After recording robust sales in the festive season of October, the automobile industry is back in the slow lane as sales in November and early December fell sharply across companies and vehicle categories. An overarching slowdown, coupled with the prolonged monsoon that destroyed crops and contracting rural incomes, has further dealt a blow to auto companies.
Dealers in the Nashik region said more people are choosing bank finance to purchase commercial vehicles and it has become difficult due to a delay in the approval process.
Banks are taking a cautious approach to rural lending following a spike in bad loans in the agriculture sector. Additionally, the crisis in the
non-banking financial companies (NBFC), which are major financiers to dealers and buyers, have also impacted the sentiment a time when disposable income is shrinking.
“I am losing 10-12 percent of my customers, just because they don’t get bank finance like earlier,” said Jitendra Shah, a Mahindra and Mahindra dealer on the outskirts of Nashik.
"Eighty percent of my customer are farmers and people from rural areas. In the last 5-6 months, financing from banks has been difficult and facing a delay. Banks do a lot of background checks and paperwork and if a farmer has had a bad crop, it is difficult to get approvals. And I lose a customer,” he added.
Farmers in Nashik region lost almost 60-70 percent of their main cash crops, onion and grapes, due to the extended monsoon season, which usually ends in September but this year lasted till November. While demand-and-supply mismatch led to soaring onion prices, lower yields meant not many farmers benefited. Only those who could save their onion crop from excess rains profited from the high onion prices.
“While there is a mixed sentiment in the Nashik region, footfalls in our dealership has reduced by 30 percent post the festive season. Mahindra vehicle sales grew 9 percent during festive season, largely because of the launch of XUV 300. All other products, including commercial vehicles, saw de-growth versus last year,” Shah said.
The government should look at easing finance norms and lower interest rates to help people buy more vehicles, he added.
Sunil Shivram Gangurde, who came with his wife and a 5-year old daughter to take delivery of his new Mahindra XUV500, said he had to delay his purchase because the loan process was not completed in time. “I wanted to buy the vehicle during Diwali but financing paperwork took time. However, I wanted to buy before January 2020 to avoid buying more expensive BS-VI cars.”
Few metres from the Mahindra dealership, a Maruti Suzuki showroom in Nashik looked busy with a couple of customers were enquiring about the products. But the story was same for them.
Sanjeev Bafna, CMD of Seva Maruti Suzuki dealership, said customers were able to finalise their loans at the desk here, expediting vehicle purchases. Now, there is a huge delay in processing loans, which impact buying decisions of customers, Bafna explained.
Maruti Suzuki dealership in Nagpur caters largely to first time car buyers. “Compared to last year, we have seen a 13-15 percent de-growth in our sales. This when we had targeted a 15 percent growth, so my real drop is 30 percent,” Bafna added.
While historically November is a slow month because bulk of sales happen in October (festive sales), this year the decline has been much sharper.
Dealers in Nashik are not hopeful of an improvement in December but expect that the new year will bring in more sales.
“I believe cash will start coming in now as it is harvesting time for grapes. Expect post December, things will start settling down on Euro 6 cars, there will be clarity on electric vehicles and customers can make their buying decisions. To push sales we have in fact continued all the festive season schemes till now,” said Bafna.
With inventory at sustainable levels, Shah was a bit more cautious and had not extended schemes for both Mahindra and Tata vehicles in his dealership. “In the winter season, people expect discounts, but there are a very few offers from the company and our end. So people are waiting before they make their purchase.”“I think the December to March period is going to be soft for our region. It is only when the new crop comes to the market can we expect a recovery. Let’s hope climate also plays ball,” he added.