Coronavirus (COVID-19) and lockdown will close many traditional Car, Tractor, Bike Dealerships - Where to Invest?

According to the market experts, the Covid-19 or Coronavirus pandemic and ongoing lockdown situation in India will close many traditional (petrol/diesel) car, tractor, bike showrooms in India - the combination of market paranoia, genuine crisis, and economic disaster will come with consequences and especially in an industry which is transiting to electric vehicles. 

Adding to the above, obviously the BS6 switchover from BS4 (The BS6 has only 10 ppm (parts per million) of the sulfur content while in BS4, 50 ppm of sulfur content is allowed. In the year 2016, the Government of India decided to skip BS5 norms and directly shift from BS4 to BS6 by April 2020, thereby signaling a major shift in the country’s transportation policy.) has drastically affected car showroom owners before this crisis itself. Similarly, the strict measures of the current government to regulate the use of tractors as a passenger vehicle to transport people have affected the tractor sales already. One of the most visible reflections of this crisis happened in Ugadi in Karnataka or Gudi Padwa in Maharashtra (celebrated with many names almost all over India) when people would generally make purchases because of the auspicious day. Every year, alike Diwali, showrooms used to be hustling to manage the deliveries of the vehicles but this year turned to be very bad. All the big dealerships are mentioning an uncertain future while the smaller ones agonize! Worst affected are the new dealerships, they have no clue on what to do with the infrastructure they have put up.

Already till 20th March things were bad but the onset of April has pushed the entire world to a gloomy reality where fixed costs like rent, loan, staff salaries, etc. remain the same while cashflow is nill. If we study data, the footfalls in many showrooms were in double digits in March, less than 30 mostly. E-vehicles dealerships had better numbers, only, and nothing to be surprised about as the electric vehicles dealers plainly play on the demand and supply curve. The way e-vehicles have been welcomed in India is dramatic, early movers who had associated with some good brands have been seeing good days!

Any dealership model depends on inventory. Most of the dealers, especially the smaller ones, take minor loans to get the inventory and pay-back as sales happen. It is another critical stress for many dealers that they have no idea when would the inventory move and they could pay-back. Though the BS4 inventory has moved out for most of the car dealers but still the situation remains grim!

Why electric vehicles aren’t hit that hard?

As hinted above, electric-vehicles dealers (e-scooter dealers or e-rickshaw dealers) are lesser hit because:

● Majority of the dominating brands are young like Deltic (deltic.co), a unit of Delta Autocorp LLP. Already one of the market leaders in e-rickshaw segment with 300+ dealerships across India, Deltic takes zero brand fees from its dealers while having a very smooth and flexible relationship with the dealers around inventory. Because of brands like these, dealers are feeling relieved 

● The market is new and has been accepted by Indians, from a village to cosmopolitan cities everyone is going electric. New purchases are bound to happen 

● The Government is especially aiding this segment to sustain and grow with good subsidiaries and policies. As we spoke with one of the Deltic’s officials, she mentioned how they have been a part of many government programs in the last 2 years 

● The setup cost, apart from negligible brand fees, is less. The showrooms are humble and utility-based with less number of staff on the payroll, dealers are eased in many ways

Hopefully, the gloomy days will be over soon and India along with the world will rise to see the sunshine again. Yet the automobile dealers need to ideate, strategize, and take wise decisions soon. Switching to a low-cost e-vehicles setup could be one of the good options! Using the infrastructure and the network for the good while holding multiple dealerships if the policies.

Anyways, please don’t panic. We shared this report with you to make you look at the silver lining and options, every case is an individual and personal case - act wisely in yours.