‘Things Are Out Of Our Hands!’: Anxious Auto Dealers Anticipate Festive Sales Washout

India’s automobile dealers, who have barely managed to stumble out of disruption caused by both waves of the Covid-19 pandemic, face divergent problems ahead of the festive season that accounts for nearly three months of sales. While car sellers don't have enough inventories to cater to the bookings, demand is largely missing for their well-stocked motorbike counterparts. “As of today, car dealers don’t have stock for selling next month, so how can you be prepared for the festive season? And in two-wheelers, entry level motorbikes’ demand is severely hit,” Vinkesh Gulati, president of the dealers’ lobby Federation of Automotive Dealers' Association, told BloombergQuint. “It’s a double trouble for the auto industry and it’s going to impact the festive sales.” Car sales were beginning to pick up amid rising preference for personal mobility as economies opened up after lockdowns, but manufacturers are grappling with higher commodity prices and shortage of microprocessors from East Asian countries. Two-wheeler sales suffer from poor demand as affordability plummeted and fuel costs soared. To be sure, automakers were banking on the festive season to push sales after the pandemic’s second wave, as business was on the decline in the years leading to its outbreak. As a result, sales and production ground to a halt for the first time last year..While demand for cars and utility vehicles bounced back immediately as Covid-19 restrictions ended, the shortage of microprocessor chips—the brains of electronic components inside cars that control everything from steering to emissions—worsened amid mounting infections in the key producer of Malaysia, hurting automakers severely.That has already forced Maruti Suzuki India Ltd., India’s largest carmaker, to announce production holiday. Mahindra & Mahindra Ltd. has been the worst hit because of the chip shortage and Tata Motors Ltd. is working to mitigate the impact on its sales.But, according to FADA, the crisis not only brought down inventory levels at dealerships, it has further extended waiting period to purchase cars by up to three-four months.Gulati said during festive sales, inventory is usually two times the normal, but car dealers don’t even have enough stock to even carry forward to September.“Things are out of our hands,” Gulati said, adding there isn’t much dealers can do if customers are at the dealerships, but supply isn’t there. “This is a survivability issue; it’s like losing money.”Amin Rehman, who runs a Hyundai Motor India car dealership in Delhi, concurred. “We’re short by 15-20% of our ideal inventory in the run-up to the sales, and we aren’t ready to meet the festive demand,” he said, adding waiting period for bestselling variants of products like Creta and the recently launched Alcazar are as high as eight months.And as waiting periods lengthen further, Rehman is seeing cancellations. “If the supply isn’t there, it’s going to impact us badly.”Shashank Srivastava, executive director at Maruti Suzuki India, said he isn’t sure if the company will be able to meet the festive demand. The carmaker, he said, is sitting on an inventory of 20-23 days..This Is Maruti Suzuki’s Biggest Concern Ahead Of Festive Season.Among two-wheeler makers, the story has been the opposite. Demand has plunged after a series of price hikes implemented in the last two years, the rise in commodity prices and the pandemic’s second wave disrupting demand. Rising infections in the hinterland—which accounts for a large chunk of sales—and higher fuel prices haven’t helped, too. That has resulted in affordability of entry level two-wheelers becoming a concern. “The price of a two-wheeler has gone up by nearly 30% in the last two years, and with increased fuel costs, affording them has come into question, especially in the rural pockets,” Nikunj Sanghi, a two-wheeler and four-wheeler dealer, told BloombergQuint over the phone. “The issues are related to affordability and there’s nothing to say affordability will improve in the festival period,” Sanghi, who generates 80% of his sales from rural areas, said. For his dealership, retail sales have nearly halved, with inventory climbing up from “few weeks” level to “few months”. If the trend persists, he expects to be saddled with five months of inventory. “There will be pick-up in sales, but it’s not going to be like normal festival sales.”Yadvinder Singh Guleria, director of sales and marketing at Honda Motorcycle and Scooter India Pvt., however, said his company is seeing good demand with increased footfalls over a year ago, but remains “cautiously optimistic” on the festive season.“Overall, there has been a big impact on the cost of ownership and that slowed demand in the market but there’s pent up demand as well,” Guleria said, adding they’re not focused on building inventory of 70-90 days for the festive season.A Rajasthan-based dealer for Hero MotoCorp Ltd. told BloombergQuint on the condition of anonymity that he’s unable to accommodate more stock amid a pile-up of old stock that’s yet to be sold. He said he’s in talks with the company to desist them from building up inventory. This dealer requested anonymity citing business repercussions. Meanwhile, Gulati of FADA said dealers are doing everything to push demand and attract customers, including offering higher discounts and attractive financing schemes..Chip Shortage Hurt Demand For Cars In August, Brokerages Say

‘Things Are Out Of Our Hands!’: Anxious Auto Dealers Anticipate Festive Sales Washout

While car sellers have inadequate inventories to cater to bookings, demand is missing for their well-stocked motorbike peers.

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