First Business News Portal in English from Nepal
KATHMANDU: After the tourism industry it is the automobile sector that has been hit hard by the lockdown imposed to stem the spread of the coronavirus. The automobile industry that had generated revenue of Rs 100 billion in fiscal year 2018/19 could not generate even half that amount till mid-July of fiscal 2019/20, according to NADA Automobiles Association of Nepal.
Like other industries, automobile dealers also resumed business after the first phase of the lockdown was eased by introducing different innovative auto schemes, offers and services with a target to awaken an interest among customers. Many of the auto dealers had just been able to resume their pre-scheduled business when the government announced the reimplementation of lockdown on August 18.
Krishna Prasad Dulal, president of the automobile dealers association, mentioned that as it is the auto industry was already struggling and the pandemic and lockdown hit the trade even more adversely. He clarified that the industry was not doing well earlier too because of the problems in down payment, complex procedure for auto loans, the road conditions and various other reasons.
“Since the last three to four years imports of automobiles have been declining by 10 to 15 percent annually. Compared to last year, imports this year have declined by 50 percent as of mid-July,” he said.
The industry had been providing employment opportunities to around two million people in different sectors including sales, spare parts, lubricant market, dealer network, among others. However, because of the lockdown all the related businesses have come to a complete standstill.
A glimmer of hope for private vehicle sales Despite the auto business hitting the bottom due to the lockdown, it witnessed a high number of enquires for purchase of private vehicles in the post-lockdown phase. Due to the fear of contracting the coronavirus while travelling in public vehicles more people have somehow made up their minds to buy their own vehicles.
In between the government easing the first phase of the lockdown and announcing the second phase of prohibitory order automobile dealers have received a high number of enquiries especially for two-wheelers. The two-wheeler market could witness a boom as soon as the situation normalizes as they are affordable and the operation and maintenance costs are also comparatively low.
“People now do not feel comfortable using public vehicles and it is difficult to maintain social distance in a four-wheeler. Hence, the lockdown and the odd-even rules for vehicles post-lockdown have made people realize the need for a two-wheeler,” explains Deepak Agrawal, vice president of Jagadamba Motors Pvt Ltd. He further shares that even those people who own a four-wheeler are opting for two-wheelers as an alternative medium at present.“So, there is hope for the business of two-wheelers after the lockdown is over,” he mentions.
Though the market for two-wheelers is sustainable the market for four-wheelers does not look good. Many four-wheeler auto dealers had introduced different innovative schemes post-lockdown. For instance, CG Motocorp, an authorized dealer of Suzuki four-wheelers, announced the ‘Naya Suruwat’ scheme whereby customers had to make low down payment along with heavy cash discount of up to Rs 225,000, auto insurance for a year, exchange bonus of up to Rs 200,000, among others.
Likewise, MG Motors Nepal also started selling MG four-wheelers at a heavy discount of up to Rs 350,000 and provided various offers after the first lockdown.
However, people are hesitating to invest in four-wheelers due to the uncertainty created by the pandemic. Karun Shakya, senior assistant at CG MotoCorp, shares, “People are apprehensive of using public vehicles because of the fear of getting infected by the virus. As a result more people want their own vehicles, so compared to last year, enquiries for private vehicle has been high,” he says, adding, “But people have actually not bought vehicles as they are sensitive in terms of investing in a private vehicle during this uncertainty.”
“It is the peak season for the automobile business and around this time we usually receive high demand for our electric vehicles (EVs) but the lockdown from the beginning of this year has affected sales a lot,” says Sunil Chaudhary, assistant manager at MG Motors.He said that the company used to sell up to 400 units of vehicles in previous years, however, sales this year are down by 50 to 80 percent. “We have sold only 120 units of our EVsand they too were already booked before the lockdown,” shares Chaudhary.
Sustaining strategies and expectations Most companies at present are reducing their operational and marketing costs wherever possible to reduce their expenditure. They have been operating their business by mobilizing staffs on alternate days but have not reduced the number of employees. Some of them are utilizing online platforms, developing apps and some have even started home delivery services.Due to the downturn in business, the dealership networks outside the valley have been more affected than the corporate offices.
“Operating one showroom costs around Rs 1.5 million, therefore, it is difficult to survive without any sales. Our staffs in Pokhara have been contemplating to shut down the dealer outlet there but we are asking them to carry on and introduce new schemes to attract buyers,” explains Chaudhary. “We cannot just ask our employees to leave as they are our assets. However, if the lockdown is extended for another six months then we probably will reduce their salaries,” he states.
Auto dealers at the moment are in a wait and watch mode. They are concerned about the risk of the virus but at the same time they are waiting to see how the government addresses the situation and how it pans out. Instead of seeking relief packages the auto dealers are looking for viable solutions to cope with this crisis. “Imposing a lockdown is not the ultimate solution. May be many people are dying not because of the pandemic but due to the unavailability of proper health service,” notes Dulal. “So, the government needs to come up with a long-term but safe solution to the problem created by the coronavirus if it wants to sustain industrial growth in the country,” he adds.
Dulal further mentions that NADA has been requesting banks ease the procedure for auto loans so that business can pick up.
“Lockdowns are imposed to break the cycle of infection among people and it also gives the government time to manage the fundamental health facilities but the government here has not managed even basic necessities like ventilators, proper hospitals, isolation wards, among others,” says Chaudhary.“We are not seeking any relief package. What we want the government to do is manage the basic things. We can revive our businesses on our own. We expect only proper health and safety management from the government,” he adds.
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