Confusion Abounds Post Supreme Court Order

Dear friends,


The Hon’ble Supreme Court’s order banning sale of BS III vehicles w.e.f. 1st April 2017 has come as the bolt from the blue for the automobile dealer fraternity across the country. The letter and spirit of the notifications issued by the Government is that the appointed date of 1st April 2017 is for the manufacture. In other words, the understanding was that all vehicles manufactured on or after 1st April 2017 shall be BS IV compliant and that the BS III vehicles manufactured up to 31st March 2017 would be allowed to be sold post 31st March 2017 in keeping with the practice followed in the past when the country migrated to BS II and BS III emission standards.


The sudden departure from the past practice put paid to all the expectations within the automotive industry and retail trade, resulting in humongous loss to the industry and my fellow dealers.


The apex court’s order is giving rise to various problems in that the different states are interpreting the order differently. Besides, a number of automobile dealers from various States have reported technical problems in registration of vehicles online on 30th & 31st March 2017 due to the Transport Departments’ servers slowing down and the systems collapsing, arising from the huge rush for registration. As a result, the data of vehicles sold on 30th & 31st March could not be transmitted to those RTOs online on the same day in such cases.


There is a peculiar problem in Delhi and, perhaps also at other places, where quite a few dealers are not online. These dealers take vehicles and the necessary documents to their respective RTOs for registration of vehicles sold by them. The fees and taxes are paid at the time of submission of registration documents. There is no provision or system whereby they can remit the payments to the RTOs online on the same day. These dealers are left high and dry, as the Transport Department in Delhi is not registering these vehicles on the basis of a circular issued by EPCA. Hopefully, the problem will be resolved soon.


It may be mentioned here that there is no system of temporary registration for private vehicles in Delhi. Even in the case of commercial vehicles, there is no requirement of temporary registration, if the vehicle is registered within 30 days of sale, except in cases where the chassis is sent outside Delhi for body building.


FADA, as a body of automobile dealers, has written to the Ministry of Road Transport & Highways for an early clarification to obviate the confusion prevailing currently. While EPCA is playing a significant role in improving environment and road safety,  the alacrity and the overzealousness displayed by it is giving rise to a lot of confusion and disruption in the market.


We hope, the Central Government or, for that matter, EPCA will issue the clarifications at the earliest so that the vehicles sold by 31st March can be registered without further delay.


Adverting to the auto market, while the sales numbers for March 2017 sound good, the auto market that was recovering gradually after the shock of demonetisation, may be relapsing into the phase of uncertainty, owing to the blow inflicted by the Supreme Court order. However, I am sanguine that the auto market will take this disruption in its stride and march forward on a growth path, as it has done in the past.


Regarding the activities of FADA, by the time this issue of FADA Journal reaches you, we would have concluded the Council Meeting, Regional Meeting and Awards presentation ceremony scheduled for 22nd April 2017 at Jaipur.


We are eagerly looking forward to the event, as two important sessions, namely, (i) Interaction with the Transport Minister, Government of Rajasthan and (ii) Presentation on GST are integral part of the programme. We shall also have a session by the senior officials of Facebook India on the role of social media in the current and emerging automobile business environment.


With best wishes,


Yours sincerely,


John K Paul

 

 

 

 Gaining Traction

Dear friends,


It is comforting to note that after the widespread disruption caused by the demonetisation of high-currency notes, the auto market is slowly but surely settling down, if the sales figures for the month of February are any guide.
A pragmatic Union Budget presented by the Hon’ble Finance Minister on 1st February has also, to some extent, improved the sentiment, and given boost to the auto market. The sales are yet to reach the numbers witnessed pre-demonetisation, though.


As informed through my previous column, a 35-member FADA delegation participated at the 2017 NADA Convention, which also marked the celebrations of 100 years of NADA that came into being in 1917 following the imposition of luxury tax on cars by the then US Government. NADA’s 100-year illustrious service to the automobile dealer fraternity and its phenomenal contribution in protecting and promoting the interest of auto retail market in the US, send out a strong message that an umbrella organisation like FADA can do wonders if the automobile dealers unite and organise themselves under its banner.


