No End to Market Woes in Sight

Dear friends,

A series of reports emanating of late indicate grim tidings for the Indian economy, increasing the pressure on the beleaguered auto market.

Industrial production contracted 1.6% in May, exports fell 4.6% in June while retail inflation accelerated to 9.87%, reversing three months of decline and effectively ruling out any cut in interest rates to stimulate demand. 

Worse, industrial growth has been revised downwards to 1.88% for April, against the earlier calculation of 2.33%. This means industrial growth was a meagre 0.1% in the first two months of the current financial year against 0.6% in the corresponding period of 2012-13.

The contraction in industrial production and exports shows that India faces the double whammy of weak domestic and foreign demand. This appears to suggest that the auto market has a long, winding journey ahead before it hits the sweet spot again. 

What is disconcerting is that the depressing news for Indian economy continues unabated and there are no indications to suggest an early end to the economic woes.  WPI edged up to a three-month high of 4.86%, dashing already slender hopes of reduction in interest rates. The rise in inflation because of steadily increasing fuel and food prices, combined with the rupee depreciation has made the Government press the panic button.

In fact, to arrest the free fall of rupee against dollar, the apex bank has virtually hiked the interest rates without tinkering with the policy rates by capping liquidity in the system at Rs. 75,000 crore and raising the cost of borrowing for lenders by 200 bps.

The silver lining in the clutch of data released recently is that trade deficit fell to a three-month low of $12.2 billion from $20.1 billion in May because of a sharp fall in gold imports after the Government raised import duties and made bullion imports unattractive.

Another reason that sustains hope is that the extent and coverage of monsoon this year has been good. In India, monsoon is the key to determine agricultural output, inflation, consumer spending and overall economic growth. Normal rainfall is expected to lead to higher farm output, which will rein in food prices that have largely been fuelling inflation. Agriculture sector which accounts for 17-20% of the GDP, is largely dependent on the rains. A rise or fall in agriculture has a ripple effect on the economy. With 75% of Indians directly or indirectly dependent on agriculture, a good monsoon will boost the spending and output of several commodities, thus helping the revival of market.

Adverting to FADA’s activities, we held a Regional Meeting and Council Meeting at New Delhi on July 6. The meetings assumed added relevance, as there were a number of important matters having far-reaching implications for the retail automobile trade, which came up for discussion.

As you are aware, members of FADA are spread far and wide across the country. It is well-nigh impossible for the FADA office bearers to visit all the cities and towns to meet and interact with the members. Regional meetings provide an opportunity for interaction between office bearers and members located in various parts of India. Such interactions help in identifying issues and problems facing the members of auto retail fraternity at the local & regional levels for concerted action by FADA and local association of automobile dealers. These forums also bring forth valuable feedback and suggestions from members to enable FADA attune its activities and initiatives suiting the needs and requirements of its constituents. 

The regional meeting at New Delhi gave us an insight into the issues confronting my fellow dealers in Delhi. The outstation members got to know a great deal about how the local association of Delhi has been able to address and handle adroitly the issues relating to logistics charges and HSRP. It was a learning experience for all of us in auto retail in other parts of the country, for, sooner or later, these issues are likely to crop up in other States as well. My kudos to the Automobile Traders Association Delhi for ably handling these issues, as positive outcome will set the tone and benefit the entire automobile dealer community in India.

We also got to know a lot about the role and activities of Automotive Skills Development Council (ASDC) through a presentation made by Mr Sunil Chaturvedi, CEO, ASDC. Likewise, Mr Deepak V, Executive Director, Prashaste Training Academy, through his presentation gave an update on the training & development program being conducted jointly by FADA and Prashaste and the plans for the future.

The Regional Meeting was also an occasion to launch AutoHealth product of IndiaFirst Life Insurance Company. The idea underlying the tie-up with IndiaFirst for AutoHealth product is that my fellow dealers not only provide health insurance cover to their customers but also add to their revenue streams. A similar initiative, namely, AutoLife launched last year has been successfully implemented by a number of automobile dealers across the country.

