The Hindu Business Line : Vehicle dealers fear the worst as inventories pile up

Difficult road
Dealers cannot sustain losses for over 3-4 months, says auto dealers body
Hyundai undertakes internal discounting
Maruti gives dealers more time to bring down inventory

K. Giriprakash

Bangalore, Nov. 20 Vehicle dealers, including those who sell passenger cars across the country, fear they may be forced to start surrendering their dealerships if sales continue to slow down for another three months.

“We don’t think most of the dealers can sustain losses for more than three-four months,” a spokesperson for Federation of Automobile Dealers’ Association (FADA) told Business Line. He said the most affected would be the smaller dealers, and those situated in semi-urban areas may be forced to surrender their dealerships. “Several dealers are incurring losses of as much as 2 to 3 per cent of the cost for every unsold vehicle,” the spokesperson said.

The spokesperson said that there are over 6,500 dealers across the country who sell the range from trucks to two wheelers. “The most affected are those dealers who sell heavy vehicles. Their inventory pile up is as high as 90 days,” he pointed out.

Bank norms

But a Hyundai spokesperson put down the lag in sales to the banks’ move to tighten norms for disbursing loans. “They have tightened their norms for lending and their stand is turning away customers,” the spokesperson said.

He said sales will continue to go down unless the banks start lending more and relax the norms.

“We are trying to help our dealers to stay afloat through internal discounting so that the stock keeps getting cleared faster,” he said. He said most of the private sector banks have stopped lending and the remaining banks have increased their interest rates.

The spokesperson said that the situation was turning out to be tougher for both the dealers as well as car manufacturers. “These are hard times. We are in it together,” he said.

‘Carmakers can help’

But another dealer, who owns dealerships of multiple brands, said that car makers can help the dealers by giving more incentives and interest-free stocks. “It will give us higher margins for each car sold and we can sustain ourselves for a longer period,” the dealer who did not want to be named said.

He said some of the State governments, especially those in south India which have extremely high road tax, should bring down the tax for at least six months to accelerate sales.

Maruti Suzuki’s Chief Executive Officer for Marketing & Sales, Mr Mayank Pareek, said that car makers should view the current situation as an opportunity to explore newer markets. He said his company has tried not to pressurise its dealers to sell more cars during the current downturn.

“We are giving them enough time to bring down the inventory through a series of measures,” he said.