Good News for Car Dealerships. 🚗
The income of domestic passenger vehicle (PV) dealerships is likely to rise by about 100 basis points (BPS) this financial year. This increase is due to higher sales volumes, as reported by Crisil Ratings.
Why Are Sales Expected to Rise? 📈
Himank Sharma, a director at Crisil Ratings, mentioned that changes in tax slabs will boost urban demand for passenger vehicles. People in cities are expected to spend more, and with the ongoing popularity of SUVs, sales are likely to grow. Additionally, a good monsoon and higher minimum support prices in rural areas will improve farmers’ incomes, which may lead to an increase in small car sales. Overall, the industry is predicted to grow by 7-9% this financial year.
Benefits for Dealers 💰
The report highlights that increased sales volumes will benefit dealers in two main ways. First, their income will rise as promotions and discounts decrease, leading to an operational profit increase of 3.2-3.4%. Last year, the profit had dropped by 30-35 BPS. Moreover, inventory levels are expected to remain low, meaning dealers will not need to spend heavily on expanding showrooms.
Stable Credit Profiles for Dealers 📊
Crisil’s analysis of 110 PV dealers shows that their credit profiles will remain stable after a shaky last financial year. Volume growth is projected at 4-6% this year. Auto companies are also likely to increase prices, which could raise revenue from SUVs by 3-4%. Last year, dealers faced high inventory levels, but better demand this year may reduce inventory days by 5-10, though it will still be above average levels seen before FY 2024.
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