Auto retail sales drop 55 per cent in May as COVID puts brakes on vehicle registrations

Retail auto sales in India in May 2021 were down by 55 per cent compared with April 2021 data, according to vehicle registration data issued by dealer association body FADA. Retail auto sales also fell by 71 per cent to just 5,35,855 units in May 2021 as against 18,22,566 units in May 2019.

Unlike other months, there can't be an annual comparison since India was under complete lockdown in May 2020. Hence, all comparisons have been done with April 2021 (MoM) and two years back with May 2019.

FADA President Vinkesh Gulati said, "Apart from urban markets, this time, even rural areas were badly hit. May saw continued lockdown in most of the states. Not surprisingly, auto retail for the month witnessed a bloodbath as sales fell by 55% on MoM basis."

Segment wise, two-wheeler retail sales in May 21 (over May 19) fell by 71 per cent to 4.10 lakh units while passenger vehicle sales were down by 64 per cent to juts 85,733 units. On a monthly basis, 2W sales fell by 53 per cent, 3W by 76 per cent, PV by 59 per cent, tractors by 57 per cent and CV by 66 per cent respectively.

"The auto retail fraternity is in dire need of support. 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," said Gulati.

FADA has appeals 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 the auto retail trade works on the principle where dealers get funded from financial institutions in terms of inventory funding for a period of 30-45 days (varies from bank to bank) to purchase vehicles from auto OEMs, it said.

"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 is negligible as there were minimal sales. Due to this, dealers will not be able to repay their loan tranche payment which is getting due. This will ultimately lead towards 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," said Gulati.

Near term outlook

The first 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 the lockdown. If the trend continues, we may see almost similar sales when compared to June last year, FADA said.

It added, "The monsoons arrived in India almost on time. If Met predictions are to be believed, normal and evenly spread rains may bring an early respite for the rural economy thus pushing demand for vehicles faster than expected."