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Auto dealers hopeful of bountiful festive season, says FADA chief

G Balachandar Chennai | Updated on September 27, 2019 Published on September 27, 2019

Ashish Harsharaj Kale, president of auto dealers’ body The Federation of Automobile Dealers Associations.

Though the passenger vehicle segment managed to reduce its inventory levels, two-wheeler segment continues to battle with high inventories. With better monsoon and expected improvement in liquidity situation two-wheeler companies and dealers expect some improvements starting this festive season. Ashish Harsharaj Kale, president of auto dealers’ body The Federation of Automobile Dealers Associations (FADA) spoke to BusinessLine on the prospects of revival in demand and liquidating two wheeler inventories. Edited excerpts:

How has the festive season begun for two-wheeler segment?

The festive season, which kicked-off towards the end of last month with Onam in the south, followed by Ganesh Puja in the West, has not commenced as expected by the dealer fraternity. Reasons adversely affecting the festive sales are the extended monsoon, which went beyond its regular period adversely impacting the rural sales as complete clarity on agriculture produce is yet to come. Other key reason which had a definitive impact on the sales across India is the anticipation of tax concessions, specially in the GST rates. With the receding monsoon and clarity provided by Government on GST rates, we now expect the Navratari and Diwali to be better. We are already witnessing some up-tick in inquiry level and bookings and this will further pick up as we get into the festive season. We expect sales to revive further and are hoping that we are growth positive during the festive season.

Though it is a delayed one, does monsoon bring some cheer to revive motorcycle sales in rural areas?

Absolutely; Motorcycle sales is a segment where a major contribution comes from rural India. Initially in the month of June and first week of July, the monsoon was very deficient across the country, but by mid-July it picked up, covering almost the entire country with bountiful monsoon and in some areas above normal monsoon. With a better monsoon so far, the farming fraternity is confident of high yield in the coming months as well, which would translate into better revenues adding up to their purchasing capacity and regaining the buying sentiments in rural and semi urban markets.

Is the two-wheeler industry still battling with high inventories?

Yes, the two-wheeler inventory continues to be significantly high, being stocked for close to 60-65 days on an average, until July 2019. Now, with the expectation of high retail sales in this festive season, dealers have been assured by the Original Equipment Manufacturer (OEM)’s of regulated wholesale supply, thus leading to inventory reduction. With a regulation of the wholesale supply to dealer, FADA expects the inventory to come down to a reasonable level of 40 days towards the end of October and continue to decrease till the time it reaches a normal level of 21 days by the end of November 2019. We have recommended with-holding 21 days of inventory, which would be a healthy inventory occupancy period. FADA has been advocating to all 2-Wheeler OEM’s, urging them to help regulate the inventory to regular levels of 3 weeks and help our members avoid the perils associated with high inventory.

Will BS 6 transition be a big headwind for two-wheeler segment this fiscal due to cost increases?

Exact cost increase has to be ascertained but if it is in the 15 per cent range as it is expected, it will definitely create some headwinds in the initial weeks till customers readjust their budget. Honda Motorcycle recently launched their BS 6 version two wheeler at 12-15 per cent price difference. If this is the price different for all OEM’s then its a very substantial difference for the two-wheeler customer and the industry will definitely face headwinds in the transition.

How is the mood now among the dealer community?

With the festive season at its full swing, we at FADA and the entire dealer community are very optimistic for a better festival season sales and are in a positive frame of mind despite all the challenges the industry has faced. A better monsoon across the nation, government’s sincere approach in getting the demand in the economy on track and most importantly the return of hunger seen in past two weeks for retail business by banks and NBFC’s who are the lifeline for auto retails industry, I am quite sure that this festive season will bring a plentiful harvest to the farming as well as the auto dealer community.

Published on September 27, 2019
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