Uniting for Disruptive Times

There are challenges galore for the automotive retail business, going forward, in view of the fast changing scenario in which the ‘digital’ is the buzzword. Automobile dealers have, therefore, to gear for the disruptive times ahead in order to stay afloat in the business. This was the message that emerged out of the discussion at FADA’s 52nd Annual Session held on 23rd & 24th September 2016 in Kochi.

Speaking at the 52nd Annual Session of FADA on 24th September 2016, the Chief Guest - Dr T M Thomas Isaac, Finance Minister, said that automobile sector was making significant contribution to the state and national economies in terms of employment generation and revenues to the Central & State Governments. As such, no Government could afford to ignore this important sector of the economy. A new, dynamic middle class with changing life style is emerging as the economy grows, which augurs well for the automotive sector. The tremendous growth of vehicle population has given rise to a host of challenges like increasing congestion & accidents on the roads and environment pollution. Automobile dealers, as responsible corporate citizens, should also strive to address these social concerns in the interest of sustainable growth. He also exhorted automobile dealers to pitch in with their support for skill upgradation in keeping with the newer technologies being used in the vehicles.

The State Finance Minister expressed the view that the introduction of proposed GST would significantly reduce tax component on the vehicles and, as a result, the vehicle prices, paving the way for faster growth of the automotive sector. Hence, automobile dealers can look forward to the good times ahead.

Welcoming the guests, participants and media on the occasion, Zulfiquar Marikar was happy to inform that it was the first time that FADA had organised its Annual Session in Kerala. It was also the first time that an automobile dealer from Kerala had been elected as the President of FADA since its inception in 1964.

In his opening address, John K Paul, newly elected President, FADA, said that automobile dealers were in for disrupting times ahead. Tesla has been a path-breaker, causing disruption in the market. E-commerce is emerging as the parallel channel, so are the virtual showrooms and digital platform. The aggregators of cab services are directly talking to the manufacturers and already emerging as threat to the automobile dealership business. In not too distant future, the electric cars, autonomous cars and autonomous rides are going to be major disruptive forces that the automobile dealerships would have to contend with. GST, a game-changing tax law in the offing, would revolutionise the tax administration. National Green Tribunal (NGT) and the Supreme Court, by their recent orders, recently stopped the auto market in its tracks, which goes to suggest that automobile dealers have also to gear for the challenge of environment concerns and judicial activism, amongst other innumerable challenges, he added.

Underlining the importance of auto sector in the State economy, John Paul said that auto retail trade and service industry employs over one lakh  people in Kerala and contributes more than Rs. 3,500 crore in taxes to the State exchequer. However, the incidence of taxes on motor vehicles is as high as 45-50%, which needs to be rationalised, particularly in view of the fact that the personal vehicles have become necessity in the absence of adequate, good public transport to cater to the mobility needs of the people in the growing economy.

Sumit Sawhney, Country CEO & MD, Ranault India and Special Guest of Honour on the occasion, opined that the future of Indian automotive industry was bright, as, from the current $74 billion, the turnover of the auto industry was expected to reach $300 billion by 2026, when the industry would be employing a staggering 31 million people.  He said that since the road infrastructure could not be built overnight, the regulatory intervention in the form of scrappage policy was necessary. The new vehicles are environment friendly and safer and will, hence, improve environment and road safety. Automobile dealers have 8-9 revenue streams and not just sales margins, which need to be tapped.

Alluding to the challenge posed by aggregators and e-commerce, Sawhney said that this was a temporary phenomenon and would not significantly replace the current business model. “Dealers have to sell sales experience. The service industry is nothing but people, people and people,” he said.

James Joseph, who started his own venture of selling jackfruit in dried form under the brand name JackFruit 365 as a cure for diabetes, after leaving cosy job with Microsoft, said that sound and healthy business practices have more impact on people. He advised automobile dealers to use the power of their network to tackle disruption.

Making a presentation on the proposed GST, Rakesh Batra, Partner and National Leader, Automotive Sector, Ernst & Young , said that while the impact, overall, of GST on auto sector would be positive, the GST regime, as currently proposed, gives rise to a number of issues and gray areas for the automobile dealers to address, viz. likely increase in working capital, topline & bottomline impact, uncertainty in tax rate on sale of pre-owned cars, treatment of inventory in stock and inventory in transit on the day when GST comes into effect. In addition, GST would require a massive IT system upgrade.

Setting the tone of proceedings and acknowledging with thanks the gracious presence of A K Saseendran, Transport Minister, Government of Kerala on day 1, i.e. on 23rd September 2016, Nikunj Sanghi, Past President, FADA, said that the new Motor Vehicles Act, proposed by the Government, laid emphasis on self-regulation, delegating the routine work like registration of vehicles to the dealers. In some of the States where the dealers have been empowered to register vehicles, the scheme has been hugely successful. Delhi Government is going a step further and considering to entrust registration of even CVs to the automobile dealers. The idea is to relieve the Transport Department of the routine work so that officials can focus on enforcement of rules on the roads. The other advantage is that no vehicle goes out of showroom without being registered. It is a win-win for all – the customers, the Government and the automobile dealers.

He offered full support of the automobile dealer fraternity to any proposal of the State Government for driver training, saying that driver training initiatives by OEMs in various States were essentially driven by the dealers. Sanghi also suggested the need for a scrappage policy (like Cash for Clunkers in US) for older vehicles, arguing that old vehicles were damaging environment and putting road users to risk.

Referring to the shortage of drivers, technicians and skilled manpower, in general, Nikunj Sanghi said that FADA had joined hands with SIAM and ACMA to form Automotive Skills Development Council to train people and develop skills to address the shortage of skilled manpower in the automotive sector. 20 more training centres would be up and running soon, he added.
A K Saseendran, Transport Minister, Government of Kerala, said that one could see showrooms and workshops even in small cities. Hence, the importance of auto sector in terms of employment generation, revenues and contribution to the GDP could not be overemphasised. The State Government was laying stress on building good, scientific roads.

Adverting to the suggestion for delegation of permanent registration of vehicles to the dealers, Saseendran said that though the State Government favoured such a move, there was a resistance from the officials. He asked the Kerala Automobile Dealers Association to give him a comprehensive proposal for consideration.

Earlier, Rajan Pental, Group President, Yes Bank, echoing the views of his Chief Economist, said that the automotive scenario was looking bright due to good monsoon rains, expanding economy, growing personal loans & credit card numbers and implementation of the Seventh Pay Commission recommendations. He, however, cautioned that the last quarter of FY’17 would be turbulent for the automobile dealers, as the OEMs would like to push the inventory before the GST kicked in, on one hand, and, on the other hand, the customers would like to wait to avail the benefit of lower prices post GST.

AGM & Council Meeting

52nd Annual General Meeting of FADA and 281st meeting of FADA Council were dovetailed with the 52nd Annual Session. In addition to the adoption of Annual Report and Annual Accounts of FADA, the AGM elected new Council for the year 2016-17 and re-appointed M/s Bhatia & Bhatia as Auditors up to the conclusion of the next AGM of FADA in 2017.

FADA Council, constituted at the AGM, held its 282nd meeting immediately after the AGM and elected John K Paul (Kochi), Ashish Kale (Nagpur), Vinkesh Gulati (Allahabad) and Saurabh Kedia (Kolkata) as President, Vice President, Hony Secretary and Hony Treasurer, respectively, for the year 2016-17.




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