Sustaining on Eternal Hope

Dear friends,

We, in auto retail business, have been clutching at straws and hoping for a growth momentum in automotive market for over two years now. However, our hopes have remained hopes with sustainable recovery eluding us time and again.

We started the FY’16 with renewed hopes of early revival of auto market. The sales performance for the first two months of the fiscal is not something to rave about. With rural incomes hitting bump due to erratic, deficient rains, the two-wheeler sales that had spectacular run are losing steam. A little comfort is that commercial vehicles have started growing, thanks to the impetus given to the infrastructure development by the incumbent Government. Passenger vehicles are also witnessing a modest uptick. However, it is too early to celebrate. 

What I gather from my fellow dealers is that the retail sales do not reflect the wholesale numbers reported by the OEMs. There is inventory build-up at the dealerships. It is huge discounts and freebies that are largely driving the sales. When seeking to know the health of the auto retail, I encounter bitter smiles - signifying only topline growth with bottomline hurting in most cases. I think the time has come for manufacturers and dealers to come together to work on the productivity of the assets deployed at the dealerships.

The economic environment remains challenging. Macroeconomic indicators give mixed signals. Industrial production is having roller-coaster ride. The forecast of deficient monsoon rains this year has added to the worries particularly for the rural market, which is not good news for the two-wheeler segment. While agriculture accounts for roughly 17.0% of India’s GDP, its ripple effect on other sectors of economy cannot be overemphasised.

On the positive side, the petroleum prices are exhibiting a semblance of stability after sharp upward movement last month and the inflation remains benign despite erratic rains. India's external account is within the comfort zone with the Current Account Deficit (CAD) narrowing to $1.3 billion or just 0.2% of the GDP in the Jan-Mar’15 quarter. Industrial activity picked up in April, posting a better-than-expected 4.1% growth, up from 2.5% in the previous month. This piece of news is encouraging, fuelling hopes that a revival may be underway.

The growth prospects of economy and, for that matter, auto market largely hinge on the good monsoon rains this year. The drought, if it happens as predicted, for the second consecutive year will be a big blow. What is comforting is that multilateral agencies continue to be bullish about India’s growth prospects. I am also hopeful the Rain God will be kind to us this time and that despite various challenges, auto market will soon be driving on sustainable growth path.

Regarding FADA’s activities, I wish to inform that FADA Council will be meeting in Kolkata on 4th July 2015. There are quite a few important items on the agenda for consideration of Council. Apart from approving the Annual Accounts and Annual Report, Council will also be discussing and finalising the dates, venues and programmes of two important forthcoming events, viz. FADA’s Annual Session and 9th Auto Summit. Strengthening and further developing the FADA Academy training programme, as also the digitalisation of FADA, are also high on Council’s agenda. 

My fellow dealers, particularly from eastern part of India, are welcome to attend the Council Meeting at Kolkata on 4th July 2015 as our special invitees.

Meanwhile, please feel free to send your views and suggestions, if any, for further improving the working of FADA.

With best wishes,

Yours sincerely,

K V S Prakash Rao

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