Demonetisation: Car dealerships see near zero sales

Car dealers in India say that demonetisation has brought sales to a screeching halt. 

Federation of Automobile Dealers Associations (FADA), in a statement, said the situation of retail sales is much more alarming than the dealer community could anticipate. “The entire auto retail trade has come under severe stress, " adding, "Most of the dealerships are saddled with stocks and near zero retail. The situation is unlikely to see much improvement till financial year end."

This will result in it effecting even the banking sector as the dealerships may not be able to pay back banks. “As a consequence, it seems unlikely that a majority of dealerships would be in a position to honour their commitments to banks and financial institutions,” it said.

FADA expects as much as a 30% drop in retail sales in November due to demonetisation.

John Paul, President, FADA urged the vehicle manufacturers to come up with their support to reduce inventory at the dealerships and to make available enhanced credits from banks to the dealers.

He said that FADA had taken up the issue with all banks and financial institutions as well, urging them to take a favourable stand so that the auto market would sail through this turbulent situation.

Paul further suggested that banks should also come forward to increase vehicle/personal loan limits for the customers, including 100% on-road funding for vehicle purchases. Likewise, the Government should take steps to reduce the service charge levied by the banks for credit card transactions, which will go a long way in minimising cash transactions.

FADA has proactively established contact with automobile dealers across brands, categories and sizes of business since the announcement of demonetisation of old Rs 500 and Rs 1,000 notes.

A previous report by Zeebiz had seen an impact on car and bike sales as a large majority of sales in rural areas are done using cash transactions. This is more in the case of two-wheelers, SUVs and premium cars.

SIAM too had said that 70% of India's auto sales were financed through loans. But this meant that a large 30% of transactions take place using cash or other instruments. A reason why automobile saleswere expected be impacted in the near term.