India, Kerala floods: Car inventory worth Rs 1,000 crore sinks across dealerships

Torrential rains in Kerala may have possibly wiped out car inventory worth Rs 1000 crore stocked with dealers as most showrooms remained marooned for more than a week.

Earlier this month, the coastal state saw its worst downpour in nearly 100 years leaving 373 dead and thousands others homeless. The state government has estimated a loss of Rs 20,000 crore with several small businesses being severely hit.

Kerala is the single biggest of the six markets for passenger vehicles in the southern region making up 27 percent of the 245,000 quarterly sales. Cars submerged for a long period find very little resale value and are typically reduced to scrap.

Around 17,500 cars across the state are estimated to have suffered the impact spread over 350 dealerships. "The average ticket price per car sold in Kerala is around Rs 6 lakh," said a senior executive from the Federation of Automobile Dealer Association.

The loss will impact dealers more than anyone else as the inventory was to be fully paid for by the dealers to the car manufacturers. Car makers, however, could selectively decide to help their dealers through compensation.

Inventory of motorcycles, scooters, mopeds and agricultural machines like tractors, trucks and buses too have suffered massive losses during the floods. The state has more than 700 dealers of a variety of automotive brands.

To make matters worse, in the run-up to the state's biggest festival Onam, automotive dealers had stocked up on their inventory in the anticipation of the festive demand. "Onam leads to higher than usual buying by dealers every year," added the executive.

Onam falls on August 26 this year.

Cars in many showrooms including that of Maruti Suzuki, Hyundai, Tata Motors, were completely submerged.

The natural calamity occurred at a time when the state had rapidly risen in the ranks of India's best markets for automotive sales.

Led by its financial capital Kochi, Kerala had emerged as one of the top Tier II markets for luxury cars. German luxury car making giant Mercedes for instance Mercedes has five dealerships in the state. British luxury car maker Bentley has sold more than 15 cars in Kerala until mid of 2017.

"It will be at least 2-3 months before the buying class comes back to showrooms because the first attempt will be rebuilding the homes and livelihoods," said the executive.

The insurance claim process will be time-consuming as the scale of damage is huge. List of claimants for loss of business is expected to be significant.

"We are presently helping our dealers with bank procedures and insurance claims. We are requesting insurance companies to at least release 75 percent of the amount," added the executive.