2-Wheeler Retail Sales Fall 53% Percent; FADA Demands Govt Support

2-Wheeler retail sales May 2021 registered a massive fall after an already dull April. This comes on the back of similar trends last year…

Due to the devastating second wave of the COVID pandemic retail automobile sales have plummeted in India. Federation of Automobile Dealers Association (FADA) has released its monthly data for May 2021.

Drop in the Sales Figure

Since India was under complete lockdown in May 2020, sales have been compared with May 2019 and the previous month of April 2021. According to the statistics provided, monthly sales declined by 55 percent. Among them, Two wheeler sales dropped by 53 percent as compared to April’s already low numbers.

India registered total retail sales of 4.10 Lakh units of 2-wheelers against 14.20 Lakh units in May 2019 and 8.65 units in April 2021.

3W/PV/Tractors/CV sales dropped by 76%, 59%, 57% and 66% respectively. Sales and services both have been interrupted due to the ongoing lockdown which is getting extended due to a surge in the infection cases.

This time the rural markets have also been affected which further takes a toll on the sales of the commuter segment which is the major contributor to the volumes in India.

FADA has requested the Prime Minister to mandate RBI to grant a moratorium for loan repayment by auto dealerships in India. The federation appeals to the banking bodies to grant a 90-day moratorium for all levels of dealerships.

The Need for Moratorium

In the automobile business, financial corporations provide funding to the dealers for 30 to 45 days in terms of inventory funding. This allows the dealers to buy their required lots of vehicles from the automakers.

As we know in most of the states lockdown has extended well over a month making sales and revenue negligible for the authorized dealers. No sales causing no revenue which in turn disables the showrooms to repay the funding they get from the financial institutions.

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The non-repayment will result in a decline in the credit score of the dealerships. Hence, the relaxation period from RBI will help the dealerships to make some sales (provided unlock goes into effect) and create enough revenue to repay the loans.

While the first week of June brought a ray of hope for the automobile sellers in some states, further enforcement of lockdown in others have dashed hopes of many showrooms. If this continues, the dealerships fear that they will face an unrecoverable loss.

2-Wheeler retail sales May 2021

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FADA has also urged the automakers to provided financial support and relaxation. As of now, a few names such as Tata Motors, Bharat Benz, Honda, and Renault have extended financial help for their partner showrooms.

Recently, we did mention Eicher Motors’ decline in sales due to COVID affecting their production line. The same issue is happening with almost every automaker. Both sales and services have fallen sharply. We can hope that government accepts the plea of FADA and redirects RBI to relax the repayment dates to make space for the dealers to sell the existing automobile and make a profit.

We will share individual sales of all the automakers in our next story.