Indian Auto Market: Long-Term Outlook Bright Despite Current Woes

While Indian auto market has been witnessing cyclic ups and downs in the past, the current recession is the worst it has ever experienced. There is a slowdown across segments and the sentiment is very negative. The prolonged spell of the current downturn has cast a gloom in the market. The automobile dealerships, in particular, confronted by host of challenges, are finding it difficult to stay afloat.

The historical evidence clearly suggests that the fate of auto market is essentially linked with the pace of economic growth & development. The present economic environment being what it is, the automobile dealers in general, do not see the market returning to buoyancy any time soon.

The current uncertainties notwithstanding, the Indian automotive market is poised for a steady growth going forward. Growth drivers such as rising income levels and changing life styles, particularly the growing aspirations of rural India, increasing urbanisation necessitating the increased mobility needs, low penetration levels and changing consumption pattern, are in place to fuel healthy demand in medium and long runs. 

This was the unanimous view that emerged at the 49th Annual Session of Federation of Automobile Dealers Associations (FADA) held at New Delhi on 6th September.

Speaking on the occasion, Chief Guest - Joginder Singh, President & MD, Ford India, said, “While the Indian auto market is passing through turbulent times for over a year, the long-term outlook is bright, as Ford foresees it.” He expressed the view that the centre of gravity was shifting from North America & Europe to Asia and Asia Pacific. Singh expected the global auto market to grow from the current 82 million vehicles to 110 million vehicles annually by the end of this decade, of which India would account for 9 million vehicles, thereby becoming the third largest market in the world. He exhorted the automobile dealers to stay focussed on long-term and to recalibrate according to the changing scenario. “Ford remains bullish about Indian market and will be investing further $2 billion in the next few years In India. In addition, Ford global suppliers are set to enter India in a big way,” he added.

Adverting to the current slowdown, Joginder Singh felt that the trade-offs and the balancing were required on the part of Government and industry. Terming the automobile dealers as the guardian of the brand, he advised the dealers to channelise their energies and efforts on life-time relationship with their customers and not just on transactions.

Jnaneswar Sen, Sr Vice President, Honda Cars India stressed on the importance of CRM and customer satisfaction with a view to retaining the customers for life time. The sale of one Honda car, generates revenue of over Rs. one lakh for the dealership over a period of five years. He, therefore, suggested a strong focus on customer relations and after-sales service. Sen felt that while cutting costs was fine, there should not be any compromise on manpower, infrastructure and systems, as the future for Indian automotive market was promising.

Earlier, welcoming the guests, Mohan Himatsingka, President, FADA, said “The Indian auto market is currently going through the most turbulent phase in its history. Virtually, all segments of the market are engulfed by the recession. The grim situation finds reflection in the 2013 India Dealer Satisfaction Study by J D Power, which 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.”

He added that unrelenting inflation brought about by soaring food & fuel prices, has chiefly played the spoilsport for the economy and auto industry.  In spite of monetary tightening measures adopted by the RBI, inflationary expectations are not subsiding.  Attendant ills in the form of higher lending rates are squeezing demand on one hand and increasing the cost of dealership operations on the other. 

“The problem for automobile dealerships is that they cannot play around much with their cost structure, for, most of the expenditure under various heads of dealership operation is inelastic and cannot be reduced. As the market matures and grows, the number of models and their variants also increase. Dealerships have to have in their inventory all such models and variants, as also their spare parts. Similarly, in an intense competitive environment, marketing effort has to be sustained to keep the sales kicking. With growing urbanisation and tightening of environment & safety laws, the real estate and compliance costs continue to rise unabated,” he said. 

In his presentation, Manish Jar, Group MD, Sewells Group said, “Though Auto Industry in India is going through a really challenging times, this is a temporary phase. The global mega trend that is causing the rise of emerging markets like India and China has something to do with socioeconomic cycles that run over multiple decades. The growth is going to come back as soon as the political factors become more optimal. Because there is a better future ahead of us, auto dealers must find ways to stay afloat in these challenging times. In this regard, there are many lessons that we can learn from dealers in developed markets that survived the global financial crisis. Also, we must use this time to ready ourselves for future. Readiness for future would mean understanding the emerging trends in auto retailing and adapting to them.”

Dr Rajeev Puri, Management Consultant, Talent Farm Solutions referring to the Indian victory against Pakistan in 1971 as the biggest martial victory in the last 500 years, described it as the best example of what proper manpower, strategy and planning can achieve. The fierce intra-franchise and inter-franchise competition in the market today has turned virtually into warfare, where manpower, strategy and planning play a very significant role. Dr Puri exhorted automobile dealers to switch from discount-based selling to value-based selling to beat the competition. He said, “The success and growth of any business rests on strong foundation. The business can succeed and grow only if it is founded on ethical practices.”

Nim Saranna, CEO, Fastlane Automotive Intelligence, in his presentation, laid emphasis on the importance of business intelligence and reliable data in arriving at correct decisions and planning for the future. He said that Fastlane Automotive Intelligence has been working on and managing the vehicle data systems in the UK and other developed countries, which is of immense help to various stakeholders. He expressed the need for similar robust vehicle data management system in India.

Sudeep Kolte, Vice President, Sales B2C, Shell India, spoke about the quantum jump in the lubricants’ quality & technology and the expanding global footprint of Shell. He expressed the view that working together would be a win-win for both automobile dealers and Shell.

The occasion marked the advent of 50th year of FADA’s existence. A special logo in celebration of 50 years of FADA was unveiled by the Chief Guest and other Guests of Honour, present on the occasion. During the next one year, FADA will be organising special events to celebrate its Golden Jubilee, which will culminate in a grand function some time in September 2014, coinciding with FADA’s next Annual Session and AGM.

FADA’s AGM and Council Meeting

FADA held its 49th AGM followed by 266th meeting of Council constituted anew at the AGM. Council re-elected Mohan Himatsingka as President; KVS Prakash Rao as Vice President; John K Paul as Hony Secretary and Mukesh Jain as Hony Treasurer, for the year 2013-14.

New council listed the following priority areas for action during the next one year:

(i)  Stepped-up interaction with OEM’s on dealer viability and manufacturer-dealer relations;

(ii)  Increasing frequency of regional meetings for interaction with members spread across the country and identification of issues & problems facing automobile dealers at the State & local levels;

(iii)Conduct of Auto Summit 2014, bringing various stakeholders on a common platform for sustained growth & development of automobile sector;

(iv)  Organising B2B shows enabling automobile dealers to explore & expand business opportunities; and

 

(v)  Celebrating 50 years of FADA’s existence organising events & activities throughout the next year.

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