Light at the End of Long Tunnel?

Dear friends,

I shall be completing my second term in the office of President of this august organization shortly. It is time that we take a stock of the developments during the last one year.

When I started my second innings as President on 6th September 2013, the scenario was that of doom and gloom. The auto market was passing through one of the worst recessions it has ever witnessed. There was no sign of things looking up anytime soon. 

The advent of FY 2014-15 and the formation of a stable Government at the Centre brought in its wake a ray of hope for the auto market. Indeed, there have been tell-tale signs of recovery for the last few months. However, we remain guarded in our optimism.  

One thing is for certain that the sentiment has improved. There are quite a few positive developments in the recent months, which are encouraging.

India’s GDP in Q1 of FY’15 grew better than expected at 5.7% that is the highest in the last two years and a huge plus in the context of 4.6% growth achieved in the previous two quarters. The good news is that this 5.7% growth in GDP in Q1 has been aided by a marked improvement in the performance of industrial sector.

With GDP growth in Q1 exceeding expectations, the global rating agencies have already started to sound bullish about the Indian economy. They remain cautious, though.

On the flipside, after the high of first quarter GDP data, the core sector numbers for July and Purchasing Managers' Index for Manufacturing (PMI) provide a sobering reality check that the recovery from the prolonged slump will not be easy as imagined. There are dampening signals, though not worrisome, emanating lately. The core sector index rose by a paltry 2.7% in July, down from 7.3% in June. The IIP growth in June 2014 slowed down to 3.4% from 5.0% recorded in May 2014. The HSBC India Manufacturing PMI for the month of August slowed to 52.4 as against a July's 17-month high of 53.0. Likewise, the HSBC India Services PMI for August 2014 was 50.6, the slowest in three months. Nevertheless, in spite of these blips, the mood remains positive.

Another heartening news is that crude oil prices in the international market are slowly falling despite geo-political tensions, mitigating worries on this account to a large extent. Diesel prices are currently, more or less, aligned with the market prices, giving respite to the Government from the burden of huge diesel subsidy and offering it a leeway to contain the fiscal deficit within the target of 4.1% of GDP for the current financial year as envisaged in the Union Budget.

Thirdly, the exports in the recent months have been clocking decent growth numbers. With imports slowing down, Current Account Deficit that stood at 1.7% in Q1 is manageable and is not a cause of much concern.

Fourthly, investment activity has gathered pace and reassured consumers have begun to spend again, indicating the worst slowdown in the last decade may finally be over. 

We, in auto market, have, for long, been clutching onto any straw in the wind. In the context of our none-too-happy experience in the last 30 months, the question keeps bugging whether the growth momentum seen in Q1 will be sustained. The stubborn inflation remains sticky and showing no sign of climbing down to the comfort level. As a result, the RBI was constrained to keep the interest rates unchanged in its last review of the Monetary Policy.

All said and done, the green shoots of recovery are getting deeper. We, therefore, hope to see a tangible revival in the fortunes of automotive market very soon, especially with the festive season drawing near.

Adverting to FADA’s activities, we had an action-packed year. The mother of all FADA’s events, i.e. Auto Summit 2014, hogged much of our attention during the year. The 8th Auto Summit – biennial convention of automobile dealers commencing from the year 2000 - was organized at a grand scale in February 2014. The Auto Summit was a stupendous success in terms of participation, stature of speakers and quality of deliberations. The two-day Summit saw impeccable arrangements and lively proceedings. I am grateful to the then Hon’ble Union Minister of Heavy Industries & PE, who made it convenient to inaugurate the Summit and to deliver his inaugural address. I also express my sincere thanks and gratitude to the industry leaders, including Dr Brijmohan Lall Munjal and Mr Vikram Kirloskar, President, SIAM, who spared their precious time to be with us at the Summit. My grateful thanks to the experts and captain of allied businesses for their august presence and enriching our experiences with their valuable thoughts and views. I am equally indebted to the sponsors but for whom it would not have been possible to mount the Auto Summit in such a spectacular way. I acknowledge with thanks the unstinted support extended by fellow council members and members of the Organising Committee, especially the support and leadership provided by Mr Vinay Nevatia, Mr Rakesh Jain and Mr Bharat Sanghvi, in successfully organizing the Auto Summit 2014.

I am happy to note that the study on ‘Competitive Benchmarking of OEM Practices for Passenger Vehicles Retail in India’ undertaken by Frost & Sullivan on behalf of FADA was completed during the year. The objective of the study was to indentify and bring forth good practices of various OEMs in relation to their dealers so that these practices become benchmarks for other OEMs to replicate. 

It is satisfying to note that the momentum and frequency of FADA Academy Program in association with Prashaste Training Academy was sustained, six training & development programmes being organized in different cities during the year. We intend to make this activity more broad-based and frequent in the coming years to equip my fellow dealers to stand up to the new paradigm that is changing at an alarmingly fast pace.

I am delighted to inform that the 5th edition of Automotive Dealership Excellence Awards – a joint initiative of FADA and Auto Monitor magazine – saw unprecedented response and participation, culminating in a gala awards presentation ceremony during the Auto Summit.

The year gone by saw FADA step up its interaction with the industry and the Government. I am thankful to the industry leaders and the Government for their appreciation of the viewpoint and concerns of automobile dealers.

It is also heartening to note that FADA continued to build and deepen relations with the auto retail organizations in other countries of the world.

What is the most fulfilling is that FADA responded proactively to the concerns and challenges facing auto retail business and spared no effort in addressing and resolving them to the extent possible.

I express my sincere thanks to my colleagues in the Council, who rose above their personal interests to lend their whole-hearted support in the larger interest of automobile dealer fraternity as a whole. In particular, I am grateful to my Vice President – Mr K V S Prakash Rao, who stood by me like a rock and extended his unflinching support and guidance. My grateful thanks to our Past Presidents for their guidance and wise counsel, which was always forthcoming.

Last but not the least, my heartfelt thanks to the members of automobile dealer community across the country. But for their support and cooperation, it would not have been possible for us to achieve what we did during the year.

Before signing off, I would like to place on record my acknowledgement and appreciation of the support provided by FADA Secretariat in discharge of my responsibility as the President.

I wish my successor All the Best.

Yours sincerely,

Mohan Himatsingka

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