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Challenges brought on by COVID-19

Updated: Dec 14, 2020


The first few days of the retail operation have been quite scary for the automobile industry. Customers are preferring to redeem their cash bookings and cancel their vehicle purchase to conserve cash as automotive dealerships gradually resume operations across the country.


According to multiple sources across the automobile industry, the first few days of the customer reactions have been a bit scary. Except for the transactions where only the physical delivery of the vehicle was due (the money was fully paid before the countrywide lockdown happened) most customers tend to avoid new purchase decisions and their footfalls too have reduced to a trickle.


“Going by the cancellation rate there won’t be much deliveries left over the next few days”

Dealer



“There’s been a feeble reaction to the resumptions of the operations. Going by the cancellation rate there won’t be much deliveries left over the next few days and we might be enforcing a new lockdown on ourselves,” said a passenger car dealer preferring anonymity.


There had been an impressive number of confirmed customer bookings for a number of vehicles before the March lockdown. The customers came in hordes to book Hyundai Creta and Kia Seltos as the new generation compact SUV with terrific design elements and strong technology quotient. Also the British brand MG Motors had an impressive number of confirmed bookings for their debut model Hector that has been doing well in the market.


However, the new wave of austerity is forcing all to maximize savings and avoid fresh purchases that could possibly lead into a debt trap. In India more than 70 percent of the new car sales originate with finance backings and lucrative EMI deals coming from OEM-backed finance companies or the super aggressive private and public sector banks. The overall portfolio of new vehicles are heavily supported by the finance that lead to most of the purchases.



“If more than 70 percent of new cars are sold on finance that lead to hefty penalties in case of defaults, most of the customers are avoiding them right now. Customers are also against any additional financial burden in these times of Covid-19 when earnings are going down and job-losses are rampant,” said a senior company executive.


Around 1000 dealerships have started operating this week across India led by segment leader Maruti Suzuki and South Korean Hyundai Motors and few other brands in the passenger vehicle portfolio. They were looking at increasing the retail sales punch, but the customer reaction has left many dealers pensive and baffled.


“We do expect improvement as more and more potential customers get aware of the resumption of these operations”

Vinkesh Gulati, FADA


There are over 7,000 passenger vehicles outlets across India, led by Maruti Suzuki network that comprises 3,086 showrooms across 1,964 towns and cities in the country. Major markets like Delhi-NCR, Mumbai, Chennai, and Kolkata that form more than half of the India's passenger vehicle market are in the red zone and lie closed for the time being. Most are yet to secure any clearances from the respective governments and their operational feasibility would take some more time.


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