Economic Downturn Has Bottomed Out: Dr Montek Singh Ahluwalia


Growing economy and rural market to fuel growth of automotive market


The current subdued mood in the auto market is transitory. The Indian automotive market is going to grow in the medium and long runs riding on the growing economy and rising aspirations & disposable incomes of the middle-income households & rural people, and favourable demography. However, the road ahead is not smooth all the way and the auto market is likely to encounter rough terrain from time to time. This was outcome of the deliberations of FADA's 7th Auto Summit 2012 held on 9th & 10th January 2012 at New Delhi.

Dr Montek Singh Ahluwalia, Dy Chairman, Planning Commission, who was the Chief Guest at the Valedictory Session, expressed the view that the current downturn in economic growth due to developments in Euro zone, had bottomed out. Allaying the fears, he said that the economy was on its way back to the high growth trajectory as the inflation was subsiding and the rupee stabilising against the dollar. The economic growth would climb back to 9% in the next couple of years. This augured well for the automotive market, he added amid thunderous applause in agreement from 800-strong audience at the Summit.

Dr Ahluwalia agreed that the retail sector had not received the attention it deserves, adding that modernisation of retail was necessary. He said that while the economy of late had been witnessing slowdown, the situation was not alarming, as India would still be able to clock a GDP growth of upward of 7%. Once the Euro zone settled down, the funds would start to flow in. Responding to the questions regarding high incidence of taxes on auto fuels and soaring interest rates, he said that these stemmed from macroeconomic imbalance. Once the macroeconomic balance is there, everything would fall in place.

Earlier, Anand Mahindra, speaking as the Chief Guest at the Inaugural Session, painted a very rosy picture of the auto market in India, saying that with low levels of motorisation in India and rising incomes of the people concomitant with the growing economy, Indian auto market cannot but has to go up. Sounding bullish, he said that Indian auto market was at a take-off stage and would soon be in the big league of top automotive markets in the world after US and China. Referring to the moderation in growth at present, he said, "When the market hits the bumpy road, we need not get depressed and be ready to take the challenges head on." Explaining metaphorically, he said that instead of applying brakes, the industry and the market have to be geared to steer through the rough patch, eventually making our own road to the growth & prosperity. He exhorted automobile dealers to follow 4 rules of off-road driving when the going gets tough, viz. (1) 'Don't apply brakes and instead swerve through the rough path; (2) Know your terrain and adapt; (3) Keep your car (read manpower) in top condition; and (4) Make our own road.

Dwelling on the off-road driving rules and their relevance to the auto market, Anand Mahindra commented that India is the youngest country in the world. With income levels & aspirations of the people rising and consumption pattern & living styles of the rural people catching up with the urban people, auto market in India is headed for a great future.

Pointing out that the customer is becoming increasingly well-informed and knowledgeable, he referred to the popular Hindi song: "Pappu can dance sala" suggesting that today, even a child is very smart and is making all of us dance.

Metaphorically explaining the rule No. 2: "Know your terrain and adapt", he advised that the changing needs and requirements of customers have to be understood by any business to sustain growth. It is, therefore, important for the automobile dealers to make use of Internet including blogs, social & digital media for understanding the customers' needs.

Referring to the other two rules of off-road driving, he suggested that the organisations always have to be in top shape to tackle any eventuality or challenge on the road ahead and should lead the way for others to follow.

Rajiv Bajaj, MD, Bajaj Auto emphasised that excellence and specialisation should be the motto for all. Instead of getting into everything under the sun, we should evaluate our own strengths and weaknesses and focus on what we are good at. He pointed out that 90% of the new products introduced in the market fail, because these products seek to serve the existing market instead of creating new market.

Stressing on four A's of success, namely, (1) Ahankaram meaning assessing one's capability & susceptibility and distinguishing between growth & greed; (2) Anticipate; (3) Adapt; and (4) Align, he said that focus, strategy, anticipation, adaptation and alignment of efforts are what is needed for a successful enterprise. He added that management is all about alignment. All the problems are the result of misalignment.

Exhorting that the attention should be on 'cause' than on 'result', he concluded by saying, "Chase excellence, Success will chase you".

Delivering the keynote address, S Sandilya, President, SIAM and Chairman, Eicher Group said that the automotive industry in India has made long strides in all facets, as the entry of all global majors in India and the massive response to the 11th Auto Expo go to show. Being in touch with the customers is going to be a major challenge for the market, which will have to adopt innovative ideas including 24x7 sales & service and intelligent call centres to keep the customer engaged and interested. With automotive sector going through the transformation constantly, building & strengthening relationships in an ecosystem would be the way to tackle the challenges.

Adverting to the formation of Automotive Skills Development Council (ASDC), he said, ASDC will not only address the manpower issues in the long run, but is also a business opportunity for automobile dealers inasmuch as they could pitch in with their support in the delivery part, i.e. conducting training courses under the aegis of ASDC.

Addressing at the Motivational Session for the young generation, Gnanvatsal Swamiji of Swaminarayan Temple, Mumbai advised young automobile dealers and new entrants in auto retail to work hard and follow ethical practices in business. No business can survive and sustain for long without honesty and ethics, he added.

Stephen Wade, Chairman, National Automobile Dealers Association (NADA), addressing the gathering said that automobile manufacturers and dealers must play collaborative role to support each other. He cited the example of the concerted role played by manufacturers and the dealers in US during the economic depression and the acute slowdown faced by the US market in late 2008 and early 2009. These collaborative efforts resulted in various positive policy measures including "Cash for Clunker" program that in turn gave a great boost to the vehicle sales there.