Council meeting held earlier during the day was equally fruitful.  As you are aware, FADA has been organising Auto Summit – a biennial convention of automobile dealers, coinciding with Auto Expo, since 2000. FADA Council decided to organise the 8th Auto Summit at Hotel Le Meridien, New Delhi on 7th & 8th February 2014. As in the past, it will coincide with Auto Expo, which is scheduled for 7th to 11th February 2014 at Greater Noida. 5th edition of Automotive Dealership Excellence Awards (ADEA) will also be dovetailed with the Summit.

Needless to mention, the Auto Summit has been getting bigger and better in terms of size, substance and grandeur with each successive edition. The increasing stature of the event finds reflection in the growing interest and participation of almost all industry leaders, captains of allied businesses and our fellow dealers from across India and abroad. The Auto Summit brings all stakeholders on a common platform and is eagerly looked forward to by my fellow dealers as well as others connected with automotive business.

I seek your support to make the Auto Summit 2014 a grand success, like the previous Summits, by your participation along with your fellow dealers in large numbers. The programme is under finalization. You may look forward to further announcement regarding programme and registration requirements in the forthcoming issues of this Journal and in FADA’s website.

Council discussed the findings of the latest Dealer Satisfaction Study by J D Power. The study is a revelation in that it 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.

As I have informed in my previous columns, FADA has also commissioned a study by Frost & Sulivan on benchmarking of the practices of car manufacturers in India in relation to their dealers. The work on this study has already commenced. I appeal to my fellow car dealers to give your free and frank opinion if and when F&S approaches you. The study aims to identify the best practices in various areas so that these could become benchmarks for all car manufacturers.

Simultaneously, we are having dialogue with banks and insurance companies to secure better deals for the members of auto retail and consumers. I am happy to inform that their response is positive and encouraging. I shall share the details, as the discussion further progresses and fructifies.

I am happy to inform that FADA’s 49th Annual Session and Annual General Meeting will be held on 6th September 2013 at New Delhi. The venue and the programme are being finalized. I invite all my fellow dealers to attend.

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

With best wishes,

Yours sincerely,

Mohan Himatsingka

 

Persisting Uncertainty a Cause of Worry

Dear friends,

A series of unflattering developments in the recent past are not what we had bargained for. These reports have put a damper on our hopes of early recovery of the auto market.

The industrial production growth slipped to 2 per cent in April 2013. While the factory output remained on a positive growth trajectory for the fourth consecutive month, the April growth rate is hardly any consolation considering the low base of April 2012. 

A major cause of worry for all of us is the volatility in the dollar-rupee exchange rate. The rupee touched a record low of 60.00 per dollar during intra-day trading on June 20, before closing at 59.57. The rupee has depreciated by more than 8% in the last few days, and is still hovering dangerously close to 60.00 against dollar. The sharp devaluation of rupee has serious consequences for the Indian economy that had been showing some stability of late. 

The weak rupee is likely to widen the current account deficit that is already at worrisome level. Secondly, it will likely impact prices, slowing down, if not reversing, the easing of inflation. These two unseemly situations limit the RBI’s headroom for further cut in policy rates. As a result, softening of interest rates, on which auto market has been pinning its hopes, may not come about anytime soon. On the other hand, all-round increase in prices as a result of costlier imports will spell further uncertainty and make the people keep the big-ticket spending, including vehicle purchases, on hold. The depreciation in rupee value has already started casting its shadow on the fuel prices. While international fuel prices are more or less stable, fuel prices in India are on the rise again due to devaluation of rupee.

However, it is not an out-and-out gloom and doom scenario. Timely arrival of Monsoon and its steady progress across major part of India is encouraging and rekindles hope that the current bad patch may be a thing of the past soon, particularly, since the retail inflation is largely fuelled by the food items. The annual monsoon rains are crucial for the 55% of farmland without irrigation in India. It is essentially the rural income, which propels the growth of auto market.

Secondly, for all the worries among investors and policymakers over the rupee's sudden plunge to record lows, the economy is in better shape to handle depreciation and to absorb shock today than it was when the currency last hit the buffers a year ago.

