Demonetisation Pain for Auto Market

 

Dear friends,

Hope, you would have had a blast and buoyant business during the long festivities culminating in the auspicious occasion of Diwali. As I understand from my fellow dealers across the country, the month of October turned out to be much better than September that had witnessed tepid retail sales; the OEMs had reported healthy wholesale numbers, though.


After taking over as the President of this august body, I want to assure you that we, in FADA Council, have got down to the job with all earnestness. As per the agenda broadly drawn up, stepping up interaction with SIAM and the individual manufacturers was one of the top priorities outlined by the new Council, with a view to sensitising the OEMs on dealers’ concerns, as also building and promoting healthy OEM-dealer relations.


I am happy to inform that a team of FADA office bearers held meetings with the chief executives of four OEMs, viz. Mr Anand Mahindra, Mr Nalin Mehta, Mr Sudhir Rao and Mr Ravi Pisharody, in their respective offices on 7th November 2016 in Mumbai. A FADA team also met Mr Yoichiro Ueno, President & CEO, Honda Cars India. Positive response of the OEMs to the matters discussed at the meeting was encouraging. The meeting helped in better understanding and appreciation of the areas of mutual interest. Further meetings with other OEMs are planned, as a part of the continuing OEM-Dealer dialogue and stepped up interaction between SIAM and FADA, in the interest of growth & development of automotive business as a whole. Meanwhile, if you have any specific issue or matter to be taken up with the OEMs, please send your inputs.


As I write this message, two unexpected developments have taken place. One, Mr Donald Trump, considered a rank outsider, has been elected as the President of USA, against all odds. Since Mr Trump is a wildcard, the global economy faces uncertainty in the immediate term. It is hard to guess at this point of time how the scenario unfolds.


The second development back home in our country, i.e. the demonetization of Rs. 500 and Rs. 1,000 currency notes from the midnight of 8th & 9th November, has taken all of us by surprise. While the Government’s aim of curbing parallel economy  by this revolutionary step is laudable and good for the economy in the long run, it  has immediately hit the common people and the auto market. Automobile dealerships across the country are saddled with the huge inventory, as a result of slowdown due to cash crunch. We urge manufacturers to come up with their support to reduce inventory at the dealerships and to make available enhanced credits from banks to the dealers. In order to promote widespread use of credit cards, we also urge the Government to take steps to reduce the service charge levied by the banks for credit card transactions.


While on the subject, the Government is pushing hard for the introduction of GST with effect from 1st April 2017. The GST Council has recently decided on the GST rates, which will be 5%, 12%, 18% and 28%, though classification of goods & services in these GST brackets is yet to be decided. We, in FADA, are keeping track of the developments.


FADA  participated at the Two-Wheeler Conclave organised by Autocar Professional on 16th November 2016 at New Delhi as Association Partner. FADA also participated at the SIAM CSR Conclave held the same day. Panelists representing FADA at these two conferences cogently put across  the dealer point of view and CSR activities being carried on by its members across the country.


Please feel free to send your suggestions, if any.


With best wishes,


Yours sincerely,


John K Paul

 

 

 

 Standing Up to the Challenges

 

Dear friends,


I express my sincere thanks & gratitude to FADA Council and Past Presidents for reposing their faith in me by electing me as President of this august body.


Occupying this coveted office puts an onerous responsibility on me to live up to the high expectations of members of automobile dealer fraternity spread across the country. As FADA has grown in size and stature over the years, the expectations of its constituents have also been growing. The task becomes all the more difficult for me in the context of phenomenal work done and high standards set by my predecessors. However, with the support and cooperation of you all, I shall try my best to prove equal to the task.


Though we shall be discussing within Council as to what our priorities and agenda should be during the next year, I would like to share with you, few initial thoughts of mine through this medium to elicit your inputs and suggestions.


There is a perception, right or wrong, amongst two-wheeler and CV dealers that FADA does not pay much attention to the issues specific to two-wheeler and CV dealers. While I, personally, do not subscribe to this perception, we are going to create two verticals within FADA for two-wheeler and CV dealers. To start with, we propose to organise a two-wheeler conference focussing exclusively on specific issues facing two-wheeler dealers. Pending our own two-wheeler conference, FADA has joined hands with Autocar Professional, as Association Partner, for their two-wheeler conclave scheduled for 16th November 2016 at Hotel Hyat Regency in New Delhi. I appeal to my fellow dealers to attend.


Another matter high on my agenda is to strengthen associations of automobile dealers at the city, state and regional levels. In view of the vast geographical spread of the country, it is virtually impossible for the FADA’s office bearers to visit each and every place for interaction with members. These associations can act as bridge between FADA and members in various parts of India. Being the pulse of automobile retail trade, FADA would welcome the issues and suggestions thereon from the local associations for being taken up at the appropriate level. FADA can also help these local/regional associations with the policies & practices obtaining in other States, as also with the case laws on various matters.


