Automobile dealer volumes to jump 10-15 per cent this fiscal: survey

New Delhi, Sep 1 (KNN) Dealers of two-wheelers, passenger vehicles and commercial vehicles expect sales to increase 10-15 per cent this fiscal on a low base of last fiscal, driven by new model launches, pent-up demand, and festive season sales, said a survey by CRISIL.

On the flipside, a possible third wave, spurt in fuel prices and supply constraints of original equipment manufacturers (OEMs) are seen among factors that could slow the sector down.

"Last fiscal did see a demand uptick during the festival season, but it did not sustain. Two-wheeler dealers were the most impacted. This fiscal, too, sales across segments are yet to reach pre-pandemic levels. Also, the deal conversion cycle has doubled, with customers deferring purchase decisions. While sentiment is positive among dealers, the risk of a third wave during the upcoming festive season is a key concern," said Bhushan Parekh, Director, CRISIL.

Similar to last fiscal, regional performance is expected to show sharp variation. While most passenger and commercial vehicle dealers expect sales to improve across regions, 44 per cent of passenger vehicle dealers in the north and 40 per cent of commercial vehicle dealers in the south expect a decline. Last fiscal, 45 per cent of the commercial vehicle dealers surveyed in the north and 67 per cent in the west witnessed over 20 per cent on-year decline in sales.

Overall, two-wheeler dealers are optimistic about sales this fiscal. Dealers in the east and west expect higher sales, while 33 per cent in the north and 20 per cent in the south are not as hopeful. Last fiscal, ~60 per cent of the two-wheeler dealers surveyed in the north and south reported over 20 per cent on-year decline in sales.

"Low inventory levels will help in quicker recovery and also reduce holding costs. About 75 per cent of the surveyed dealers reported vehicle inventory of less than 45 days due to better management. Indeed, while lockdowns started in April this fiscal, they had liquidated inventory in March. Added to this, staff rationalisation and cost control measures initiated last fiscal have softened the impact on dealers’ financials. Majority of the survey respondents do not expect any material retrenchment or attrition of staff, or dealership exits this fiscal," said Mubasshir Bakir, Associate Director, CRISIL.

Though the government did not introduce specific measures for the auto industry’s revival in Union Budget 2021-22, it recognised auto dealerships as micro, small and medium enterprises (MSMEs). Since then, a large number of commercial and passenger vehicle dealers surveyed have registered themselves as MSMEs, though two-wheeler dealers are yet to do so. This could be because many dealers are not fully aware of the credit schemes available for MSMEs and have only availed of moratorium extension until now.