India’s Panicked Two-Wheeler Dealers Send An SOS

Dealers of motorcycles and scooters in India were hoping for a better new year as the world’s biggest two-wheeler market was yet to fully recover from the setback of 2020 lockdown and rising costs. But 2021 has turned out to be even worse. Panicked owners of outlets are pleading for help.

As states imposed strict curbs to contain a devastating second wave of Covid-19, showroom traffic collapsed. About 60% of India’s 26,500 auto dealerships sell two-wheelers and rural India is their biggest market. With the virus now ravaging the hinterland, a quick rebound is out of question when outlets are sitting on an inventory of about month and a half on an average. Job cuts and shutdowns loom.

“We could see layoffs and some of them might have to shut shop or reduce the number of two-wheeler outlets,” Vinkesh Gulati, president of Federation of Automobile Dealership Association, told BloombergQuint over the phone. Dealers who don’t have deep pockets will find it difficult to survive without cutting costs or help from automakers.

Sales have dropped because of local lockdowns across India. According to the federation, 80% of the outlets have been forced to temporarily shut down because of restrictions.

The owners of outlets have sought help from the makers of scooters and motorbikes. WhatsApp groups with dealers from multiple states as members keep buzzing with SOS messages.

“It is really very tough time as all OEMs are not giving any support to dealers and also the government is not giving any relief to dealers; then how we will pay our inventory funding which are going to be due this month,” a text on one of the groups viewed by BloombergQuint read.

Gulati said original equipment makers, in informal discussions, have asked to “wait and watch”.

BloombergQuint awaits responses to queries emailed to Honda Motorcycle and Scooter India, Hero MotoCorp Ltd., Suzuki Motorcycle, Bajaj Auto Ltd. and TVS Motor Co. on how they plan to support the dealerships.

“If last year’s sales were bad, this year it is going to be worse,” Shrestha Jaiswal, a Kolkata-based dealer of Honda Motorcycle and Scooter India Pvt., said over the phone. He cut costs to manage expenses by reducing staff and slashing bonuses, he said.

“We have bank loans, EMIs to pay and there is cost of operations as well. Sales were already down 50% last month, and in May there are hardly any walk-ins,” said Jaiswal, who is sitting on a 45-day stock. “We have no choice.”

He has written to Honda Motorcycles through local automobile traders’ association seeking help on interest payment.

About 700 kilometres east of Kolkata, a two-wheeler dealer in Uttar Pradesh is preparing to take a tough call. The Hero MotoCorp dealer, who spoke on the condition of anonymity out of business concerns, said he has asked his HR department to chart out a plan to cut the workforce to save costs. And unlike last time, he cannot afford to wait for the situation to improve as rural demand has tumbled.

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