Why Lockdowns Will Be More Punishing For Two-Wheeler Dealers

Auto dealers stare at an inventory pile-up again this year as several states in India have reintroduced Covid-related lockdowns to contain rising infections and deaths that have overwhelmed the nation’s hospitals.While car and utility vehicle dealerships as sitting on stock of less than a month, outlets selling scooters and motorcycles are saddled with inventory of more than a month, according to BloombergQuint’s estimates based on wholesale and retail sales data of the last four months. The exact inventory levels may be a little higher because the retail data doesn't include registrations from Andhra Pradesh, Madhya Pradesh, Lakshadweep and Telangana.Until March, sales recovered as India’s economy rebounded quicker than expected from the nationwide stay-at-home curbs, aided by demand for personal mobility during the pandemic. Then the second wave of Covid-19 struck and India added record infections and death toll spiked. One by one, states started imposing lockdowns, curtailing economic activity and dealerships had to resort to temporary shutdowns.“The situation is not worrisome for four wheelers as there is already a demand booking with the dealers, but the situation is worsening for two-wheelers,” Vinkesh Gulati, president of Federation of Automobile Dealership Association, said over the phone from Ahmedabad. The average inventory at four-wheeler dealerships is at 15-17 days, while it is around 35 days for two wheelers. .Gulati said two-wheeler dealers were already struggling with slow pickup in demand, and lockdown had only swollen the inventory pile..Retail Auto Sales Slump To Lowest Since July Amid Second Covid Wave.Higher cost of ownership due to increase in prices, and costlier fuel weighed on rural sales despite a good monsoon, bumper crops and government’s spending..Dealerships, speaking to BloombergQuint on the condition of anonymity out of business concerns, admitted that inventory was piling up.A Kolkata-based Honda Motorcycles and Scooters India Pvt. dealership said the inventory is almost nearing 60 days in May as footfalls fell during the partial lockdown.A Hero MotoCorp Ltd. dealer in Uttar Pradesh is sitting on stock of 30-35 days as the state curbed movement in May amid rising Covid-19 cases.A Hero Moto dealer in Rajasthan is saddled with 45 days of inventory.A TVS Motor Co. dealership said it was holding 40 days of inventory.Car and utility vehicle stock at dealerships was low because global shortage of semi-conductors slowed production, evident from long waiting periods.An Uttar Pradesh-based Maruti Suzuki India Ltd. dealer said his outlet has an inventory of 20 days.A Bengaluru dealer for Hyundai Motor India Pvt. and Honda Cars India Ltd. is sitting at around 15-20 days of stock.A Mahindra & Mahindra Ltd. dealer in Rajasthan said he has stock of less than 15 days..'Our assessment too suggests that two-wheeler inventory remains above normal level and given sustained pressure in the rural segment; the inventory levels are likely to remain at an elevated level in the near term,' Ashish Modani, vice president at ICRA Ltd., said. “And if the demand remains week, then some correction may be required to curtail down wholesales to bring back retail inventory at comfortable levels.'.Meanwhile, sudden lockdowns and Covid-19 resurgence have prompted automakers to halt production. Companies that have announced staggered or full shutdowns in the past month include Hero MotoCorp, Honda Motorcycle, Maruti Suzuki, Toyota Kirloskar Motor Ltd., Honda Cars and M&M. That also suggests these companies have enough stock in the pipeline or with dealers.“Nobody saw the situation turning like this,” Gulati said. Automakers were not at all prepared for the lockdowns as they were building inventories for the Navratri and wedding season, he said..Consumer Goods Sector’s Rural Cushion Is Depleted In Second Covid Surge: BQ Exclusive

Why Lockdowns Will Be More Punishing For Two-Wheeler Dealers

Auto dealers stare at an inventory pile-up again this year as several states in India have reintroduced lockdowns.

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