Mixed Signals

Mohan Himatsingka, President

Dear friends,

The great Indian festival season beginning in September 2012 came to an end with the celebration of Diwali.Auto market was counting a lot for its revival on the festival season when people in India go for big-ticket purchases. What I understand from my fellow dealers is that the expected festival season boom has failed to materialise in November 2012, dampening the hope for a modest growth in the current financial year.


However, few segments of the auto market, especially UVs and two-wheelers continue to witness the steady
growth. Two-wheelers continue to stay in positive territory, although their growth is not something to rave about and is a far cry from the healthy double-digit rise in the earlier years. The performance of UVs and crossovers has been outstanding in this financial year. This goes to reflect that it is not entirely a gloom and doom scenario. In fact, we are again faced with a situation when there is a gloom after 3-4 years of boom.

The cause of worry is that economic scenario, being what it is, is not inspiring. The challenges of depressed economic environment, unrelenting inflation, volatile fuel prices and high interest rates continue to dog the auto market. The GDP growth in the 2nd quarter of FY 13 dipped to 5.3% from equally lukewarm growth of 5.5% in the 1st quarter. We have been hoping for a revival in economic & investment climate, but it is not happening.

With economy not doing well and fiscal management becoming difficult, the Damocles sword of downgrade
by international agencies is constantly hanging over head, which is not a situation India would like to be in. Current low-beat economic environment notwithstanding, there are straws in the wind, which suggest that the lows in the economy may have bottomed out.

The Index of Industrial Production (IIP) for the month of October expanded at a robust 8.2% versus a contraction of 0.7% in September, beating the analysts expectations of 4.5-4.9% by a large margin. This is the highest that the IIP has touched since June 2011, when the indicator came in at 9.5%. What is heartening is that the manufacturing sector grew at 9.6% in October 2012 compared to a contraction of 1.5% in September.

While the magnitude of upside in IIP has come as a pleasant surprise, a large part of it may have been
contributed by the base effect. Therefore, we should be careful in not over-interpreting this number and wait and watch for the IIP numbers in the next 2-3 months to firmly conclude that the industrial production and, for that matter, the economy are on a path to sustained recovery. Already, we have seen that the auto sale numbers in November are not encouraging. As such, it will be premature to start celebrating at this stage. However, we can draw comfort from the fact is that even though the IIP numbers for October look a little too good for comfort, things are definitely on the upside.

To give a push to the sustained recovery, it was high time that interest rates are reduced. However, given the current growth-inflation dynamics, RBI has kept the policy rates unchanged and held the rate cut in abeyance till the next review in January. With retail inflation sitting at around 9.8% the situation was a sticky one for the apex bank. The good thing is that WPI has, of late, shown a downward trend, moderating to 7.2% in November. Moreover, the October IIP numbers have surely brought in a mood of optimism that the worst is behind us. There are enough signs of optimism. A lot of supply side issues that were there last year, seem to have gone away. Hopefully, we may see expansion month after month from here and rate cut in January 2013.

Regarding the activities of FADA since my previous message, Automotive Dealership Excellence Awards for
the year 2012 (ADEA 2012) is one of the important activities, which is engaging most of our attention right now. The awards will be presented to the proud winners, as in the past, at a glittering function on 9th March 2013 at Hotel Leela in Mumbai.

As you are aware, the annual awards seeking to recognise and reward the automobile dealers excelling in
auto retail business and community service were instituted, jointly by FADA and Auto Monitor magazine in the year 2009. There is no gainsaying that ADEA is getting better and bigger with each edition. This is the fourth edition of ADEA and we are hopeful that the latest edition will see new highs in scale and grandeur, as also in participation.

The nominations for those wanting to be considered for the awards for the year 2012 are open. The applications and details can be downloaded from the websites www.fadaweb.com or www.adea.in. For the convenience of my fellow dealers, the application form has also been published elsewhere in this issue.

Reiterating my appeal in the previous message, I would urge my fellow dealers to participate in the awards in large numbers to make the awards truly representative of excellence in auto retail. The idea underlying the institution of ADEA is not only to recognise and reward the individual automobile dealerships who have set new benchmarks in various areas of dealership management and social work, but also to spearhead a movement of all-round excellence in auto retail as a whole.

The objective of adding weightage for CSR in adjudging automobile dealerships for the awards is to highlight and make visible the outstanding work being done by automobile dealerships across the country for the improvement of road safety, environment and deveopment of the society at large.

The auto retail business contributes enormously in terms of contribution to the national & state economies and employment generation. Simultaneously, a large number of members of auto retail fraternity are also engaged in community & social work. However, it is regrettable that such a tremendous contribution hardly gets noticed and recognised. The awards present a unique opportunity for the members of auto retail business fraternity to get noticed and be counted.

It needs no reiteration that no business can survive and sustain for long, unless it enjoys the goodwill of society at large. Building bridges with the society through community service and socially relevant activities is, therefore, imperative. Automotive Dealership Excellence Awards aim at, among other things, securing from the Government and the society, the attention and recognition the auto retail deserves.

The added attraction in this year s awards presentation event will be a B2B show and workshops on how
working closely with other allied business partners can improve the dealerships productivity and profitability. This is an event not to be missed by my fellow dealers. We are working on the programme of the awards presentation function scheduled for 9th March 2013 and shall come back to you with complete details in due course of time.

Rest assured, you will be hearing a lot on FADAs other activities that are on the anvil and will be rolled out shortly.

Looking forward to your suggestions and observations, if any, on the working and activities of FADA.
With best wishes,

Yours sincerely,
Mohan Himatsingka

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