The car dealership business has been witnessing a number of headwinds within the current previous together with subdued demand for two-wheelers (2W), provide constraints impacting the expansion of passenger automobile (PV) gross sales, and a excessive base impact limiting the expansion within the tractors phase.
To assess the on-ground sentiments of the auto sellers and to know the present demand and provide tendencies for numerous segments, ICRA has carried out a survey on 22 sellers of PVs, 2Ws, business automobiles (CVs), and tractors unfold throughout rural, semi-urban and metro areas.
The survey indicated recovering demand in choose segments. 80% of 2W supplier respondents indicated that demand stays weaker than final yr. Extended work and training from house have impacted scooters demand, whereas undistributed rainfall affected demand for rural-centric bikes.
However, retail demand for PVs stays wholesome and demand for CVs has been enhancing after two years of downturn. 53% of the respondents indicated that demand in PV and CV segments is healthier in comparison with the earlier yr.
The car business has been grappling with provide constraints because the semiconductor scarcity has impacted automobile manufacturing. The PV phase was affected essentially the most as demand for PVs remained wholesome and exceeded provide.
However, semiconductor availability has been enhancing on a sequential foundation over the previous few months. Around 41% of the survey respondents indicated that the availability scenario throughout the dealership segments has witnessed enchancment within the current months, whereas 27% reported that provide remained constrained.
Supply constraints have resulted in elevated ready intervals and decrease stock ranges on the dealerships. 92% of PV supplier respondents indicated that ready intervals have elevated in comparison with the final yr on account of provide constraints.
While provide has been higher in different auto segments, 40% of the 2W, CV, and tractor supplier respondents have additionally identified that the ready interval elevated in comparison with the final yr. Nevertheless, 60% reported that the excessive ready interval has not resulted in elevated cancellations.
Around 2/third of each PV and CV sellers indicated that present stock holding is lower than a month (2-4 weeks). However, 80% of 2W supplier respondents reported that they’ve round 4-8 weeks of stock. Due to low stock ranges, supplier reductions have additionally been minimal.
Nithya Debbadi, Assistant Vice President and Sector Head, ICRA, says “While dealership segments are witnessing varied headwinds, supply is improving on a sequential basis and demand has been improving in select segments. The stable financing environment also augurs well with improving demand. Lower inventory is expected to reduce working capital borrowings and accordingly interest costs for the dealers and support their net margins.”
“Further, due to low inventory levels, dealer discounts have also been minimal, which has further supported earnings of dealerships. Given these supporting factors, ICRA’s outlook on the automobile dealerships is stable.”
Source: www.financialexpress.com”