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This is the best time to buy cars, you will not get such discounts again: Nikunj Sanghi, FADA

We can see some relief in next 2-3 weeks and that should be a big relief.

ET Now|
Aug 19, 2019, 04.16 PM IST
Nikunj Sanghi-FADA-1200
The guarantee scheme for NBFCs that the Government of India has floated will do a lot in terms of shoring up funds for NBFCs which plays a very big role in inventory funding, says Nikunj Sanghi, Director, Federation of Automobile Dealers Association (FADA). Excerpts from an interview with ETNOW.

OEMs, dealers, everybody is trying his best to push out the inventory now that we know that the BS-VI transition is just around the corner. The pressure has really built up. What is the quantum of discounts across dealers now?
I do not think I will be able to give a ballpark picture but the discounts in terms of percentage of vehicle prices are the highest at the bottom of the pyramid, which means on the entry level cars, the discount as a ratio of the vehicle costs are the highest.

What is also happening is that in smaller cars, the discounts on diesel vehicles are the highest because in smaller vehicles diesel as a fuel is taking a hit and the customer is shifting towards petrol. Most manufacturers have said that they will discontinue diesel production of smaller cars with the incoming of BSVI because the cost of small car becoming a BSVI is very high as a proportion to the total cost.

Given how dealers and car makers and auto makers at large are pushed against the wall, now they have to clear out this inventory because they would not be allowed to sell a BS-IV car after April 2020. Can we expect further heightening of competition or discount of some kind of a price war playing out?
Not really. Not immediately because what has positively happened is that the monsoon has done reasonably well in the last fortnight and a lot of shortfall of the monsoon has been covered. Monsoons have done their bit. And two, with the festival season coming and both dealers and manufacturers are looking at a much better festival season than the past five, six months that we have already seen. I do not think discounts will go up further because they are almost at their peak, I have not seen these kinds of discounts ever before so I think in fact, I would say that this is probably the best time to buy your car. You will not get these kind of deals any other time.

What has been the kind of correction in inventory level? You are saying it is now picking up slowly and it is likely to do even better ahead of the festive season and also the wedding season etc now that monsoon is also almost over. How is it likely to play out next one or two months?
A major correction has happened in the passenger vehicle segment where inventories have moderated quite a bit as compared to what they were in the last quarter. But inventory continues to be a concern for two-wheelers and commercial vehicles. In two-wheelers, almost all OEMs and dealers put together are hoping for good festival season when they will be able to clear out their inventories. But definitely inventory correction is not as good in two-wheelers and commercial vehicles as it has been in passenger vehicle segment.

What is happening at the dealers end? A lot of them had to shut shop, a lot were facing a lot of troubles with respect to liquidity and funding, etc. SBI has extended repayment period for stressed auto dealers by up to 30 days. 15 to 30 days has been the period. How much of a relief will it provide to the dealer community and are you expecting other banks to step up?
Do not just look at SBI. Also look at the guarantee scheme for NBFCs that the Government of India has floated. That will do a lot in terms of shoring up funds for NBFCs which play a very big role in inventory funding. With that money coming into the system, we should see much better environment in terms of money available to dealers. Put together, we can see some relief happening in the next two or three weeks and that should be a big relief.

Even OEMs are now cutting down, hiving off staff and are looking at downsizing and cost control now in a big way because a Tata Motors sticking its neck out saying that it is very, very challenging out there, is a big deal.
You would have also seen the FADA statement where our President said that in the last quarter almost two lakh people have been relieved from dealerships. A lot of corrections have taken place in terms of manpower as far as dealerships are concerned. At the present level, where almost every OEM is taking shutdowns to correct inventory levels, this pain is likely to continue and there is sufficient inventory in the pipeline for the festival season. I do not think there will be a very big inventory build up for the festival as it normally happens.

Also Read

Auto sector situation unlikely to improve in next 2 quarters: Nikunj Sanghi, FADA

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