Inflation is falling, albeit moderately. Wholesale Price Index (WPI) has been on steady decline for some time and eased to 4.7% in May 2013 from 4.89% in April 2013. The retail inflation is still sitting at an uncomfortable level of 9.31% and remains a concern, though. Lower oil and gold prices are helping narrow a current account deficit that reached an alarming 5.1% of gross national product last fiscal year. And, exports are slowly and steadily showing uptick. The slowdown that resulted in decade-low growth of 5% in the previous fiscal year appears to have bottomed out, helped in part by some modest RBI interest rate cuts and the government's reforms aimed at boosting capital inflows.

Above all, the global rating agency Fitch Ratings has offered India relief from a flood of bad tidings—a depreciating rupee, weak factory output data and sticky retail inflation—by upgrading the country’s sovereign credit outlook to stable from negative.

The news is all the more savoury, as the revision comes within a month of Standard & Poor’s warning that there was a one-in-three chance of a downgrade in the country’s sovereign rating to junk status in the next 12 months. Now, with the upgrade by Fitch, we shall, hopefully, see a revival in business confidence and investments in the near future. 

Regarding activities of FADA since my last message, FADA’s training programme in association with Prashaste Training Academy has been progressing well since its launch in February this year. Six programmes have been organised so far at Hyderabad, Pune, Patna, Kochi, New Delhi and Bangalore, respectively. I am happy to note that the programmes witnessed enthusiastic participation. In today’s fiercely competitive environment, the importance of training & development cannot be overemphasised. The dynamics of auto retail are changing alarmingly at fast pace. As a result, the old management techniques and tools are losing their relevance by the day. These programmes aim at improving efficiency, productivity and profitability, at the same time equipping automobile dealers to stand up to the current & emerging challenges.

Needless to say, profitability of automobile dealerships remains the chief concern of FADA in the context of ever growing manpower, marketing and inventory holding costs, on one hand, and the shrinking or, at best, the static sales margins, on the other.

While appropriate sales margins for automobile dealers commensurate with the increasing costs is engaging our attention and continues to be high on FADA’s agenda, we are simultaneously working to identify additional business opportunities and revenue streams for the auto retail business. On being taken up by FADA, State Bank has already reduced rate of interest on working capital and has started giving commercial vehicle dealers commission on sale of finance. We are also following up with other banks. 

Simultaneously, we are also in regular touch with the insurance companies, as motor insurance and other insurance products have become significant components in an automobile dealership’s revenue model. FADA’s tie-up with IndiaFirst Life Insurance Company for promoting the AutoLife is the case in point. AutoLife is not only a CSR activity inasmuch as it promotes road safety and proper road behaviour, but is also a business opportunity for my fellow dealers. FADA is taking this tie-up to the next level, with the launch of another product from IndiaFirst, namely ‘AutoHealth’. The launch will coincide with FADA’s Council meeting, on 6th July 2013 at New Delhi. Hopefully, my fellow dealers will tie up with IndiaFirst and add another revenue stream to their business, as many of my fellow dealers across the country have already done by joining hands with IndiaFirst for ‘AutoLife’.

With the falling walk-ins in the showrooms and growing online searches for automobile dealers on Google, Bing and Yahoo during the vehicle buying process, it is very essential today for every dealer member to have presence both on web and mobile for selling and servicing of vehicles. 

For the benefit of our members, FADA has entered into an agreement with Carazoo Online Solutions, a leader and pioneer in this space with more than 120 dealers as their clients across brands and regions. They offer websites (virtual showrooms), mobile sites, online marketing services, live chat solutions, etc, at a special price to FADA members. I hope, my fellow dealers are making the most of this partnership.

Another route to identify and tap allied business opportunities, adopted by FADA, is to organise B2B shows at regular intervals across the country. The first B2B show organised at Mumbai in March was a tremendous success and the participants went back with a lot of food for thought.

This is not all. Many more initiatives are on the anvil. You will be hearing about them, as we move along.

We have scheduled a Council Meeting and a Regional Meeting at Shangri-La’s Hotel, New Delhi on 6th July 2013.  I cordially invite my fellow dealers to attend the Regional Meeting that will commence at 7.00 p.m.