As you are aware, FADA has retained a service tax consultant to clarify, guide and educate its members on various issues related to service tax. We also propose to engage legal experts in other fields to help members deal with litigation and complex legal issues that arise from time to time.


There are host of issues between OEMs and dealers inter se. We wish to step up our interaction with SIAM and would like to meet OEMs individually to sensitise them on issues of concern to automobile dealers so that the remedial action could be initiated for sustainable growth of automotive business, as a whole.


GST is the biggest tax reform the country has undertaken since its independence. The expert view, by and large, is that the introduction of GST will be beneficial to the automotive sector, including auto retail business. However, the plain reading of the GST law gives rise to few concerns and apprehensions that need to be addressed and clarified. To prepare our fellow dealers for the GST, we are in dialogue with GST experts. If need be, we shall be taking up the issues arising out of GST with the Government.


Look forward to your views and suggestions.


Wishing You Happy & Prosperous Festive Season,


Yours sincerely,


John K Paul

 So Far So Good

 

Dear friends,


Auto market has been making a steady headway since the beginning of the year 2016. The vehicle sales that had been dragged down by the uncertain economic environment and rural woes arising from two consecutive years of drought and subdued rural incomes are back on track. Monsoon rains this year have been bountiful so far, giving further boost to the market sentiment.


Normal monsoon rains will not only give impetus to the rural economy, but will spearhead the economy as a whole. Though agriculture accounts for only 16-17% of India’s GDP, its rub-off on other sectors of economy cannot be overemphasised.


Inflation, particularly food prices had been climbing up again in the recent past, sending the Government and the people into a tizzy. It is heartening to note that the food and vegetable prices have started cooling, as a result of the generous monsoon rains. With petroleum prices attaining a semblance of stability, we are going to witness consumer price index, which is hovering at 5.8% currently, easing off to the comfort zone of below 5.0%.


An encouraging sign is that the incumbent Government’s emphasis on infrastructure development and speeding up the policy decision-making has started making impact and the results are becoming visible on the ground. There is a discernible pick-up in road building, electricity generation and mining activities.


Another piece of good news for the auto market is that with the implementation of 7th Pay Commission recommendations, bonanza in the form of increased salaries and payment of arrears since January 2016 awaits the employees & pensioners of Central Government and Railways some time during the upcoming festival season. The State Governments are also expected to follow suit for their State employees. All this augurs well for the auto market.


On the flip side, there is no tangible improvement in private investment. It is largely the public spending that is driving the investment at the moment. Inflationary expectations held back the RBI to reduce the interest rates further in its latest bimonthly monetary policy review. We hope, the apex bank will announce the cut in key policy rates in its next monetary policy review scheduled for October 2016, giving fillip to the private investment.


Adverting to FADA activities, I wish to inform that we are working on a number of initiatives for the benefit of automobile dealers. We propose to revive the training & development programme in a big way.  We are simultaneously working to give shape to the 7th edition of Automotive Dealership Excellence Awards. The preparations for organising the next Annual Session and Annual General Meeting of FADA are also underway. FADA Council at its next meeting scheduled for 27th August 2016 at New Delhi will consider and review various matters and initiatives. The outcome will be intimated to my fellow dealers.


Meanwhile, I request my fellow dealers to kindly inform if they would be willing to organise training & development programme in their respective regions in partnership with FADA. This will help us draw a calendar of training programmes well in advance.


It is gratifying to note that some of the local/regional associations of automobile dealers have undertaken skill development programme. I congratulate Raipur Automobile Dealers Association (RADA) that has recently tied up with an expert agency to create a skilled manpower pool in the State of Chhattisgarh.


Please feel free to send your inputs and suggestions to further improve and strengthen activities, making them more meaningful and beneficial for the automobile dealer community.


With best wishes,


Yours sincerely,


K V S Prakash Rao

 Looking Back at the Year Gone By

 

Dear friends,


By the time, this issue of FADA Journal reaches you, I would have completed two years in the office of FADA President. It is high time, we take a stock of how the last year tuned out to be.


When I started the second innings as the President in September last year, the green shoots of recovery of the Indian auto market were visible. However, apprehensions were still there in the backdrop of two consecutive years of drought. It is comforting that the vehicle sales have been moving up the growth curve month after month since the advent of the year 2016 and that the outlook is promising. The slowdown of M&HCV segment in the recent months is a cause of worry, though.


Another piece of good news is that the Government is moving very fast to clear the decks for the GST to become a reality from April 2017. While the full import of GST is yet to be understood, GST, if implemented, will unify the fragmented market into a single common market, removing many hassles and complexities experienced in the present tax regime. To prepare automobile dealers for implementation of GST without hiccups, FADA is planning to organise seminars on GST. To begin with, a presentation on GST, as relevant to the automobile dealers, will be made by Ernst & Young at FADA’s next Annual Session scheduled for 24th September 2016 at Kochi. We are also proposing to engage an expert agency to study the implications of GST for automobile dealers and to submit a report. The issues of concern arising out of the report will be taken up with the concerned authorities for redressal.


