale however warned that demand situation continues to be down and footfalls at dealerships in June were low.

"First 10 days of June witnessed extremely low demand despite most dealerships which are now open for business. Weak consumer confidence especially in urban areas continue to haunt as customers stay away from concluding their purchase due to threat of community spread and return of complete lockdown persists," he said. "With an assumption of no further lockdown and continued reopening measures, there will be substantial pick up in auto retails in June as compared to May, but the overall outlook continues to be grim with projected sales to witness a de-growth upwards of 25 percent year on year."

After an 18 percent drop in sales in fiscal 2020, automobile sales across the country are projected to witness another steep near 35 percent decline in sales in 2020-21. It would result in widespread losses for dealerships across the country and FADA has been demanding higher margins from automobile companies to tide over the crisis.

"We are strongly pursuing with all our principals to correct the long pending anomaly of low sales margin and revise it upwards to 7 percent to get it at par at least at the lower band of global dealer margin which ranges from 7-14 percent," Kale said. "Lakhs of jobs and survival for hundreds of dealers are at stake if demand de-growth predictions hold true and operating economics remain unchanged."

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