Covid-19 Fallout: FADA Writes To PM Modi For Financial Support To Auto Sector
A man talks on a mobile phone while leaning on a car in Tamil Nadu, India. (Photographer: Sanjit Das/Bloomberg)

Covid-19 Fallout: FADA Writes To PM Modi For Financial Support To Auto Sector

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The Federation of Automobile Dealers Associations has written to Prime Minister Narendra Modi seeking immediate financial support for the auto sector, amid the nationwide lockdown due to the coronavirus pandemic.

India’s automakers witnessed the worst-ever slump in sales in March as a prolonged slowdown and the lockdown stalled operations. Domestic sales of passenger vehicles fell 51 percent year-on-year to 143,014 units in March, according to data released by the Society of Indian Automobile Manufacturers. That’s the worst decline since 1997-98 when the auto industry body started recording data.

In its letter to the prime minister, FADA sought complete waiver of interest on all category of loans from banks and NBFCs during the lockdown period.

The industry body, which represents 15,000 auto dealers across India, also sought:

  • An extension of 4 percent interest subvention/subsidy for working capital/loan requirements to companies for a period of nine months post the lockdown.
  • Salaries of people employed at dealerships should be paid through Employees' State Insurance Corporation during the lockdown period.
  • Grant of MSME extension for auto retail, a move that it said will provide direct and indirect employment to lakhs of people.
  • GST cut on automobiles, incentive-based scrappage policy and priority-sector tag to boost demand after lockdown period.

FADA has marked the letter to Finance Minister Nirmala Sitharaman and Transport Minister Nitin Gadkari, among others.

According to the dealers’ association, the auto industry has already been reeling under a severe slowdown for the last 15 months, with more than 275 dealerships already shut, resulting in huge job losses.

"The current situation can lead to an existential situation for many of our members and their employees,” FADA President Ashish Harsharaj Kale said in the letter. “Majority of them are small-scale, family-run businesses with no financial sustenance for such a crisis after already having gone through a tough period in the past 15 months.”

Over the years, the auto dealership business model has come under severe strain with increasing costs and low operating margins, thereby reducing the sector's strength to face challenges like the current situation and its after-effects, he added.

"While we are taking it up with SIAM at a complete change of the business model to build up sustenance for the after effects of COVID-19 and for any future disruptions, the immediate situation is extremely bleak if not supported," Kale said.

Also Read: India’s Auto Sales Log Worst Slump In March As Lockdown Adds To Slowdown Pain

Many auto dealers will go out of business and livelihood of hundreds of thousands will be lost if the sector doesn't get government support, he added.

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