The state of affairs have been challenging for the auto industry for 15 months owing to the prolonged downturn that led to over a lakh job losses last year, across the industry and now the novel Coronavirus pandemic has taken a massive toll on the entire auto sector. The Society of Indian Automobile Manufacturers (SIAM) had already made it clear that losses across the industry will be as high as Rs. 2300 crore per day because of the countrywide lockdown and has already projected a huge drop in sales of 35 per cent. Now that the lockdown is most likely to be extended at least, till the end of April 2020, the decline too could be higher.
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We have been saying that the lockdown has a greater purpose to serve as is the only way to maintain social distancing and save human lives and every automaker is abiding it in the best way possible. That said, the industry is also seeking some support from the government for ease of business. Auto dealers at the forefront are in the most vulnerable position and fear to go out of business. Hence, the Federation of Automobile Dealers Associations (FADA) has again written to the Prime Minister of India- Narendra Modi, seeking for some support during these tough times.
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Auto dealers fear going out of business post the lockdown period.
FADA has requested to reset the clock for the period of the Lockdown for Auto Dealers on working capital limits which demands complete waiver of interests on all categories of loans from banks and NBFC's for the lockdown period. The move will leave them with enough money to meet fixed expenses such as rent, electricity and salaries of staff. Then it has also asked to extend 4 per cent interest subvention or subsidy for working capital and loan requirements to companies for a period of 9 months post the lockdown. The demand also includes allowing 20 per cent additional overdraft on sanctioned credit limits for a period of 6 months post resumption of operations to support salary disbursements and other fixed expenses cash.
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FADA has also suggested that the salary of employees during this lockdown period could be paid through the Employee State Insurance Corporation (ESIC) as this is a health pandemic. It says "Salary liabilities should be covered under the same by ESI". The body has also asked again to grant MSME extension to auto retail including wholesale and retail trade and repair of motor vehicles. However, some OEMs have also extended specific COVID-19 relief package for dealerships and have made all due payments as well as some advance payments to support fixed costs incurred by dealers.
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Suggesting some approach to boost demand post the lockdown period, FADA has also asked for a temporary reduction in GST rates and to extend depreciation benefits for FY21 including individual buyers. FADA has also demanded for an incentive based scrappage policy which will help taking old vehicles off the road and can likely push demand. Lastly, it has also asked the government to consider the auto industry as a priority sector lending, so that both retail and wholesale financing can be made available easily, ensuring credit support.
Auto dealers in India employ around 40 lakh people with each dealership employing about 80 - 150 people on an average.
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