NOT MUCH TO CHEER ABOUT

Dear friends,

The long festival season has concluded.  Hope, my fellow dealers would have had a blast and a lot of fun and frolic during these festivities.

However, what I understand from fellow automobile dealers and media reports is that the long period of festivities culminating in Diwali failed to light up the mood of auto market, as the vehicle sales, barring those of two-wheelers, remained subdued in October. The cold comfort is that the two-wheelers have kept the momentum going, sustaining hope that the recovery for auto market may be round the corner.

It is a feeling of déjà vu all over again.  We, the automobile dealer fraternity, have been hoping against hope eternally that the market will turn around soon.  However, time and again, our hopes have been belied. A reasonably good performance of two-wheelers for the last four months gave rise to the expectation of other segments of the market regaining momentum.  However, the recovery is becoming a mirage for the business as a whole and the auto market, in particular. 

The developments on economic front, while signalling that there is no reason to feel dejected, are not enthusing either. The rupee is once again witnessing free fall against dollar, causing worries that another dose of fuel prices may be on the cards.  The fear of Fed tapering has resurfaced, as the job data from the US shows that the American economy is better-than-expected.

The economic and industrial activity is yet to show any tangible improvement. Infrastructure and development projects are moving at snail’s pace in spite of efforts to fast-track them. Due to uncertain political environment and the forthcoming general elections sometime in May 2014, investors, both domestic and international, are keeping their investment plans on hold for the time being.  Interest rates continue to be sky-high and the consumer confidence is subdued due to job uncertainties.  To top it all, the inflation, fuelled by the soaring food prices, is stubbornly hovering well above the RBI’s comfort zone and showing no sign of climbing down.

All said and done, the economy and the auto market may be down but are not out. There are few positive developments that fuel hope of revival in the fortunes of auto market.

One, the rain god has been bountiful this year. The country witnessed an above normal rainfall. The monsoon was not only good in quantity but also in coverage. This has yet again rekindled the hope and an expectation of a bumper kharif crop, which is likely to lead to higher rural incomes and demand.  This will, in turn, have ripple effect on other sectors of economy, including auto sector.  The resurgent mood of rural people is already finding reflection in the growing sales of two-wheelers.

Secondly, the exports clocked their fastest pace of growth in two years, rising 13.5% to $27.3 billion during October, as demand for goods picked up in the US and Europe and Indian exporters gained from a sharp depreciation of the Indian rupee. 

The trade deficit narrowed to around $10.5 billion, nearly half the level seen a year ago. Oil imports too provided some comfort, rising 1.7% to $15 billion. 

Trade deficit has been a major policy headache for the government and investors have raised concerns over financing the huge gap. In recent months, however, with a fall in imports and resurgence in exports, trade deficit is seen to be more manageable, prompting the FM to lower the annual estimate for current account deficit to $60 billion or lower, compared to $70 billion projected earlier.  The trend of growing exports and slowing imports due to the depreciation of rupee and the curbs on imports of gold and silver, witnessed of late, has led to the hope that the CAD will be brought down further to $50 billion or 2.7% of GDP.

We are, therefore, looking forward with a sense of anticipation, to the revival in sentiment of auto market and to the better sales volumes in the remainder of the current fiscal.

Adverting to the activities of FADA, as I mentioned in my previous column in October, our preparations for the Auto Summit 2014 are going full-throttle. I am happy to inform that Mr Praful Patel, the Hon’ble Union Minister of Heavy Industries has already consented to inaugurate the Summit and to deliver his inaugural address. The confirmations are pouring in from industry leaders as well.

An International Round Table that will have the participation of our fellow dealers from international community and discuss auto retail practices across the major markets in the world is also scheduled, so are the workshops on matters concerning day-to-day management of the automobile dealerships. These workshops will discuss ways and means of improving efficiency & productivity, cutting costs and plugging leakages through CRM, processes and technology. I may add here that these workshops were roaring success last time and evoked an overwhelming response.

The Auto Summit is an opportunity for automobile dealers and others connected with automotive business to enrich their experiences. Especially for the automobile dealers, it is an occasion to meet their Principals and fellow dealers from within and outside India and to build and deepen their relations. The participants at the previous Auto Summits had a fulfilling experience, which they cherish.

The presentation of awards for the Automotive Dealership Excellence Awards for the year 2013 in the evening on 7th February 2014 forms an integral part of the programme of Auto Summit 2014. The awards instituted in 2009 to recognize and reward excellence in various areas of auto retail business  as well as the contribution of members of auto retail fraternity in CSR activities and community service have been growing in popularity and participation with each successive edition.  The objective of instituting these awards is to bring forth best practices in auto retail business as benchmarks for other fellow dealers to implement in their dealerships. Another objective of these awards is to highlight the contribution of automobile dealer fraternity in social work and community service, as no business can survive and thrive unless it enjoys the goodwill of the society.  

My appeal to my fellow dealers is two-fold: (a) Register in large numbers for the Auto Summit 2014 if you have not done so; and (b) Participate in Automotive Dealership Excellence Awards by sending your nominations overwhelmingly so that the awards truly represent the excellence in auto retail. The registration/nomination forms and the other details have already been sent to you and are published again elsewhere in this issue.

Another major activity of FADA, which is underway, is the study on benchmarking of practices of OEMs for retailing of passenger vehicles in India. FADA has commissioned renowned international consultancy firm, Frost & Sullivan to conduct the study. The idea of appointing an independent consultancy firm for the study is that its findings enjoy the credibility.  The objective of the study is to identify the best practices in retailing of passenger vehicles and to bring in the uniformity across all players and brands.

A 4-member delegation of FADA recently visited the Commercial Vehicle Show in Wuhan, China on the invitation of Organising Committee of the Show. The show was impressive and displayed the strength and long strides made by the Chinese automobile industry. We also visited a few automobile dealerships. What emerges loud and clear from our visit to the automobile dealerships in China is that the problems and issues facing auto retail, i.e. discounting, abnormally high stocks and inventory levels, etc. are by and large common, especially in the developed markets, across the world.

Please feel free to send your suggestions and ideas, if any, so that we can initiate and attune the activities of FADA to make them more useful and meaningful for its constituents.

With best wishes,

Yours sincerely,

Mohan Himatsingka

 

 

 

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