“In recent times there have been a lot of cases of financial indiscipline where dealers were seen utilising inventory funding for renovating and expanding their dealerships”, Aggarwal said in his inaugural keynote address at the ETAuto Retail Forum 2021 on Friday.
“Dealers usually take loans from many banks to meet their working capital needs and inventory management requirements. If they divert these funds to avenues other than retail networking, this will not only put the financial health of the dealer at risk but will also have a trickle down effect on the whole industry,” he said.
Aggarwal asked OEMs to keep dealerships afloat during tough times and give financial assistance and special incentives to them.
ETAuto Retail Forum (ETARF) kicked off its fifth edition with a focus on automobile retailing business, the shape and size of future dealerships, leveraging the emerging opportunities in the used car business, and on the increasing digital trends such as augmented reality (AR) and virtual reality (VR).
“The first 3-4 months of the current fiscal was a washout for the dealership and industry. Earnings of the workshops came down to zero as no trucks were reported for servicing due to lockdown,” Aggarwal said.
He said that manpower was an asset and the industry was in constant fear that dealerships would lose workforce and competent technicians.
“In the last two-three years we have spent a lot of money on training these technicians on BS-VI technology, so losing them will be detrimental to the industry,” Aggarwal said.
On the commercial vehicle industry outlook, he said despite sequential sales recovery in the past two months, the sector’s overall sales growth will remain low this fiscal year due to spare capacities created in the system and reduced fleet utilisation.
“I think that the CV industry will drop by another 35%-40% in FY21 on top of the drop of 40% in the previous years. There will be a drop to 200,000-250,000 units this time,” he said.
The uptick in replacement demand, coupled with the government’s focus on the infrastructure, will act as a cushion to absorb the dearth of demand created by the pandemic.
“The Government has announced more than INR 100lakh crore of infrastructure investments in the next 2-3 years. If these programmes are executed on time, there will be more requirements for construction trucks,” Aggarwal said.
In the day-long event, ETARF focused on instilling financial prudence and inventory management in the post-pandemic period, apart from understanding the challenges in the auto finance ecosystem and its future possibilities.
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