Indian automakers bleed as lockdown continues, zero domestic sales in April

NEW DELHI, May 27, 2020, India Today. Zero. That’s the combined domestic vehicle sales reported by top automakers in India for the month of April. All major carmakers operating in India — Maruti Suzuki, Mahindra and Mahindra, Hyundai, MG Motor and Toyota Kirloskar — reported zero domestic sales in April, making it a washout for automakers in the country, India Today reported.

The automobile sector, already going through a rough phase before coronavirus crisis hit the country, is now staring at an abyss because of various factors.

Their biggest concerns are job uncertainty amongst citizens (potential customers), fear of further lockdowns and lack of demand in the wake of the recessionary outlook.

Reports of various companies asking their employees to leave started surfacing as soon as PM Modi announced lockdown 2.0. The auto sector was further hit with a further extension of the lockdown.

No demand

Large segments of the auto industry are still not operational due to the lockdown and an entire host of smaller companies that supply components and parts to bigger companies are also staring at an uncertain future.

A report from Chennai suggests that smaller auto component manufacturing MSMEs have resumed operations, but there is no demand.

While auto companies have opened some of their plants after two months of lockdown — where workers are working in one shift — the real problem lies in demand.

Many dealers confirmed that there are absolutely no buyers. They even add that many customers who pre-booked cars have now cancelled orders.

Automotive Skill Development Council (ASDC) President Nikunj Sanghim who has a dealership of Hero and M&M, told India Today TV that as operations resumed, many customers poured in. The sad part is that they came in to cancel their pre-booked cars.

“Customers are apprehensive about their jobs, many feel given the current economic situation they might lose their jobs, as a result, they want to save money instead of buying a vehicle,” Sanghi said.

“It is not just the employees who are uncertain. Businesses, too, have suffered. There is uncertainty regarding the next lockdown, many feel that a stringent form of lockdown might be imposed in future. This too is prompting people to stay away from making new vehicle purchases,” he added.

New plans to woo customers

But India’s largest automobile manufacturer, Maruti Suzuki India Limited (MSIL), is looking at ways to overcome these hurdles.

MSIL has tied up with Cholamandalam Investment & Finance Company Limited and ICICI Bank to offer ‘Buy now, pay later’ scheme.

Prominent features of this tie-up include:

1. Flexi EMI scheme: It enables customers to pay low EMI initially in order to help them overcome the liquidity stress due to COVID-19 pandemic. The EMI amount starts with a low Rs 899 on a loan amount of Rs 1 lakh for the first three months. Thereafter, the EMI amount is higher.

2. Balloon EMI scheme: This scheme helps the customers to pay EMI as low as Rs 1,797 per lakh during the tenure, barring the last instalment when they pay one-fourth of the loan amount. This scheme is curated specially for the customers who are keen to pay lower EMI through the loan tenure.

3. Step-up EMI scheme: This offers the customers a unique advantage of increasing EMI amount up to 10 per cent every year as their income increases. The EMI could start from Rs 1,752 per lakh in the first year of repayment which progressively increases by 10% every year for loan tenure of five years.

Shashank Srivastava, Executive Director (Marketing & Sales), Maruti Suzuki, told India Today TV that 80 per cent of the sales in the industry are done through financing & Maruti believes the best way to boost sales is by sorting the Finance aspect of it.

He said, “Our assessment is that there is demand in the market, the majority of our customers want to pay in smaller amounts initially and smaller EMIs because there is uncertainty regarding lockdowns and jobs. So, we came up with Buy Now Pay Later scheme. We are hopeful to see growth in sales figures in months to come.”

While Maruti is looking to boost sales through its new financing scheme, another carmaker Honda Cars India Ltd. (HCIL) is using technology to pull customers.

The company has an online booking platform, ‘Honda from Home’ to offer car purchase options from the comfort of home, without having to visit the dealership.

This platform allows customers to browse through the product options, select their preferred dealership and book their car online.

While companies are deploying various tactics to lure in the customer, sales data for the months of May will show if these plans have helped.