The delegation members also took the opportunity of visiting two automobile dealerships in Atlanta. The visit was quite an enriching experience for all the delegation members. It was also an occasion to rejoice and join NADA in its centenary celebrations. Besides, FADA’s relations with NADA and other auto retail organisations across the world got a further boost. More importantly, the participation of large delegation under the banner of FADA helped promote fellowship and goodwill among the members.


Regarding the other activities of FADA since my previous column, taking our agenda of deepening understanding and relations with OEMs forward, FADA team of office bearers held meetings with the CEOs and other senior officials of Ford India and Mercedes-Benz India, separately on 1st March & 2nd March, respectively. The discussion majorly centred around the issues of skilling & training of manpower, inventory control & management, and exit route for automobile dealers. It is heartening to note that most of the issues taken up and discussed at these meetings evoked positive response.


FADA team of office bearers also held a meeting with Mr Abhay Damle, Jt Secretary (Transport), Ministry of Road Transport & Highways (MoRTH) in his office at New Delhi to discuss the confusion caused by the media reports and orders of some of the State Governments that BS-III compliant vehicles would not be allowed to be sold or registered w.e.f. 1st April 2017. It was vehemently submitted to Mr Damle that banning sale or registration of BS-III vehicles, in stock with the dealers, from 1st April 2017 is contrary to the letter and spirit of notifications issued by the Government of India (MoRTH). FADA team pointed out that the designated date of 1st April 2017 for BS-IV vehicles is with reference to the manufacture or production.


I am happy to inform that the Ministry of Road Transport & Highways has taken a stand in the case: M C Mehta vs Union of India & Ors before the Supreme Court that BS-III vehicles stock in transit as at the end of the day on 31st March 2017 should be allowed to be sold on or after 1st April 2017, in keeping the intent of the notifications issued by the Ministry and the practice followed in the past. As I write this column, FADA is also filing an intervention application before the Supreme  Court.  The next hearing in the case is on 24th March 2017. We are hopeful of a favourable order in this regard.


The next meeting of FADA Council is scheduled for 22nd April 2017 at Jaipur. A regional meeting and an awards ceremony recognising the meritorious connected with the auto retail trade in the State of Rajasthan have also been dovetailed with the Council Meeting. Members are cordially invited to attend the Regional Meeting and the awards ceremony followed by dinner.


Look forward to your inputs and suggestions.


With best wishes,


Yours sincerely,


John K Paul

 Looking Forward to 2017 with Renewed Hopes

Dear friends,


It needs no reiteration that we usher in the New Year on a cautious note with shadow of uncertainty and apprehensions in the market caused by demonetisation looming large on the horizon. When the year 2016 started off, there was a great deal of enthusiasm and hope amongst the automobile dealer fraternity, with buoyancy in vehicle sales gradually returning. However, at the fag-end of the year, the demonetisation of large currency notes virtually played the role of a demon, causing a widespread disruption in the economic activity, including auto market.


As I write this column today, i.e. 15th January, the auto market is yet to gain traction seen pre-demonetisation. Rural market is the worst hit, as seen from the two-wheeler sales that have declined by as much as 40%. The truck segment has been equally hit hard by the disruption fuelled by demonetisation. While the extent of damage in the case of passenger vehicle is not as massive as in the case of CVs and two-wheelers, there has been sharp drop in the passenger vehicle sales as well.


