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

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