I am eagerly looking forward to the Council Meeting, as it is being held after a gap of 3 months. We have a long agenda, including Annual Accounts, ADEA 2013, B2B shows and FADA’s much-awaited Auto Summit 2014, for consideration.

It needs no reiteration that Auto Summit, started in 2000, has become a mega biennial event of FADA. The Auto Summit brings together the Government, manufacturers, dealers, vehicle users, management gurus, experts and analysts on a common platform. It is also an opportunity for members of automobile dealer fraternity to meet and share their experiences with fellow dealers from other parts of India and globe.  The Auto Summit 2014 is likely to be held during Auto Expo in the first half of February 2014 at New Delhi. Automotive Dealership Excellence Awards for the year 2013 (ADEA 2013), instituted by FADA jointly with Auto Monitor to recognise and reward standout dealerships, will also be dovetailed with the Auto Summit. We shall be coming out with the announcement of the schedule and programme in due course. As in the past, I am expecting overwhelming response and participation of my fellow dealers at the Auto Summit 2014 and ADEA 2013. It is an occasion not to be missed.

Please feel free to send your valuable feedback and suggestions.

With best wishes,

Yours sincerely,

Mohan Himatsingka

 

A Hazy Outlook

Dear friends,

As I write this message, the scenario is not something to write home about. The vehicle sales are showing no signs of picking up. It has been a downhill journey ever since the start of previous financial year. The sale figures for the month of March 2013 are the repeat of lacklustre performance in the preceding months, barring October 2012 when the big ticket spending prior to Diwali festival had rekindled the hope for revival. However, the joy was short-lived as the sales figures slipped back to low gear soon after.

The key economic indicators are not encouraging either to instil confidence that the market will be back on growth trajectory soon.

Growth in services sector in March 2013 eased to its slowest since October 2011, compounding problems for the economy after earlier data showed manufacturing activity was also losing momentum.

The HSBC India Services Purchasing Managers' Index, based on a survey of around 400 companies, fell to a 17-month low of 51.4 in March from 54.2 in February. After registering a 12-month high in January, the country's services sector has reported weak output for the last two months.

Services presently make up nearly 60% of India's output and were the lone bright spot in an otherwise sluggish economy that is expected to grow at its slowest rate in more than a decade in the fiscal 2012-13.

Strong overseas demand for Indian services has taken a hit amid renewed fears over the euro zone debt crisis, which could add to exporters' problems and slow new outsourcing deals for Indian software companies, which will, in turn, further depress the auto market.

A similar manufacturing survey earlier showed that cooling domestic and foreign demand weighed on growth at Indian factories in March, with the sector expanding at its slowest pace since November 2011. Manufacturing PMI stood at 52 in March down from 54.2 in February. The slowing manufacturing activity finds reflection in IIP for February 2013, which barely managed to grow, by measly 0.6%.

Wholesale prices, India's main inflation gauge, rose to 6.84% in February and although it has generally declined in recent months, it is still above the central bank's perceived comfort level of around five per cent.

The Reserve Bank of India, facing intense pressure from industry and government to loosen monetary conditions to arrest the worst economic slowdown in a decade, has cut its key lending rate twice so far this year by 25 basis points each time, lowering the rate to 7.5% after leaving it on hold for nine months.

However, the Repo rate cut by the central bank is yet to make any significant impact on lending rates.

The depressing reading does not stop here. Sensex, a barometer of business confidence, is hovering at 7-month low. The Asian Development Bank has scaled down its forecast for India’s economic growth in 2013-14 from 6.5% to 6.0%. Fuel prices continue to be volatile, the recent lowering of petrol prices notwithstanding. The Rupee is on a roller-coaster ride and is swinging like a pendulum.

All said and done, I would like to say that auto market is down but not out. The market has seen such cyclic lows in the past, but was able to bounce back. I have unflinching faith in the resilience of Indian economy and hope that economy will wriggle out of the current slowdown phase that has lasted longer than many analysts had expected, very soon. We start the new financial year with a bagful of hopes.

