No End to Market Woes in Sight

Dear friends,

A series of reports emanating of late indicate grim tidings for the Indian economy, increasing the pressure on the beleaguered auto market.

Industrial production contracted 1.6% in May, exports fell 4.6% in June while retail inflation accelerated to 9.87%, reversing three months of decline and effectively ruling out any cut in interest rates to stimulate demand. 

Worse, industrial growth has been revised downwards to 1.88% for April, against the earlier calculation of 2.33%. This means industrial growth was a meagre 0.1% in the first two months of the current financial year against 0.6% in the corresponding period of 2012-13.

The contraction in industrial production and exports shows that India faces the double whammy of weak domestic and foreign demand. This appears to suggest that the auto market has a long, winding journey ahead before it hits the sweet spot again. 

What is disconcerting is that the depressing news for Indian economy continues unabated and there are no indications to suggest an early end to the economic woes.  WPI edged up to a three-month high of 4.86%, dashing already slender hopes of reduction in interest rates. The rise in inflation because of steadily increasing fuel and food prices, combined with the rupee depreciation has made the Government press the panic button.

In fact, to arrest the free fall of rupee against dollar, the apex bank has virtually hiked the interest rates without tinkering with the policy rates by capping liquidity in the system at Rs. 75,000 crore and raising the cost of borrowing for lenders by 200 bps.

The silver lining in the clutch of data released recently is that trade deficit fell to a three-month low of $12.2 billion from $20.1 billion in May because of a sharp fall in gold imports after the Government raised import duties and made bullion imports unattractive.

Another reason that sustains hope is that the extent and coverage of monsoon this year has been good. In India, monsoon is the key to determine agricultural output, inflation, consumer spending and overall economic growth. Normal rainfall is expected to lead to higher farm output, which will rein in food prices that have largely been fuelling inflation. Agriculture sector which accounts for 17-20% of the GDP, is largely dependent on the rains. A rise or fall in agriculture has a ripple effect on the economy. With 75% of Indians directly or indirectly dependent on agriculture, a good monsoon will boost the spending and output of several commodities, thus helping the revival of market.

Adverting to FADA’s activities, we held a Regional Meeting and Council Meeting at New Delhi on July 6. The meetings assumed added relevance, as there were a number of important matters having far-reaching implications for the retail automobile trade, which came up for discussion.

As you are aware, members of FADA are spread far and wide across the country. It is well-nigh impossible for the FADA office bearers to visit all the cities and towns to meet and interact with the members. Regional meetings provide an opportunity for interaction between office bearers and members located in various parts of India. Such interactions help in identifying issues and problems facing the members of auto retail fraternity at the local & regional levels for concerted action by FADA and local association of automobile dealers. These forums also bring forth valuable feedback and suggestions from members to enable FADA attune its activities and initiatives suiting the needs and requirements of its constituents. 

The regional meeting at New Delhi gave us an insight into the issues confronting my fellow dealers in Delhi. The outstation members got to know a great deal about how the local association of Delhi has been able to address and handle adroitly the issues relating to logistics charges and HSRP. It was a learning experience for all of us in auto retail in other parts of the country, for, sooner or later, these issues are likely to crop up in other States as well. My kudos to the Automobile Traders Association Delhi for ably handling these issues, as positive outcome will set the tone and benefit the entire automobile dealer community in India.

We also got to know a lot about the role and activities of Automotive Skills Development Council (ASDC) through a presentation made by Mr Sunil Chaturvedi, CEO, ASDC. Likewise, Mr Deepak V, Executive Director, Prashaste Training Academy, through his presentation gave an update on the training & development program being conducted jointly by FADA and Prashaste and the plans for the future.

The Regional Meeting was also an occasion to launch AutoHealth product of IndiaFirst Life Insurance Company. The idea underlying the tie-up with IndiaFirst for AutoHealth product is that my fellow dealers not only provide health insurance cover to their customers but also add to their revenue streams. A similar initiative, namely, AutoLife launched last year has been successfully implemented by a number of automobile dealers across the country.

Council meeting held earlier during the day was equally fruitful.  As you are aware, FADA has been organising Auto Summit – a biennial convention of automobile dealers, coinciding with Auto Expo, since 2000. FADA Council decided to organise the 8th Auto Summit at Hotel Le Meridien, New Delhi on 7th & 8th February 2014. As in the past, it will coincide with Auto Expo, which is scheduled for 7th to 11th February 2014 at Greater Noida. 5th edition of Automotive Dealership Excellence Awards (ADEA) will also be dovetailed with the Summit.

Needless to mention, the Auto Summit has been getting bigger and better in terms of size, substance and grandeur with each successive edition. The increasing stature of the event finds reflection in the growing interest and participation of almost all industry leaders, captains of allied businesses and our fellow dealers from across India and abroad. The Auto Summit brings all stakeholders on a common platform and is eagerly looked forward to by my fellow dealers as well as others connected with automotive business.

I seek your support to make the Auto Summit 2014 a grand success, like the previous Summits, by your participation along with your fellow dealers in large numbers. The programme is under finalization. You may look forward to further announcement regarding programme and registration requirements in the forthcoming issues of this Journal and in FADA’s website.

Council discussed the findings of the latest Dealer Satisfaction Study by J D Power. The study is a revelation in that it finds that only 44% of my fellow dealers expect to make profit during the FY 2012-13. The study also reveals the growing strain and stress in business relations between manufacturers and their dealers. It is a wake-up call for all of us, particularly for our principals, to initiate measures for healthy manufacturer-dealer relations and improving the viability of the automobile dealerships.

As I have informed in my previous columns, FADA has also commissioned a study by Frost & Sulivan on benchmarking of the practices of car manufacturers in India in relation to their dealers. The work on this study has already commenced. I appeal to my fellow car dealers to give your free and frank opinion if and when F&S approaches you. The study aims to identify the best practices in various areas so that these could become benchmarks for all car manufacturers.

Simultaneously, we are having dialogue with banks and insurance companies to secure better deals for the members of auto retail and consumers. I am happy to inform that their response is positive and encouraging. I shall share the details, as the discussion further progresses and fructifies.

I am happy to inform that FADA’s 49th Annual Session and Annual General Meeting will be held on 6th September 2013 at New Delhi. The venue and the programme are being finalized. I invite all my fellow dealers to attend.

Please feel free to send your inputs and suggestions, if any.

With best wishes,

Yours sincerely,

Mohan Himatsingka


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