Growth Cheers!

Looking Forward to Happy Times Ahead

Dear friends,

Based on feedback I have gathered from my fellow dealers, I am happy to note that the growth momentum in vehicle sales was sustained during the month of May 2016.

The icing on the cake is that India’s GDP grew by a healthy 7.9% during Q4 2015-16, according to the advance estimates released by the Government. The GDP growth for the entire 2015-16 works out to 7.6%, which makes India the fastest growing economy amongst the major economies of the world with China’s economic growth slowing to 6.8%. Core sector, having 38% weight in Index of Industrial Production (IIP), grew by 8.5% in April 2016 – the fastest in the last 17 months, which gives further confidence that the Indian economy is at the take-off stage. Paradoxically, the industrial output de-grew by 0.8% in April 2016, though.

All said and done, it does not appear to be a smooth drive all the way. Petroleum prices are showing volatility again and are currently hovering at about $50/barrel. With Rupee also weakening against Dollar, the last two months have seen significant hike in fuel prices. Drought in the last two successive years has slowly started biting. Consumer prices, including food prices, are inching up, so are the commodity prices in general. With inflationary pressure building up, the expectations of further rate cut by the RBI had, more or less, been ruled out. No wonder, the apex bank in its bimonthly monetary policy announced on 7th June has kept the key rates unchanged. All hopes hinge on the good monsoon forecast by the Meteorological Department for this year. While the rural market has been gradually picking up of late, it is the good monsoon that will make it sustainable.

The Union Budget blues have given rise to two new levies, i.e. Krishi Kalyan Cess @ 0.5% on all taxable services and Tax Collection at Source (TCS) @ 1.0% from buyers of motor vehicles carrying price tag of more than Rs. 10 lakh, effective from 1st June 2016. The need for Krishi Kalyan Cess as a social measure to promote the welfare and wellbeing of rural people is understandable. However, TCS not only increases complexities in tax collection and compliances, it has also resulted in a lot of confusion.

While the Finance Minister in his Budget speech talked about TCS from buyers of luxury cars costing in excess of Rs. 10 lakh, the fine print of Budget documents, namely, Finance Act brings, within the ambit of TCS, buyers of all categories of motor vehicles where the sale consideration exceeds Rs. 10 lakh. TCS will also be applicable, where  the sale consideration paid in cash, even if less than Rs. 10 lakh, exceeds Rs. 2 lakh.

CBDT has, in its circular dated 8th June 2016 (published elsewhere in this issue) has clarified a number of points/queries arising out of this new levy and addressed some of the apprehensions of the automobile dealer fraternity. However, there are still few questions bugging the automobile dealers, which need to be clarified. People, especially in rural areas with agriculture income, by and large do not pay taxes. Most of these people do not have PAN either. The collection of tax at source from such people, who submit Form 60/61, is going to cause problems. Secondly, amended sub-section (1D) of Section 206C of the Income Tax Act is open to varied interpretations. 

We are in touch with various tax experts and the Government authorities to get a clear picture on various aspects of TCS so that members of the automobile dealer community do not fall foul of the law.

Meanwhile, please send your views or any query in the matter so that all the queries could be collated for the expert opinion and clarified together for the information of all automobile dealers.

With best wishes,

Yours sincerely,

K V S Prakash Rao

 

 

 

New Financial Year, Renewed Hopes

Dear friends,

A piece of good news is that FY 2016-17 has begun on a high note. An icing on the cake is that all segments of auto market have notched up double-digit growth. The sales numbers for the month of April 2016 come as refreshing change that we, in automobile dealer fraternity, have been longing for roughly 3 years now.

Going by the macroeconomic indicators, I am hopeful that the upturn this time around is not just flash in the pan, but is a firm indication of the turnaround of the auto market.

Two consecutive drought years, severe water shortage in certain parts of the country and continuing challenging rural environment notwithstanding, the Indian economy is gradually gaining traction. Inflation remains benign. Despite two successive hikes of late, petroleum prices are, by and large, stable and are not displaying the kind of volatility witnessed 2-3 years ago.

Core sector growth hit a 16-month high in March, marking a strong end to FY16 and pointing to a possible industrial recovery ahead. India’s core sector expanded 6.4% in March - higher than 5.7% in February, according to the data released by the Government recently. The eight sectors that make up core sectors index together have a 38% weight in the Index of Industrial Production (IIP). A paltry 0.1% rise in IIP in March 2016 has disappointed and confounded the economy watchers, though.

