Coronavirus Lockdown: Carmakers Extend &#8377 1800 Crore Support To Dealerships

The 21 day long nationwide lockdown that’s been implemented to prevent the spread of the novel coronavirus definitely serves a greater purpose, but there’s no doubt that it has impacted the economy and industries as well. The auto industry has taken a hit  because of the halt in operations which has seen lesser cars reach dealerships. According to a report in The Economic Times, in a bid to help dealerships with fixed costs, carmakers have come up with a specific COVID-19 package of ₹ 1800 crore which would be utilised in paying off fixed costs like rent, electricity bill and staff salary among others.

Dealerships are already burdened with unsold BS4 stock which is estimated at ₹ 200 crore, hence the relief package comes as a big support. Moreover, carmakers are also planning to share part of the losses incurred because of the remainder of the BS4 inventory and have already started making the payment in the last week of March which will continue till the first week of April. In a normal situation, carmakers would have made the payment by the end of April or early May. The report also mentions that carmakers are giving away full incentives, regardless of the performance and parameters which could have been lower than what they are offering now.

Dealerships are also burdened by BS4 stock.

Speaking to ET, Naveen Soni, senior vice-president- Toyota Kirloskar Motor (TKM) said “Dealers are our biggest asset. Since the lockdown, the focus has been to assess their health. We have come out with a package that will ensure that cash flows of the dealers are taken care of the next 38-75 days,” said Soni.

In case the lockdown is extended beyond the April 14 deadline, carmakers are also considering to do more if needed in order to ensure the financial health of dealerships which is the direct link between the brand and end customers. Carmakers are reaching out to banks and financial institutions to extend payments moratorium to auto retail channels. Shashank Srivastava, Executive Director, Marketing & Sales- Maruti Suzuki, told ET that because of the lockdown, there is no retailing. But the clock on inventory financing is ticking. This is a huge burden on dealers and Maruti is in touch with all the banking partners for a moratorium on inventory financing interest.

Source: ET Auto

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