With currency supply improving gradually, we are sanguine that the auto retail market will be back on track soon. Our expectations are not unfounded. Economy, especially the organised sector, has been doing reasonably well, demonetisation notwithstanding. Bucking demonetisation, factory output measured in terms of Index of Industrial Production (IIP) grew by 5.7% in November 2016 due to better performance of manufacturing, mining and electricity sectors, coupled with larger offtake of capital goods, considered a barometer of investment. Secondly, the inflation sitting at below 5.0% is within the comfort zone. In fact, December CPI is at a two-year low. Thirdly, the oil prices by and large remain stable, although fuel prices in India have witnessed significant increase of late


Regarding the activities of FADA since my previous column, after series of individual meetings with a number of industry leaders, followed by an interaction with SIAM Executive Committee, FADA team was invited by the Hon’ble Union Finance Minister for a meeting in response to a representation made to him in the wake of demonetisation. I am happy to inform that all these meetings with OEMs, SIAM Executive Committee and the Hon’ble Union Finance Minister were quite meaningful.


The key points of discussion with individual OEMs and SIAM Executive Committee were: (a) Inventory control; (b) manpower rationalisation; (c) shortage of skilled manpower suiting the requirements of automobile dealerships; and (d) provision of fair dealer exit policy. In the meeting with the Union Finance Minister, which was held on 2nd January 2017, FADA team, while emphasising the importance of auto retail trade & service industry in terms of employment and revenue generation in the national and state economies, took up the issues of (i) Grant of industry status to the auto retail trade business for access to credit; (ii) Automatic route for FDI in automobile dealerships; (iii) increased depreciation for motor vehicles in the context of shrinking lifecycle of vehicles; and (iv) incentives for renewal and modernisation of transport fleet.
It is heartening to note that all the suggestions made by FADA to OEMs and the Hon’ble Union Finance Minister were well-received.


The new team FADA office bearers is really thinking big and contemplating many changes, including creation of a legal cell within FADA for the guidance of automobile dealers in order to make the body more useful for its constituents. A number of other initiatives are also on the anvil. You will hear about them, as we go along.


Please feel free to send your inputs and suggestions, if any.


With best wishes,


Yours sincerely,

John K Paul

 

 

 

 A Realistic Budget Without Frills

Dear friends,


Mr Arun Jaitley, Union Finance Minister has adopted a cautious and balanced approach and focussed on long-term growth prospects while presenting the Union Budget 2017. The automotive sector, which has been reeling under severe slowdown in the wake of demonetisation of high currency notes, was expecting the announcement of immediate relief measures in the Union Budget for its revival. The Union Budget 2017 falls short of the expectation in that there are no specific budget proposals giving relief to the auto sector or, for that matter, manufacturing sector.


We, in auto retail business, were anticipating slew of measures, including higher depreciation rates for motor vehicles and incentives for the scrapping of old vehicles. These support measures will have not only given boost to the struggling auto market, but will also have  had a significant positive impact on environment and road safety due to renewal of vehicle parc and modernisation of road transport fleet. We were also expecting an announcement for reduction in transaction charges payable by merchants in case of payments received through credit cards, which would have gone a long way in promoting the widespread use of credit cards and less-cash economy.


The Finance Bill 2017 proposes to amend Income Tax Act to prohibit cash transaction of more than Rs. 3 lakh, which is likely to have an adverse impact on rural market. The idea is good inasmuch as the proposal seeks to curb black money. There is no gainsaying that the rural people still use cash in a big way for sale & purchase transactions. We, therefore, feel that the proposal should have been implemented after 1 or 2 years when transactions through banking or digital medium are expected to become the norm and all-pervasive. 


All the same, the big push given in the Budget to the infrastructure development and renewed emphasis on rural & agriculture sector with substantially higher outlays, as also the 25.4% increase in central capital expenditure during the financial year 2017-18 will have ripple effect on the economy as a whole, including auto sector. Another comforting feature of the Budget is that the Fiscal Deficit for the year 2017-18 has been pegged at 3.2% without compromising on the outlays for various sectors and economic growth.


We hope, the Finance Minister will consider our suggestions, including suggestions for increased depreciation for motor vehicles and incentives for scrapping the polluting & unsafe old vehicles before the Finance Bill is passed by the Lok Sabha.
Adverting to the auto market, the vehicle sales seem to be picking up after being jolted by the demonetisation impact. The tempo of sales is nowhere near the pre-demonetisation buzz, though. I am hopeful that the buoyancy will return to the auto market soon.


