Auto Dealers in Distress : Federation of Automobile Dealers Associations (FADA) Writes To PM Modi

The Federation of Automobile Dealers Associations (FADA) has written to Prime Minister Narendra Modi seeking immediate financial support from the government for the ailing sector amid the nationwide lockdown due to coronavirus pandemic. In its letter to the prime minister, FADA sought inclusion of Auto Industry in Priority Sector lending so that both Retail and Wholesale Financing can be made available easily. 

The industry body, which represents around 15,000 auto dealers, also sought a reduction in GST for a Temporary Period to lower the Cost of Acquisition and thereby stimulate the demand. The Automotive Sector is impacted by very High GST Rates and the net impact ranges from 29% to 50% depending on the category of the vehicle. 

Alternatively a Direct Benefit to Consumers of 3-4% Interest Rate Reduction Through Banks and NBFC’s will also reduce the Overall Cost of Owning a Vehicle and can also be an Alternate or Additional tool for Demand Generation

The industry body has sought measures like incentive-based scrappage policy like “Cash-for-clunkers” in US and EU and extension of depreciation benefits of FY21 to boost demand post-lockdown period.

FADA said the auto industry has already been reeling under a severe slowdown for the last 15 months, with the majority of dealerships being Small Scale Family Run Businesses with No Financial Sustenance for Such a Crisis, more than 275 dealerships have already shut, resulting in huge job losses.

Automobile Dealers employ over 40 Lakh Employees in the country at Dealerships and Service Centers with 25 lakh direct employees and another 15 Lacs are Indirectly, But Over the years, the auto dealership business model has come under severe strain with increasing costs and low operating margins, thereby reducing the sector's financial strength to face challenges like the current COVID19 pandemic and existing lockdown.