What is more comforting is the fact that the Meteorological Department has predicted a normal monsoon this year, which will go a long way in alleviating the rural woes that have largely been responsible for the slowdown in auto market.

Adverting to FADA’s activities since my previous column, we held a FADA Council meeting on 23rd May 2016 at Jabalpur. A grand function to mark the completion of 30 years by Mahakaushal Automobile Dealers Association (MADA) was also organized. What stood out and impressed me the most was the camaraderie and fellowship among the automobile dealers in Jabalpur. MADA, as a collective voice of automobile dealers in Mahakaushal region, has successfully taken up issues and problems confronting the members of the automobile dealer fraternity with the concerned authorities from time to time. Its success ratio is almost 100%. 

For MADA, it is not all about business issues alone. The Association has embarked upon a number of initiatives of social relevance, such as Clean and Green Jabalpur, which has earned it the accolades and praise from various quarters. Needless to mention, no business can survive and thrive, unless it has connect with and enjoys the goodwill of the society at large. As corporate citizens, we must undertake social responsibility for the upliftment and betterment of the society in which we operate. 

Another notable feature of the 30-year celebration function was the conferment of recognition on outstanding employees of various dealerships. There is no gainsaying that it is the quality of human resources, which makes or breaks a business. It is, therefore, befitting that the top performing employees were recognized on the occasion for their meritorious services. I convey my heartiest compliments to MADA for completing 30 illustrious years of service to its members. Also, my kudos to MADA for the excellent social & community welfare work being done by it.

I express my sincere thanks to Dr Kailash Gupta, President and other members of MADA for the hospitality and courtesy extended to members of FADA Council and making impeccable arrangements.

I hope, other regional associations are also carrying out similar CSR activities to enhance the image and prestige of automobile retail trade in their respective regions.

Kindly feel free to send your suggestions and inputs, if any, to make the activities of FADA more meaningful to its constituent members.

With best wishes,

Yours sincerely,

K V S Prakash Rao

Union Budget 2016 - A Mixed Bag for Auto Sector

Dear friends,

The Union Budget 2016, presented by the Hon’ble Finance Minister on 29th February, is a mixed bag for the automotive industry. The focus on infrastructure development, particularly bettering the road infrastructure across the country will definitely benefit the auto sector. However, higher taxes proposed in the Budget on cars & SUVs will adversely impact the auto sector that is yet to recover from a prolonged slowdown phase.

The renewed thrust on agriculture & rural sectors as well as infrastructure development and higher allocations under these heads in the Union Budget will create more opportunities of employment, especially for the rural people, thereby helping revive rural demand, which has been under severe stress for the past 2 years due to uncertainty facing rural economy because of deficient, erratic rains.

A total investment of Rs. 97,000 crore has been proposed for the road sector, including PMGSY allocation, during 2016-17. The expansion and betterment of roads will not only generate additional jobs, but will also boost vehicle demand, addressing to some extent, the problems of environment pollution and road safety at the same time.

We, in FADA, welcome the amendments that are proposed to be made in the Motor Vehicles Act to open up the road transport sector in the passenger segment, which will impart pace to the development of transport sector while giving impetus to the commercial vehicle segment, in particular.

We compliment the Government for its proposal in the Union Budget 2016 to set up 1,500 multi-skill training institutes under the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), for which Rs. 1,700 crore has been set aside. 

Raising the cap on exemption for HRA from Rs. 24,000 to Rs. 60,000 in the case of those living in rented houses and the increase in tax rebate from Rs. 2,000 to Rs. 5,000 for those whose income is less than Rs. 5 lakh are other welcome features of the Union Budget. The tax relief will leave more disposable income in the hands of middle-class people, particularly salaried people, which is likely to result in the increased demand for consumer goods and consumer durables, especially two-wheelers.

It is good to note that the fiscal deficit targets for the FY 2015-16 and 2016-17 at 3.9% and 3.5%, respectively, have been retained despite substantial 15% increase in the planned expenditure. This should be comforting for the RBI to further reduce interest rates to give fillip to the investments and growth. 

On the flipside, infrastructure cess of 1% on small petrol, LPG, CNG cars below 4-metre in length and less than 1200cc engine, 2.5% on diesel cars with engine capacity of less than 1500cc and 4% on other passenger cars and SUVs, resulting in substantial increase in the Car & SUV prices, will have a depressing effect on auto market. 

