Engineering & Capital Goods News

Pandemic teach lessons on funds management, auto dealer business recast, Auto News, ET Auto

NEW DELHI: In what may come as the most challenging period of the Indian automotive industry, the pandemic has given new opportunities and taught important lessons to manage finances and restructure the overall dealer business, a panel of experts said at the fifth edition of ETAuto Retail Forum.

AS the first quarter went dry with literally no sales, the industry experts viewed the pandemic period as the most distressing of all times. However, the automotive industry bounced back across segments, especially passenger vehicles and two-wheelers. Moreover, the Indian customers began to show a lot more interest in premium vehicles like SUVs, said Tarun Garg, director – sales and marketing, Hyundai Motor India, said.

Similarly, recovery in two-wheelers has been led by commuter motorcycles largely led by Tier-III and Tier-IV cities, Devasish Handa, vice president, sales, marketing, and after-sales, Suzuki Motorcycle India, said. So finance penetration has gone up in these areas, he said.

With this strong recovery on cards, Arvind Kapil, HDFC Bank, country head – retail lending, said, “From the bankers perspective, we see the pandemic behind us. Vehicle sales are growing in double digits. This is largely led by the self-employment group which has grown three to four times. Also, banks are flush with liquidity, and it is the best time to take loans as lending rates are 125 basis points down.”

Experts on the panel indicated that on the one side sales are recovering and on the other cost of operations at dealerships is going down as the dealers have renegotiated rentals, have removed unproductive staff, wages have not increased, and stocks are all-time low. All these make dealership a profitable business.

M P Shyam, MD, Akshaya Motors, said, “Dealers who were financially prudent have emerged stronger while dealers who diverted funds for long-term expansion over short-term goals are bringing back money to the system”.

Agreeing to the point, Tarun Garg said, “There has been a lot of learning in the last eight to nine months at both dealership and OEM levels. Dealerships are learning more financial discipline, while OEMs are also learning on low stocks. During 2016-17 and 2017-18 when the automotive industry was growing, we drifted away.”

He added, “2021 looks much better as the economy is recovering. Stress on dealers will be negligible.”

OEMs now have their systems and check on funds taken from financiers and on stocks. Bankers are now ready to finance any amount as long as it is for vehicles. Prudent dealers have kept their books clean and have rebounded with great strength, Arvid Kapil, said.

“As of now, nothing is alarming on the financing side. It is a good time for the finance ecosystem,” he said.

Source link