As for activities of FADA since my previous column, you will be glad to know that FADA took a large delegation, comprising more than 40 members to participate at NADA’s 2017 Convention & Expo from 26th to 29th January 2017 at New Orleans, which also marked the completion of 100 years by NADA as the Voice of Dealers in USA since its inception in 1917. The FADA delegation also visited two auto dealerships in Atlanta to understand the business practices, working and revenue model of dealerships in US. It was an enriching experience for all the delegation members. The participation helped the delegation members learn and identify the good business practices that could be adopted by the dealerships in India for improving productivity, efficiency and profitability. It was also an occasion to celebrate. The visit under the banner of FADA also promoted fellowship between FADA and NADA, on one hand, and among the members of delegation, on the other. The visil also helped in building and deepening relations with other auto retail organisations in various parts of the world.
Please feel free to send your inputs and suggestions, if any.


With best wishes,


Yours sincerely,


John K Paul

 

 

 

 

 Demonetisation Throws A Spanner in the Works

Dear friends,

 

The Auto market having shown signs of resurgence & buoyancy in the current year is back in slow lane. Demonetisation has dented the vehicle sales more than what we had initially anticipated or bargained for. It now appears that the cash crunch is going to persist for some time to come.

 

While the long queues at the banks and ATMs leads us to conclude that the demonetisation has hit the common man severely, current slowdown in auto market, to my mind, has more to do with the sentiment. I am not discounting the adverse impact of currency shortage, though. The cash crunch has cast its shadow over the entire chain of business activities.  As a result of this all-round slowdown and downbeat business sentiment, the people are keeping their purchases on hold.


The normalcy is going to take time, as the new currency supply improves and the people, particularly in the countryside and rural areas, get used to doing transactions through the banking channel and the digital platform. I have strong belief in the adaptability and resilience of the Indian people, who, I hope, will, once again,prove that they are above any challenge. I still hold the view that the move to demonetise Rs. 500 and Rs. 1,000 notes is laudable and will stand the economy in good stead in the medium and long terms, the immediate pain notwithstanding.


Regarding the challenges faced by the automotive retail trade, I wish to assure my fellow dealers that FADA is doing all it can possibly do under the circumstances. FADA has written to all manufacturers for their support in reduction of huge inventories built up at the dealerships due to the slowdown as a result of the demonetisation and also making available enhanced credits from the banks to the dealers. FADA has also taken up with the banks and NBFCs seeking increase in credit limits for the dealers and the vehicle buyers, including 100% funding for the vehicle purchases. Likewise, the Government has also been requested to take steps to reduce the service charges on credit card transactions to promote the wide use of credit cards.


It is satisfying to note that the OEMs, banks, NBFCs and the Government have responded favourably and come up with some of the measures with a view to alleviating the demonetisation pangs.


Since my previous column and as a sequel to the series of meetings already held, the office bearers of FADA have met more OEMs individually. The FADA team also made a presentation to the Executive Committee of SIAM on issues and concerns of automobile dealers. These meetings were held as a part of the agenda for the next year drawn up by the new FADA Council, which includes stepping up interaction with SIAM and individual OEMs.


I am happy to inform that the response to most of the matters taken up and discussed at the meetings with various OEMs has been positive. The interactions with SIAM and individual OEMs have led to the better understanding and helped identify the areas of mutual interest.


I wish to assure that these interactions are not one-off. We, at FADA, wish to sustain and carry forward the dialogue in the interest of healthy OEM-dealer relations and sustainable growth of automotive business as a whole.


While FADA takes the initiative to appraise our partners in business with our problems, we must be fully aware that there're numerous actions that we too are  responsible for. Keeping our house intact, taking a legitimate and reasonable stand and above all convincing others of the difficulties we face are our sole responsibility.


Let us be optimistic !


Wishing You All a wonderful season ahead and a Happy & Prosperous New Year !

Yours sincerely,


John K Paul

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