Auto dealers seek immediate financial support from OEMs, govt to stay afloat

Facing unprecedented odds, automobile dealers are seeking immediate financial support from car manufacturers and the government to tide over the current challenging business environment.

File photo used for representational purpose only. (Bloomberg)
File photo used for representational purpose only.

Already, facing heat due to a prolonged slowdown in the industry and a sizeable unsold BS 4 stock, the dealers are now faced with the challenge of retaining their workforce and sales infrastructure with coffers running dry due to the ongoing nationwide lockdown.

Automobile dealers' body Federation of Automobile Dealers Associations (FADA) President Ashish Harsharaj Kale told PTI that they are counting on support form the OEMs to sustain their businesses in this difficult situation.

Also Read : Why the world's largest car market will withstand the Covid-19 shock

"The OEMs have taken care to refund our outstanding dues in an urgent manner. We have also received some upfront advances. Few OEMs have also announced some extra financial support to us and we are sure that others would also help us in the coming days," Kale noted.

Support is important to maintain and retain the workforce employed at the dealerships, he added.

"We have not cut salaries or manpower in March and it is going to be tough to give salaries in April with zero earnings, zero cash flow," Kale said.

If the OEMs do not come forward to support at this juncture then they are going to face major issues in their sales network when lockdown is over and normalcy is restored, he added.

"These are extraordinary circumstances, they will have to dip into their pockets and support because they will need the sales networkas well as manpower to return to normalcy when the lockdown is over," Kale said.

He added that recent announcement by Hero MotoCorp and Honda Motorcycle & Scooter India to buyback unsold BS 4 stock is a much-needed relief to the dealers.

He hoped that other OEMs would also come forward to help their community.

Former FADA President and President Automotive Skills Development Council ( ASDC) Nikunj Sanghi said OEMs have given support packages that were already due to the dealers.

"Till now there has been no additional support. How do we get through this zero cash flow situation. There is fixed cost component like salaries, electricity bills, rentals, bank interest, security etc...

"So we are clueless on how with the kind of margins that we have and with absolutely nothing left in our coffers, how are we going to do business," he said.

Already the government has come up with strict instructions to pay full salaries and not to remove any manpower, Sanghi said.

He said that OEMs were also facing pressure due to zero sales but they were still in a much better position to take care of dealers as well as component makers.

"Unless they come forward and support the dealers, just government support is not going to help. I think OEMs will have to act as parents for both component makers and dealerships and will have to be large hearted and come out with packages which go beyond just giving us money, which is due to us," Sanghi said.

FADA is seeking help from the government for working capital support along with extension of MSME benefits.

It is also seeking GST cut on automobiles for a temporary period after the lockdown is lifted in order to revivegrowth in the sector.

Besides, it has also sought interest subsidy for vehicle purchase for limited time and extension of depreciation benefit announced by the Finance Minister for 2020-21 as well, while extending it to individual buyers too.

First Published Date: 12 Apr 2020, 14:41 PM IST
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