Wade said that the dealers are the eyes and ears of the manufacturers, as it is the dealers who face the customers as the letter's front end. Stressing the importance of continued dialogue between manufacturers and dealers, Wade pointed out that Dealer Attitude Survey conducted by NADA is taken very seriously by the OEMS as the benchmark in manufacturer-dealer relationship.

Earlier welcoming the delegates, Vinay Nevatia, Chairman, Auto Summit 2012 said, "Somewhat subdued sentiment currently has led FADA to the theme: 'Shifting Gears -Terrain Ahead' of the 7th Auto Summit, indicating that the auto market is likely to alternate between buoyancy and downturn as we move ahead. Automotive dealers need to be prepared to shift gears according to the situation encountered."

Nikunj Sanghi, President, FADA delivering his address said, "With a combined turnover of around Rs. 3,60,000 crores, auto retail is 3-4 times of the size of rest of organised retail. The unfortunate part is that while rest of the organised retail steals the attention of the Government, politicians and the media alike and hogs headlines with unfailing regularity, auto retail that is 3-4 times larger than so-called organised retail hardly gets the attention it deserves and has no nodal ministry in the Central Government to address its concerns."

Rakesh Jain, Director, Auto Summit 2012 while thanking the guest speakers and participants said that the engrossing deliberations at the Summit spanning over two days had been revelations and enriching experience for the participants, especially, automobile dealers.

An impressive array of speakers representing auto industry & trade, Government, internationally renowned consulting firms and management gurus from within India and abroad addressed and interacted with the participants at the two-day 7th Auto Summit of FADA. The Summit evoked massive response with over 800 delegates comprising automobile dealers, representatives of manufacturers & allied businesses and media, attending the convention.

Group discussions on various issues that are core to the day-to-day management & operation of automobile dealerships evoked an equal interest among the participants as was seen from the attendance at 7 workshops on subjects of topical interest to automobile dealers, which were organised as a part of the programme of Summit.

The Summit also provided a peep, through the perspectives of industry, allied businesses and independent consultants, into how auto retail and, for that matter, how automotive scenario will look like in future.

The message that came out of the two-day proceedings loud and clear was that while the automotive market is poised for a big leap forward, automobile dealerships will have to be process driven and professionally managed to stand up to the changing paradigm of automotive business.

They would have to invest significantly in human capital, adopt innovative ideas, including, creating virtual dealerships, adoption of IT and internet in a big way, tapping and harnessing local people as their brand ambassador, etc. to fight the competition and to live up to the constantly changing behaviour, needs and requirements of the customers. Instead of selling vehicles, the focus would have to be on selling experience. In the case of commercial vehicles, emphasis should be on selling total transport solutions to the customer.

The single biggest challenge for the stakeholders in automotive sector, which emerged from the deliberations, is the shortage of trained manpower. Another important learning brought home was that customers' loyalty cannot be taken for granted with growing awareness and all-pervasive Internet and IT. Addressing the challenges of shortage of manpower and customer relations requires out-of-box thinking. Instead of traditional practice of employing people with aptitude, people with attitude and passion for automobiles like students and housewives could be employed part-time. Likewise, extensive use of social media networking and Internet could come handy for constantly engaging the customers.

It was in fitness of things and appropriate that doyens of auto industry and auto retail were honoured on this occasion. Keshub Mahindra, Chairman, Mahindra Group and Rahul Bajaj, Chairman, Bajaj Auto, doyens of auto industry, as also Mr Bharat M Sanghvi and Mr Vinay Nevatia, champions of auto retail in the country, were honoured with the Life Time Achievement Awards for their pioneering role and phenomenal contribution to the growth & development of auto industry and retail automobile trade in India over the years.


Special Features of Auto Summit 2012

ADEA 2011

Dovetailed with Auto Summit 2012, Automotive Dealership Excellence Awards for the year 2011 (ADEA 2011) - an annual activity initiated jointly by FADA & Auto Monitor magazine in 2009 with a view to recognise and reward exceptionally performing automobile dealerships - were also presented at a gala function in the evening of 9th January 2012. The ADEA 2011 evoked a tremendous response in terms of the nominations received for various categories of awards. The glittering ceremony was graced by R Seshasayee, Executive Vice Chairman, Ashok Leyland who was the Chief Guest on the occasion and Dr Pawan Goenka, President, Automotive & Farm Sectors, Mahindra & Mahindra, who was the Special Guest of Honour. Scores of other prominent industry leaders were also present on the occasion, in addition to the representatives of allied businesses and media, in large numbers.


Fellowship with Leaders of Industry

Another special feature of Auto Summit 2012 was the scheduling of an informal discussion with leaders of industry over tea/coffee, preceding ADEA function. The occasion enabled automobile dealers to informally discuss and share their experiences with the leaders of industry over tea/coffee and get industry's perspective of current and emerging scenario. The objective was to ensure free & frank discussion without any inhibition or being bound by a particular format in order to bring forth the real situation as it exists at the retail level

Formation of international organisation of automobile dealers

Auto Summit 2012 was the launching pad for the formation of an international organisation comprising associations of automobile dealers of various countries. The move initiated by FADA was discussed with the international delegates from France, USA, Italy and Bangladesh. The idea was well received by the members present at the meeting. Taking the discussion forward, FADA will be approaching the retail organizations in other countries as well, which will pave the way for the formation of an international organisation representing auto retail in due course of time.


Vodafone as telecom partner

Vodafone, a major telecom service provider in India and FADA have entered into a mutually beneficial arrangement under which Vodafone will offer to members of FADA, various value-added services at special rates. Vodafone will approach the individual members, who will be free to negotiate and finalise the terms of arrangement individually at the local level.

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