Car makers to release Rs 1800 crore advances to dealers amid COVID-19 crisis

This is expected to help the dealers make payments to their staff and settle some of the statutory dues like electricity charges etc.
Car makers to release Rs 1800 crore advances to dealers amid COVID-19 crisis
Car makers to release Rs 1800 crore advances to dealers amid COVID-19 crisis
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Automobile companies are trying to protect the interests of their dealers by offering financial support at this time of near existential crisis for many of them. This is particularly true of the passenger vehicles segment. Coming on top of one of the worst years in sale of cars and the issues thrown up by the switch to the BS-VI vehicles, the 21-day lockdown has virtually broken the back of the car dealers in the country. Now, the car manufacturers have come forward with some help.

As a first measure, the dealers are being released advance payments to the extent of ₹1,800 crore, as per a report in the Economic Times. This is expected to help the dealers make payments to their staff and settle some of the statutory dues like electricity charges etc. It is estimated that around ₹20,000 crore worth inventory is stuck with the dealers. These figures are for the whole industry.

Breaking them down, you will find Maruti Suzuki India which enjoys an overall market share of 50%, having a proportionate share of these, though the inventory level may vary depending on the speed with which stocks move.

The difficulty the dealers face is while there is no revenue since their sales and service outlets are completely shut, the interest on the inventory keeps getting metered. The rough estimate is this could alone be around ₹200 crore.

The auto companies are also reportedly releasing the incentives to the dealers in full instead of nit-picking on some performance parameters.

Many of the companies have come up with different names for the out-of-turn benefits being given to the dealers due to the coronavirus lockdown. ‘Hyundai cares’, ‘going further together’ (by Ford) and ‘Dealer Support Package’ (Toyota Kirloskar) are some of these.   

For the car makers, the dealer network is very critical. They are the frontline warriors dealing with the customers and are capable of making or breaking a brand. If dealers decide to close their dealerships, it can take months to have an alternate party working in that locality. This would mean loss of sales. This is one of the reasons the companies are becoming proactive and arranging to keep the dealers humoured.

Some of the companies have probably committed to bear part of the interest on inventory for a limited period, say 21 to 30 days.

It may be some time before the full extent of the losses due to the lockdown is assessed and understood.

 

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