Bloodbath in Auto Industry for May 2021, reveals FADA retail data

This was revealed in the FADA monthly vehicle retail data for May 2021. Unlike other months, FADA could not represent a year on year (YoY) comparison since India was under complete lockdown in May 2020. Hence, all comparisons for  the month of May 2021 have been done with April’21 (MoM) and 2 year back with May 2019.

FADA President Vinkesh Gulati  noted, “The 2nd wave of covid has left the entire country devastated as there may not be a single household which did not get affected. Apart from urban markets, this time, even rural areas were badly hit. May saw continued lockdown in most of the states.”

“While a handful of OEMs (Tata Motors – CV, Renault, Bharat Benz and HMSI) have announced financial help to their channel partners, others are yet to do so. Hence, FADA humbly requests all those OEMs which have still not announced any financial assistance to kindly do it urgently,” he added.

FADA also appealed to the Prime Minister that instead of restructuring, banks should allow a moratorium of 90 days to all categories of dealers without keeping a turnover limit. This is required as Auto Retail Trade works on the principle where dealers get funded from financial institutes in terms of inventory funding for a period of 30-45 days (depending from bank to bank) to purchase vehicles from Auto OEMs.

Since the current lockdown has already lasted well over 30-45 days and is still continuing in South India, revenue for most of the dealers are negligible as there was minimal sales. Due to this, dealers will not be able to repay their loan tranche payment which is getting due. This will ultimately lead to default. Since there are no guidelines, extension of tranche is considered as restructuring of loan. This will ultimately have a negative impact on dealers credit score as their CIBIL rating will get impacted, FADA cautioned.

Near Term Outlook

The 1st nine days of June have seen better than expected retails due to pent up demand which was there in the system when states started implementing lockdown. If the trend continues, FADA hopes almost similar sales when compared to June’20 last year.

All-India Vehicle Retail Data for May’21