Adverting to activities of FADA since my previous column, the close of financial year on 31st March 2013 kept most of us engaged in our respective dealership business. Also, the energy sapping event, viz. Automotive Dealership Excellence Awards for the year 2012 (ADEA 2012), which concluded with the presentation of awards on 9th March 2013 in grand style at Mumbai, necessitated a breather. 

However, it was a little pause and not the stop. The ongoing activities already set in motion continued with the same zeal and fervour. A training programme on ‘Maximising Sales’ was successfully organised at Pune on 5th & 6th March 2013. Of 3 such programmes to be organised during the month of April, the second programme is scheduled for 12th & 13th April 2013 at Patna and the third programme will be organised at Kochi on 19th & 20th April 2013.

I had mentioned, in my previous columns, about FADA’s stepped up interaction with State Bank of India. As you are aware, SBI has aggressively forayed into auto retail market and dealership business funding in a big way.  Based on FADA’s suggestions, the bank has already introduced an incentive scheme for CV dealers and their sales/marketing executives, who source CV finance business to the bank. 

Following our meetings earlier, Bihar dealers had a meeting under the banner of FADA with the officials of State Bank of India recently on financing of working capital requirements of dealers at a lower rate of interest. Mr N R Parmer, General Manager (Network), SBI assured that their rates are lowest in the industry and they are willing to finance all the automobile dealers across the country. 

We are also following up with other banks to get better deals for the automobile dealers and customers for their finance needs. A group of FADA members held a meeting with the General Manager of Central Bank of India and his team in their office at Mumbai on 11th March 2013. FADA put forth a number of suggestions on how members of auto retail fraternity and the bank could work together as partners, which would result in win-win for both. Needless to mention, automobile dealers, through a business arrangement with a bank, can identify the potential customers, assess and vouch for their credit credentials and help locate defaulters in their areas of operation, thereby reducing NPAs to a significant extent.

Let me reassure you all, we are not resting on our laurels. Efforts are afoot to have similar dialogue with other banks as well. Interest cost constitutes major chunk of a dealership business expenditure. Any money on interest cost saved is the money earned. The cost-cutting assumes added importance, particularly when the market is faced with recessionary conditions. On the other hand, attractive vehicle finance options bring in more customers to the showrooms.

You may be aware that FADA has appointed a Service Tax Consultant to help my fellow dealers understand and tide over the complexities of service tax law and procedure. The service was started about two years ago. Kindly feel free to send your queries, if any, regarding service tax to FADA for clarification by the Consultant.

A study by J D Power, in association with FADA, on dealers’ satisfaction with their respective manufacturers is underway.

Further, FADA shall soon be commissioning a study by a renowned consultant on benchmarking of practices of car manufacturers in India in relation to their dealers. 

I count on your support and whole-hearted response to these surveys so that the studies truly reflect the ground realities at retail level. 

Many more activities are in pipeline. You will be hearing about them, as we move along.

We are eagerly looking forward to FADA’s next Council meeting in the second half of June 2013 in Bhubaneswar. A B2B show is also proposed to be held, coinciding with the Council meeting. The previous B2B show, organised along with the awards presentation function for ADEA 2012 at Mumbai, was a big draw. We are expecting similar overwhelming response at Bhubaneswar.

I look forward to your suggestions and inputs for making activities and initiatives of FADA more meaningful and useful to its constituents.

With best wishes,

Yours sincerely,

Mohan Himatsingka

 

Buoyancy Remains Elusive

Dear friends,

The new financial year has made its advent. While the year gone by was a dream turned sour, the FY 2013-14 has not begun on an auspicious note either. The sales figures for the month of April are not something to rave about. We have been eternally hoping that the buoyancy would return to auto market soon.  However, it is turning out to be a mirage.

To add to the worries of auto market is the fact that the economy, by and large, remains sluggish and is not showing signs of picking up any time soon.

Indian services growth eased dramatically during April as new orders came in at a much slower pace. HSBC Services Purchasing Managers' Index, based on a survey of around 400 companies, fell to 50.7 in April, its lowest since October 2011 and the weakest reading in the current expansion cycle. The index had stood at 51.4 in March. 

It was the third straight month of decline, and took the index dangerously close to the 50 mark that separates growth from contraction. 

