Dealers said that the overall demand is still not back to pre-Covid levels as banks and NBFCs continue to have a cautious approach towards funding.
Federation of Automobile
Dealers Associations (FADA's), President, Vinkesh Gulati said that with the start of the festival season and the government’s continued effort to open up India, the month of August saw good numbers when compared to immediate previous months. August also saw an arrest in decline and pullback efforts on all fronts were visible, though on Y-o-Y, all categories except tractors continued to fall, though at a slower pace.
He added, "passenger vehicles after five months saw a decline reducing it to the single digit. Customers who were sitting on the fence finally concluded their purchase during the ongoing festivals of Janmashtami and Ganesh Chaturthi. Entry-level passenger vehicles were in high demand as personal mobility is being preferred with the current pandemic showing no signs of reduction.
Apart from rural market which was showing revival signs until now, urban centres for the first time showed initial signs of demand pullback. With the government’s priority in spending towards rural development and agriculture, coupled with good monsoon and a healthy sowing season, tractor, small commercial vehicles and entry-level passenger vehicles positively impacted the August sales.
"Commercial vehicles, especially M&HCV category is still suffering from higher lead times with financers and an increase in the cost of acquisition leading to viability issues. A stricter CIBIL score is also affecting customer finance," said Gulati.
The association requested the government to announce demand boosting stimulus and awaits the announcement of the reduction in GST for 2-wheelers.
"We also await the much-required incentive-based scrappage policy. Both these measures will act as demand drivers for two-wheelers and especially medium & heavy commercial vehicles sales in India thus once again making the auto industry, a lead indicator for India’s growth,” he said.
On the outlook, he said, "September brings with itself, the inauspicious 16 days Shraadh period. This coupled with 30 days of Adhik Maas (an extra month in the Hindu calendar that is inserted to keep the lunar and solar calendars aligned) is considered inauspicious in North, East and West India when no high value transactions take place."
The moratorium period from banks has ended on Aug 31, during this period, if NPA’s are not too high and the recovery rate is even neutral to positive, banks and NBFC’s may return with aggressive financing schemes for auto loans thus leading to a strong demand pullback.
"While OEM’s are dispatching vehicles to dealers with a purpose of stocking-up inventory for the upcoming festival season, retail sales are still at 70-75 per cent despite the low base of last year. FADA advises extreme caution to all OEMs and our dealer fraternity to avoid excessive Inventory build-up thus leading to unmanageable interest cost which could further result in dealership closures," said Gulati.