Continuing Slowdown a Cause for Concern

Dear friends,

The December 2012 sales figures are not enthusing, to say the least, and the auto market is once again faced with the prospect of a severe slowdown. Automobile dealer fraternity was banking a lot on the advent of 2013 to bring the much needed buoyancy back in the market. What I hear from my fellow dealers from across the country is that even the New Year has failed to rev up the mood, with customers shying away from the showrooms. Whatever footfalls are there in the showrooms are not getting converted into sales.

What is worrisome is that hopes of early revival of the market have started subsiding. The issues, such as, depressed economic environment, inflation and high fuel prices & interest rates continue to dog the auto market. The external factors, particularly, slowdown and subdued economic activity in Europe, leading to India’s widening trade gap, are not helping either.

However, there are straws in the wind, which offer cold comfort for the auto market, in particular, and economy, in general.

 

Headline inflation dropped to its lowest in three years in December, bolstering expectations that the Reserve Bank of India will cut rates at its policy review on January 29 to boost the economy, which is headed for its worst showing in a decade. The annual rate of inflation, as measured by the wholesale price index (WPI), dropped to 7.18% in December — the lowest since December 2009 — from 7.24% in November 2012. 

Downward trend in the headline inflation is good news. Manufacturing inflation has also come down. A closely watched subcomponent — core inflation — fell to 4.2% in December and revision in data for previous months was in a downward direction, signaling a softening in prices.

The inflation numbers are the latest piece of data supporting a cut in interest rates after a fall in industrial output in November. Exports too shrank in December, indicating that the Asia’s third-largest economy was close to stalling, which is all the more a reason that calls for the immediate rate cut. 

It is heartening to note that the nation’s most influential policymakers and economists are rooting for cutting rates. The debate should now shift from the timing of the cut to how much RBI will cut - a 25-basis point or a 50-basis point.

The time has come for the balance of policy to shift from managing inflation to helping growth. 

The build-up of expectations of a rate cut and the government’s decision to defer implementation of the controversial anti-tax avoidance rules by two years have enthused investors, leading the BSE Sensex to cross 20,000-mark, its highest level in over two years. 

As I write this message, yield on the benchmark government bonds has dropped and the rupee strengthened.

However, there is a flipside. Not all measures of inflation point downwards. 

Retail inflation climbed back into double digits, to 10.56%, in December compared with 9.9% in November, as its biggest component — food — became pricier from a year ago.

All said and done, softening of WPI and the resultant expectation of a rate cut has brought in its wake a cautious optimism within the auto market. I remain optimistic that the good days for the retail automobile trade will return soon.

While auto market may be witnessing somewhat bumpy ride at the moment, enthusiasm of the current FADA Council remains unfazed. We held a Council meeting recently in Hyderabad at which we took a number of important decisions, which are going to benefit the automobile dealer fraternity in a significant way and will give a big push to the activities already rolled out.

As I mentioned in my previous columns, FADA’s much-anticipated event, i.e. presentation of Automotive Dealership Excellence Awards for the year 2012 (ADEA 2012) has been scheduled for 9th March 2013 at Hotel Leela, Mumbai. Needless to mention, the awards for automobile dealers, who set benchmarks in dealership management practices and are engaged in exemplary social work & community service, were instituted jointly by FADA and Auto Monitor magazine in the year 2009. ADEA has since been growing bigger and bigger. Each successive edition of the ADEA has set a new high in participation.

The ADEA presents a rare opportunity for my fellow dealers to get noticed and recognised for the innovation, excellence in business and CSR activities. It needs no reiteration that no business can sustain growth, unless it enjoys the goodwill and support of the society at large. That is precisely the reason that we have 3 special awards for those of my fellow dealers, who are engaged in and promoting CSR activities, green initiative and safety at their work places and adjoining areas.

Likewise, while SSI and CSI are important yardsticks for adjudging the dealerships for recognition and rewards, it is really the employees’ satisfaction that makes or breaks a business. It is, therefore, in fitness of things that ADEA also recognises and rewards the dealerships for their outstanding HR practices leading to employees’ satisfaction.

I, therefore, urge my fellow dealers to send in their nominations, if already not done, so that larger participation truly represents and brings to the fore the excellence in auto retail practices and CSR activities.

Second major activity that has been set in motion is the series of training programmes for the benefit of my fellow dealers at different places in the country. In view of the fasting changing dynamics of retail automobile trade, growing awareness of the customers and use of technology, including social media for effective dealership management and customer relations, the training and management development programmes assume added importance. The calendar of training programmes for the next few months is published elsewhere in this issue. I wish to reassure that it is an ongoing activity and FADA shall come up with the further schedule of training programmes in due course.  I hope, my fellow dealers will benefit from the training programmes by participating in large numbers.

Third issue that is engaging attention of Council currently is the measures needed to revive the market. FADA cannot help much if the economic environment is subdued due to internal and external factors, leading to the downbeat business and consumer sentiment.  However, we are not just sitting back and waiting for the gloom to lift. While expecting a rate cut by the apex bank in its review meeting on 29th January 2013, FADA has already written to various banks, emphasising the need for softer interest regime and easier availability of finance for vehicle purchases. A team of FADA members would be meeting the concerned managers of banks individually to reinforce our suggestions. The depressed auto market is hurting the members of auto retail business and the banks & finance companies alike. It is, therefore, important that all stakeholders put their heads together to wriggle out of the current slowdown phase.

Fourthly, FADA is also proposing to approach the insurance companies for incentives in insurance premium in respect of the fleet of vehicles owned by the automobile dealers on the ground that automobile dealers, being in the business of mobility, are aware of and adhere to all the maintenance and road safety norms to the core.

Lastly but not the least, FADA, as a responsible corporate citizen, has tied up with IndiaFirst Life Insurance Company to promote the AutoLife initative that aims to inculcate good driving culture, such as, no unnecessary honking, overtaking, use of high beam on city roads, etc., among the vehicle users. Office bearers and members of FADA were happy to participate at the launch of 2nd phase of AutoLife initiative in Hyderabad. AutoLife, apart from being a CSR activity, also presents a business opportunity for my fellow dealers.

I would like to assure my friends that we, in FADA Council, are working overtime to promote the sustained growth of auto retail in India. You will be hearing a lot of other initiatives and activities, as we move along.

Look forward to your inputs and suggestions, if any.

With best wishes,

Yours sincerely,

Mohan Himatsingka

 

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