Services currently make up almost 60 per cent of India’s economy and a slowdown does not augur well for the country, coming, as it did, after the manufacturing PMI released earlier showed that manufacturing activity had also lost steam. 

However, it is not a gloomy scenario all the way.  A number of reports and developments, of late, inspire the confidence that the economy and, for that matter, the auto market are likely to claw back to the high growth path in the second half of the current fiscal. 

Of many positive developments in the recent past, the good news is that inflation pressures are ebbing off slowly. WPI for the month of March 2013 climbed down to over three-year low of 5.96%. As I write this message, India's headline inflation has eased further for a third straight month to 4.89% in April, as core inflation cooled and fuel costs fell. 

The ripple effect of cooling inflation is that the central bank has reduced the Repo Rate by 25 bps to 7.25% in its last policy review. With the inflation falling within the RBI’s comfort zone of 5%, we expect that the central bank will come up with further cuts in key policy rates soon. RBI remains cautious and wary about the resurgence of inflation, though.

It is worth noting that the RBI began cutting interest rates in April 2012. The Repo rate has been cut by 75 bps in the year 2013 so far. But that easing has done little to spur significant reduction in interest rates at the retail level or to give fillip to the demand. We hope that the banks would take a cue and reduce the interest rates on retail loans to boost demand.

Another piece of good news is that the commodity and raw material prices, including crude oil prices, internationally are witnessing downward trend. We welcome the recent cut in petrol prices by Rs. 3, as the soaring fuel prices, coupled with economic uncertainty, inflation and high interest rates, have been the major triggers for the fall in demand.

Thirdly, India’s exports, after having been in a free-fall mode during the major part of the previous financial year, are gathering momentum again, allaying the fears of unmanageable widening CAD.

Fourthly, Index of Industrial Production has, of late, shown a semblance of stability and upward movement slowly but surely. The 2.5% growth in the Index of Industrial Production (IIP) in March – a huge reversal from the negative 2.8% growth of March 2012 – shows that the economy is probably turning around. Capital goods production, a barometer for investments in the economy, grew an annual 6.9% from a year earlier. This is the first real green shoot that is noteworthy. Comparatively better growth rate for March ensured that IIP for the year 2012-13 expanded by 1% y-o-y.

All said and done, I remain optimistic that the current downturn phase of auto market, which has really lasted longer than expected, will blow over soon.

Adverting to FADA’s activities since my previous message, I am delighted to inform that FADA Academy’s ongoing training & development programme, being conducted in association with Prashaste Training Academy, has evoked overwhelming response. Four programmes organised recently at Hyderabad, Pune, Patna and Kochi were very well attended, and witnessed enthusiastic participation. Four more programmes are planned in May & June – at Delhi, Mumbai, Vijayawada and Bhubaneswar. The requests are pouring in from members in other parts for organising the programme in their cities.

I am happy to inform that a study on benchmarking of practices of car manufacturers in India in relation to their dealers to be conducted by Frost & Sullivan on behalf of FADA has got off the ground. A formal agreement with F&S in this regard has been signed. I am sure that my fellow dealers, on being approached by F&S, will give their free and frank inputs and opinion to make the study really meaningful.

As I have said on several occasions, the associations of automobile dealers at the local, State and regional levels are important link between FADA and its members spread all over India.  You will kindly appreciate that it is well nigh impossible for the office bearers to visit each and every city and town to meet and interact with members. I, therefore, feel that the local/regional associations of automobile dealers must be nurtured and strengthened. 

While most of the issues are localised and state-centric, FADA is more than willing to pitch in with its support on issues having national ramifications. FADA is also ever willing to share with the local/regional associations, the legal position, practices and policies obtaining in other States for resolution of the issues in their proper perspective at the State level.

It is good to see that the local/regional associations are becoming more active of late and working with zeal and zest to address the problems faced by the members of auto retail business in a concerted and coordinated manner. The sustained and concerted effort being made by the Automobile Traders Association Delhi in resolving the issues, including court cases, with regard to the implementation of High Security Registration Plate and logistics/handling charges levied by the dealers, is commendable. It would have been extremely difficult for the automobile dealers to fight the court cases and to take on the might of NGO’s and authorities individually. My kudos to Mr Raj Chopra, President, ATAD and his team for the spirit of fellowship displayed by the Association.