The Union Budget does not offer any significant relief to the middle-class people. The raising of income tax slabs would have offered a little more cash in the hands of people, translating into pick-up in demand for motor vehicles. 

We were also expecting announcement of a scrappage policy, with built-in incentives for scrapping old vehicles, which would have helped the renewal of vehicle parc and addressed, to some degree, the issue of increasing pollution levels. 

We hope, the Government and the Hon’ble Finance Minister will review the increase in duty on passenger cars & SUVs and incorporate other suggestions, before the Finance Bill is finally passed.

While on the subject, I am pained to know that a number of automobile dealerships were damaged/destroyed during the recent Jat reservation stir in Haryana. I express my solidarity with my fellow dealers whose dealerships were damaged. Some time back, a high-intensity cyclone destroyed a number of dealerships in Visakhapatnam. I would, therefore, urge my fellow dealers to go for a comprehensive insurance cover to indemnify themselves against all such possible occurrences.  

With best wishes,

K V S Prakash Rao

 

 

 

 Ending FY 2015-16 on an Optimistic Note

Dear friends,

It is a matter of satisfaction that auto market clocked a decent growth in March 2016 to end the FY 2015-16 on an optimistic note. The year as a whole witnessed a roller-coaster ride, though. 

Outlook for the current year and the subsequent years appears to be promising. The renewed emphasis of the Government through the Union Budget 2016 on boosting the rural sector and infrastructure development is a welcome sign for the auto market. Needless to mention, the rural woes due to deficient, erratic monsoon rains for two consecutive years, as also the slow pace of infrastructure development, have been two major factors retarding the growth of auto market in India, which witnessed an abnormally prolonged phase of sluggish sales for two years during 2013-15.

It is comforting to note that macroeconomic indicators are encouraging for the auto sector. The inflation, hovering at about 5.0%, remains benign. Crude oil prices in the international market have, more or less, stabilised in the $30-35/barrel band. Not surprisingly, the RBI has reduced the Repo Rate by 25 bps to 6.25%, which is a positive move and will spur investments and economic growth. We were expecting a 50 bps cut, though.

Another positive development is that the factory output and the core sector index are looking up. The combined Index of Eight Core Industries, which has weightage of 38% in IIP was 5.7% higher in February 2016 compared to the index of February, 2015. The Nikkei Manufacturing PMI in India stood at 52.4 in March of 2016, up from 51.1 in a month earlier. It is the highest reading since July 2015.

While positive trends in economy are music to our ears, we cannot afford to go overboard at this stage. Our expectations have been belied time and again in the past. While there were always straws in the wind, inspiring confidence from time to time, the economy and, for that matter, the auto market failed to live up to the promise. All said and done, positive signs in the economy augur well for the market.

Coming to the activities of FADA since my previous message, I had the opportunity of participating at the J D Power awards presentation ceremony for winners in various studies conducted by them in India during the past one year. I was given the honour of presenting award to the winner of India Dealer Satisfaction Study for the year 2015. The fact that Toyota Kirloskar Motor (TKM) won the award for the 5th year running bespeaks volumes of the dealer friendly policies & practices of the company. No wonder, the Toyota dealers in India are the happiest lot among the members of automobile dealer fraternity.

I fervently hope that other OEMs will replicate and adopt some of the policies & practices of TKM in relation to its dealers,  which will go a long way in promoting healthy OEM-Dealer relations and sustainable growth of automotive sector as a whole.

There is a FADA council meeting scheduled for 23rd April 2016 at Jabalpur. Being the first council meeting after the successful conclusion of Auto Summit 2016, it will give us an opportunity to review and identify the pros and cons. 

Kindly feel free to share your experience at the Auto Summit 2016 and give us your suggestions & frank opinion. While the feedback from members across India so far has been very positive, we would still like to address shortcomings, if any, to make the Summit more meaningful for the members of automobile dealer fraternity, in particular.

I am delighted that the council meeting scheduled for 23rd April 2016 coincides with the celebrations of 30 years of Mahakaushal Automobile Dealers Association (MADA) that is an Association Member of FADA.  A grand function to mark this momentous milestone in the 30-year journey of MADA is being organised in the evening on the same day. My heartiest congratulations to MADA for completing 30 years in the service of automobile dealers in the Mahakaushal region. 

