The outbreak and spread of coronavirus in the country have led to an alarming 45 per cent drop in footfalls in automobile showrooms across the country over the last one week and may impact stock clearance ahead of the March 31 BS VI transition deadline, dealer body Federation of Automobile Dealers Association (FADA) warned on Thursday.
It is getting progressively worse. Footfalls declined by 10-15 per cent in the first week of this month and have deepened between 25-45 per cent over the last five days.
The association said inventory levels for two-wheelers at 20-25 days continue posing a problem and while the overall consumer sentiment in the market remained low, news of the spread of the virus has added to the challenge for the dealer community.
"Dealers are now facing a new challenge with coronavirus cases being detected in India and an alarming drop in customer walk-ins in auto showrooms. The overall uncertainty of the situation due to coronavirus and the huge drops in the share markets, further contribute to the already weakened sentiment as purchase decisions are getting postponed," said Ashish Harshraj Kale, president, FADA. As it is, banks and NBFCs are getting into a cautious mode with regards to financing BS-IV stocks and many RTOs across the country prescribing their own cut-off dates for permanent registration, retails of 100 per cent of dealer inventory of BS-IV stocks continue to be a challenge.
"Supply of BS-VI vehicles is also affected due to the coronavirus situation in China and an already difficult transition has become even more difficult due to this unexpected outbreak all around. Due to all this, the outlook for the month of March is negative," he added.
The domestic automobile industry posted a marginal growth in overall retail sales in February after three months of continual decline. Sale of two-wheelers posted a 1.5 per cent growth during the month, while commercial vehicles grew by 13 per cent and three-wheelers galloped at 20.7 per cent. Passenger vehicles, however, posted a marginal 1.2 per cent decline in sales.
With the focus firmly on liquidation of all BS IV compliant vehicles before March 31, after which they will not be registered anywhere in the country, dealers are worried over high inventory levels in the two-wheeler segment where a stock-out may be a challenge by the end of the month.
"Despite year-on-year growth, overall retail sales were much below expectations as the expected pre-buying for the BS-IV stocks was not seen. Many customers held on to their purchase decision expecting sweeter deals towards the end of March," Kale said. "On the inventory front, two-wheeler inventory of BS-IV vehicles remains a serious concern. We have urged two-wheeler companies to handhold dealers for full liquidation of their BS-IV stocks. Our survey reveals a high number of two-wheeler dealers will not be able to fully liquidate their BS-IV inventory and have expressed inadequate support from their OEMs for this."
While the average range of inventory for BS IV stocks in passenger and commercial vehicle segments ranges between 10-15 days, the same for two-wheelers remains high at 20-25 days. A majority of the dealers also expect a de-growth in sales in March with more than 80 per cent saying the sentiment was either bad or neutral. The outbreak of the coronavirus, which is grabbing headlines worldwide, is also impacting footfalls and may impair the ability of the industry to clear existing stocks.
"We would once again very seriously urge the government to look towards a relief package for the auto Industry with temporary reduction in GST till return of stability and a financially attractive scrapage policy," he added. "It will also help in reviving CV sales which currently is the worst hit."