It is equally heartening to note that my fellow dealers in Indore have formed an association, viz. Association of Automobile Dealers Indore (AADI). Much as I would have liked to join, I could not attend, due to pressing personal reasons, the inaugural function of AADI held on 18th April 2013 at which the Transport Commissioner of MP was also present.  This would have given me an opportunty to  know the issues affecting the auto retail at the local/state level and to get a valuable feedback on the activities of FADA. 

I would appeal again to my fellow dealers that they must organise themselves at the city and State levels and hold regular meetings. Such regular meetings and interactions among automobile dealers help in identifying the issues of common concern for appropriate concerted action. The meetings also bring forth the good practices being followed by some of the dealers, which could be replicated by others. On the other hand, regular interactions and dialogue with the concerned authorities in the State at the level of association give rise to better understanding and appreciation of each other’s concerns, which may not be the case if the problems and issues are taken up individually by the dealers.

FADA Council will be holding its next meeting at Bhubaneswar on 21st & 22nd June 2013. A B2B Show similar to the one held at Mumbai and a training programme are also proposed to be dovetailed with the Council Meeting. I am eagerly looking forward to the Council Meeting, as there are a lot of new ideas and initiatives that will come up for discussion.

I would like to reassure that we are not resting on our laurels and are working wholeheartedly to clear the roadblocks for the auto retail business to flourish and prosper.

I look forward to your valuable inputs and suggestions.

Wth best wishes,

Yours sincerely,

Mohan Himatsingka

 

 

 

Budget 2013: A Balancing Act

Dear friends,

Given the fiscal situation made worse by the economic slowdown & external factors and the Damocles’ sword of downgrade by international rating agencies hanging over head, the Finance Minister had limited options while presenting the Union Budget 2013.

Ever since his assuming charge as the Finance Minister for the second time under UPA Government in August 2012, the intent towards fiscal consolidation through a reduction in fiscal deficit has been a key area of focus for Mr Chidambram. The series of measures initiated, of late, including gradual move towards market prices for diesel and other subsidised fuels, are in line with his renewed emphasis on fiscal prudence.

While, by and large, imposing no new taxes, the Budget has increased excise duty on SUVs from 27 per cent to 30 per cent. 

There are also other minor dampeners like increase in surcharge from 5% to10% on Indian companies and from 2% to 5% in the case of  foreign companies, for a limited period of one year though, as also the increase in surcharge on dividend distribution tax to 10% from 5% earlier. I feel that these additional taxes could have been avoided at this stage, when the industry is faced with downturn. Rather, the auto industry desperately needs sops and stimulus to come out of the sluggish spell.

SUVs were the only bright spot in an otherwise gloomy auto market that has been witnessing severe slowdown in the current financial year. Additional tax and resultant increase in prices is likely to dent the sales of SUVs as well. In view of its far-reaching forward & backward linkages, the impotance of auto industry in terms of employment & revenue generation, as also its contibution to the GDP, cannot be overemphasised.

Therefore, we would suggest to the Hon’ble Finance Minister to roll back the excise duty increase in the case of SUVs.  Ideally, all the vehicles, including SUVs, should attract the same rate of excise duty. 

All said and done, the Budget has definitely come up with fairly good sprinkling of positive measures that have the potential to revive the economy, in general and the auto market, in particular.

The allocation of close to Rs. 15,000 crore to JNNURM is a big positive for the commercial vehicle market, which is currently under acute stress on account of the economic slowdown. With the budget now proposing to use these funds to purchase 10,000 buses, the segment has something to cheer about.