With best wishes,

Yours sincerely,

K V S Prakash Rao 

 

 

 

Auto Summit 2016 - A Fulfilling Experience

Dear friends,

FADA’s Auto Summit 2016 went off very well and lived up to the expectations of participants, according to the inputs and feedback we have received from various quarters. It was a fulfilling experience for all of us in FADA and rewarding for the tremendous efforts put in by the Organising Committee and other members of FADA.

With people and most of our customers becoming internet and digital savvy, the theme: ‘Digital Dealer – Accelerate Opportunities’ aptly reflected the current and emerging scenario in which digital experience is going to be the ‘X’ factor in acquiring and retaining customers.

I am delighted by the overwhelming response generated by the Summit that witnessed engaging and lively deliberations right from the start to the end. Perhaps, this Auto Summit saw the best ever attendance since its commencement in the year 2000.

I am grateful to our esteemed guests and speakers, particularly, Mr Jayant Sinha, Minister of State for Finance, Government of IndiaI; Mr R C Bhargava, Chairman, MSIL; Mr Ravi Pisharody, VP, SIAM and ED - CVBU, Tata Motors; Mr Katsushi Inoue, President & CEO, HCIL; Mr Rajan Anandan, VP & MD, Google South East Asia and India; and Mr Arun Malhotra, MD, Nissan Motor India, who took time off  their busy schedule to be in our midst at the Summit. I am also thankful to our other guest speakers, namely, ; Mr Jnaneswar Sen, Sr VP - Mktg & Sales, HCIL; Mr Veejay Nakra, Sr VP - Sales, Mktg & Customer Care (Auto Div), M&M: Mr P Ravishankar, EVP - Sales, Mktg and Aftermarket, VECV; Mr Malind Kapur, CMO & Sr VP, Piaggio Vehicles;                             Mr Rudratej Singh, President, Royal Enfield; Mr Eric Vas, President - Motorcycle, Bajaj Auto; Mr Ashok Bhasin, Head – Sales, Mktg & Customer Care, Hero MotoCorp; Ms Delna Avari, Head – Mktg Communication & Services, Tata Motors; Mr Rajan Pental, Group President, Yes Bank; Mr Rakesh Batra, Partner and Sector Leader Automotive, EY; Mr Sharad Verma, Partner & Director, Boston Consulting Group; Mr Siddharth Puri, CEO, SVG Media Group; Mr Yashish Dahiya, CEO & Co-Founder, PolicyBazaar.com; and Mr Amit Jain, Mr Umang Kumar and other senior officials of CarDekho.com, who participated as speakers, moderators and panellists in various sessions. My thanks are also due to fellow dealers, viz. Mr Nitin Himatsingka (Mukesh Hyundai), Mr C S Vigneshwar (Annamalais Toyota), Mr K Chandrasekhar (KLN Motors) and Mr Shrish Jadhav (Niksia Group) for their ably coordinating the discussions and presenting the dealer viewpoint in interactive sessions/workshops.

We would not have been able to organise the Summit at such a grand scale but for the support of our sponsors. I, therefore, acknowledge with gratitude the support extended by Google AdWords; Ashok Leyland; VE Commercial Vehicles; Yes Bank; Honda Motorcycle and Scooter India; Shell India; Tata Motors; M&M Financial Services; Piaggio Vehicles; L&T Finance; LeasePlan India; Universal Sompo General Insurance Company; HDFC ERGO General Insurance; AU Financiers India; and EY.

I shall be failing in my duty if I do not acknowledge the the colossal effort put in by members of the Organising Committee, led ably by Dr Kailash Gupta and Mr Binod Agarwal, as also the other members of FADA, to make the Summit a grand success.

My profound thanks and gratitude to CarDekho.com, especially its MD & CEO – Mr Amit Jain, for partnering with FADA in organising the Auto Summit. The enthusiasm and dedication displayed by the entire CarDekho team was commendable.

I am also thankful to Network18 that has partnered with FADA for the Automotive Dealership Excellence Awards (ADEA) since its inception in 2009. The 9th edition of ADEA evoked stupendous response, thanks to the untiring efforts of Network18 team.

Lastly but not the least, it was enthusing to see a massive response and keen interest of my fellow dealers, who came from every nook and corner of the country to participate at the Summit, making its proceedings lively. My congratulations, thanks and gratitude to you and other participants for making it virtually a perfect day for all of us.

With best wishes,

Yours sincerely,

K V S Prakash Rao

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