It gives me sense of satisfaction that FADA continued to work with zeal & zest to promote the cause of automobile dealers and auto retail trade.


Among its various activities, FADA’s biennial event - Auto Summit 2016 was organized in style during the year. We could not have had a better theme of the Summit than ‘Digital Dealer’ in the context of growing use and adoption of digital platform for business operations in this IT age. The Summit was a stupendous success - be it the stature of speakers, the topics & quality of deliberations or the scale & grandeur. The Summit came on the heels of a grand function organized last year to mark the Golden Jubilee of FADA.


FADA continued to represent vehemently the interest of automobile dealers before the Central & State Government authorities and OEMs. Tax Collection at Source (TCS) was one of the major issues that was successfully taken up and resolved by FADA through representations and personal meetings with the Finance Ministry officials. While the TCS continues on the statute book, the clarifications issued by the Finance Ministry have removed grey areas and set at rest many of the apprehensions of automobile dealers.


I am happy that I, along with other senior members, was able to meet and interact with our fellow dealers at various places in the country to understand and identify the problems facing automobile dealers at the local and State levels. Massive turnout at two regional meetings at Vijayawada and Jabalpur, in particular, gave us a lot of useful inputs and suggestions.


My sincere thanks to my colleagues in the Council and other members spread across the country for their whole-hearted support & guidance. I am also thankful to the Government authorities and OEMs for appreciating our concerns and extending their helping hand.


I wish my successor All the Best and hope, the new team will steer FADA and auto retail trade to greater heights.


Yours sincerely,


K V S Prakash Rao

Monsoon Inspires Hope

Dear friends,

It is comforting to note that after a prolonged slowdown phase, the auto market is gradually attaining a semblance of stability. There seems to be a marked improvement in the market sentiment with the Monsoon covering almost the entire country. This comes as a major relief after two successive years of drought.

It is heartening that the Indian economy is slowly but surely moving up the growth curve. Notwithstanding the methodological concerns raised by some of the agencies about the GDP growth rate of 7.6% for the year 2015-16 put out by the Government, there is no denying the fact that the Indian economy is the fastest growing economy in the world, surpassing the GDP growth rate of China. The above-normal monsoon rains forecast for this year coming true means that the embattled rural economy that has been facing uncertainty for some time will get a major boost, accelerating the pace of economic growth further.

Needless to mention, though the agriculture sector contributes about 16-17% to the Indian GDP, its performance plays a pivotal role in stimulating or muting the economy. In other words, the catalytic effect of rural economy and, for that matter, agriculture sector cannot be overemphasised.

Another piece of good news is that the implementation of Seventh Pay Commission recommendations by the Central and State Governments and payment of arrears of the salary & pension hikes is likely to leave a lot more money in the hands of the people for discretionary spending on consumer durables, including motor vehicles. You will recall that it was chiefly the implementation of Sixth Pay Commission recommendations, along with the stimulus package rolled out by the Government at that time, which saved India from plunging into worldwide recession post financial crisis resulting from the Lehman collapse in 2008-09.

While the good GDP numbers are music to our ears, there are pitfalls on the way, which are cause of concern. The inflation is climbing up again. The food prices, in particular, have skyrocketed. The key policy rates were not reduced by the RBI at its bi-monthly monetary policy review in June 2016 due to surge in inflationary pressures. The central bank wanted to wait and watch before announcing further reduction in interest rates. As the inflation, particularly, food inflation, is unrelenting and remains at the elevated levels and there is spurt in commodity prices as well, the expectations of further cut in Repo rate at its next bimonthly review by the RBI in August are not high.

Secondly, the private investment is still not picking up. While the analysts are comfortable with the level of investment in India, it has largely been supported by the Government spending. There is a little possibility of private investment picking up any time soon, as the private investment and the inflation have a strong correlation in inverse proportion. If you look at the successful economies of the world – China, Korea, Taiwan – all grew very rapidly when their inflation rates were low. However, high FDI inflows into India is very positive for the economy. Therefore, we, in automotive retail trade, remain optimistic that the Indian auto market will be on a sustainable high-growth trajectory soon.

Regarding the activities of FADA, we are proposing to hold, in association with Google India, a workshop on digitalisation of dealership operations in Hyderabad in August 2016. The workshop will be dovetailed with the meeting of FADA Council.

The exact date, time and venue of the workshop will be intimated to FAA members, as and when finalised. Since the seats are limited, the participation will be on First-Come-First-Serve basis.

You are welcome to send your views and inputs.

With best wishes,

Yours sincerely,

K V S Prakash Rao

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