Setting up of a regulatory authority for roads, target of 3,000 km of project award in first half of FY14; Investment allowance of 15% for investments above Rs. 100 cr in plant and machinery as a tax incentive; Proposal to provide an additional deduction of interest of up to Rs. 1 lakh on housing loans of up to Rs 25 lakh for the first time buyers in addition to the current exemption of Rs. 1.5 lakh; Extension of tax concession on spare parts of environment friendly vehicles till March 2015; Tax-free bonds up to Rs. 50,000 crore during the FY’14; increase in plan expenditure during the FY 2013-14 by 30% over the FY 2012-13; and continuing focus on infrastructure, agriculture and road projects are other positive measures, which will assist the auto market to steer back on growth path.

On the flip side, we were expecting a timeframe for rollout of GST, which was conspicuously absent in the Finance Minister’s budget speech. All what the Finance Minister indicated was that there had been some consensus on the issue and that it would get passed in near future. Further, implementation of DTC is yet to see the light of the day and has been deferred again.

All in all, the Budget 2013, while laying emphasis on fiscal consolidation, continues to focus on growth in predominantly primary sectors like agriculture, infrastructure and education. Housing industry has also been given a boost.  This growth will, in turn, support the growth in other sectors including the automobile industry, especially the commercial vehicle sector.

The Budget, in nutshell, is not short on intentions. The Achilles heel of policy formulation in India has been that the intention does not get translated into action on the ground. The tardy progress of road infrastructure development in India is a case in point. I sanguinely hope that outlays and intent will get converted into outcomes.

The good news on economic front is that IIP grew for the first time in three months by 2.4% in January 2013. However, the concern is that the retail inflation currently sitting at 10.9% is showing no sign of climbing down. We welcome the 25 bps cut in Repo rate by RBI, which, I hope, will give impetus to investment and industrial activity. 

Regarding FADA’s activities, one of FADA’s major events, viz., Automotive Dealership Excellence Awards for the year 2012 (ADEA 2012) was concluded with the presentation of awards to winners in various categories at a gala ceremony on 9th March in Mumbai. My heartiest congratulations to the winners.

As I have mentioned in my previous columns, the objective underlying these awards is to recognise and reward my fellow dealers who excel in various areas of dealership management, community service and social work. The recognition and accolades for the standout dealers apart, another objective is to bring to the fore the best practices in the trade and the phenomenal social work being carried out by the members of automobile dealer fraternity in various parts of the country, for others to know and replicate.

ADEA, instituted jointly by FADA and Auto Monitor, has made tremendous strides since its inception in 2009. Each successive edition has seen bigger participation from those aspiring for the awards. The awards are also evoking increasing attention and interest of industry, allied business and society, as the attendance at awards ceremony goes to show.  I am sure, ADEA is going to become the ‘Oscar’ of auto retail in India in the years to come.

I have reiterated time and again that automobile dealers cannot afford to rest on laurels in this fiercely competitive market.  The dynamics of auto retail are changing and old management techniques & tools are losing their relevance alarmingly fast with each passing day. Automobile dealers have to be constantly on their toes and geared to stand up to the new challenges. Keeping this in view, FADA has set an on-going training & development programme rolling for its members. A series of such programmes are planned to be conducted in partnership with Prashaste Education & Management Consultancy Pvt Ltd in various parts of the country.

I am happy to inform that a Management Development Programme was successfully organised during 22-23 February at Hyderabad. The programme received tremendous response. We have received a good feedback from the members. The next programmes in the series will be organised at Pune, Patna and Kochi in April 2013. The information is published elsewhere in this issue.

Dovetailing with ADEA 2012 function, FADA also held its Council meeting on 10th March 2013 in Hotel Leela, Mumbai. One of the key decisions taken at the meeting was to renew and redouble efforts to form an auto retail organisation at the global level. FADA and, for that matter, automobile dealers in India can learn a great deal through exchange and sharing of information. Needless to mention, with the integration of Indian economy with the rest of the world, the formation of an international body of automobile dealers assumes an added importance.

A major issue of concern, which has been bugging the automobile dealer community in India, is the low sales margins. The issue came out loud and clear at the panel discussion preceding the awards presentation ceremony at which industry leaders were also present in large number. FADA shall continue its endeavour for fair dealer’s margin in India as prevailing in other mature auto markets.

Look forward to your inputs and suggestions.

With best wishes,

Yours sincerely,

Mohan Himatsingka

 

 

 

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