Palpable Excitement as the D-Day Draws Near

Dear friends,

First thing first! The Union Budget 2015 has been presented by the Hon’ble Union Minister. There were a lot of expectations of the auto sector from the Budget, particularly in view of the prolonged downturn experienced by the auto market in India. As a person representing the auto retail business in India, I would say that the Budget fails to live up to our expectations. 

There is no gainsaying that auto market in India has been reeling under acute slowdown for the last 3 years.  We, in FADA, were expecting special measures including softer excise duty regime and high depreciation rates in respect of motor vehicles, for giving boost to the auto sector. We were also expecting incentives for scrapping old, unsafe, polluting vehicles plying on the Indian roads, on the lines of ‘Cash for Clunker’ program implemented in the US, as also the similar incentive schemes introduced in Europe, in the wake of global recession post-Lehman collapse. Hope, these suggestions of FADA will be incorporated by the Hon’ble Finance Minister before the Union Budget 2015 is finally passed by the Lok Sabha.

However, while there may not be specific measures announced for auto sector, the Budget on the whole is balanced and growth oriented, minus frills and big-bang announcements. The increased allocation for infrastructure & rural development and emphasis on Make in India are expected to put the economy back on high growth trajectory, thereby fuelling the auto market.

The only concern is that the Union Budgets in the past have not been short of good intent. However, implementation of the proposals contained in the Budgets on the ground has left much to be desired. While the incumbent Finance Minister and, for that matter, the present Central Government have shown earnestness & intent to pursue the growth agenda with all seriousness, the past experience makes us keep our fingers crossed, when it comes to the implementation of various proposals without cost & time overruns.

A welcome announcement in the Union Budget 2015 is the proposal that GST will be introduced from 1st April 2016. According to various experts, the introduction of GST will not only plug revenue leakages and minimize tax evasion, but will also improve the GDP growth number by 1.5-2.0 percentage point. With States being vital stakeholders in the introduction of GST, there are numerous hurdles to be crossed, before the GST becomes a reality in India. The good thing is that the discussions with the State Governments are in the final stages and almost all issues, including the protection of the State Governments’ revenue by a suitable compensation mechanism during the initial period of introduction of GST, have largely been addressed and sorted out.

Another cause of comfort is that the macroeconomic fundamentals are looking up somewhat. The inflation remains benign. We, in FADA, welcome the recent 25 bps cut in the Repo Rate by the RBI. With inflation rate well under control and within the comfort zone, we expect further cut in Repo Rate, going forward. Needless to mention, the high level of interest rates has been one of the major factors impeding the growth of auto market in India.

Likewise, the crude oil prices in the international market are also showing a semblance of stability. Though there has been an upward trend in crude oil prices in the recent past, necessitating the increase in the prices of petrol and diesel by over Rs. 3.0 per litre, it is manageable and does not warrant pressing a panic button at the moment. The outlook in the near and medium terms, as depicted by various experts and analysts, is that the petroleum prices are not likely to see the kind of volatility witnessed in the past. 

The downside is that the industrial production, especially the manufacturing, is not displaying any significant improvement and the economic environment remains, by and large, challenging. The latest Purchasing Managers’ Index for manufacturing and growth rate of India’s Core Sector, though remaining positive, are not something to rave about. The current challenging economic environment is also reflected in the auto market, which is finding the going tough. Though the wholesales numbers proffered by OEMs look decent, automobile dealers, on the whole, are not witnessing any significant uptick in the sales volumes at the retail level. 

All said and done, we, in FADA, are sanguine that the auto market will be back in the fast lane soon.

Regarding FADA’s activities, I am happy to inform that our preparations for the FADA’s Golden Jubilee event scheduled for 17th April 2015 at Hotel Taj Lands End, Mumbai are making steady progress. The confirmations are pouring in from a galaxy of eminent persons in the Government, the auto industry and the allied businesses. It is equally good to see a wholehearted support from the sponsors of the event, who were approached by FADA.

What thrills me the most is that my fellow dealers from across the country have shown an overwhelming interest and keenness to participate and celebrate the event in style. Such a spontaneous, overwhelming response of my fellow dealers is not surprising simply because it is their own event and an important milestone in their journey. It has been an eventful journey of FADA since 1964 when it was formed by four Regional Auto Retail organizations in east, west, north and south, respectively. It is an occasion to salute our forerunners and doyens of auto retail trade without whose contribution, FADA would not have become what it is today. It is also a solemn occasion to honour the visionaries and leaders of industry for steering the Indian auto market to become a major player in the global arena.

The occasion assumes added importance, as the Automotive Dealership Excellence Awards presentation ceremony for recognizing and rewarding my fellow dealers, who excelled in various areas of dealership management, community service and CSR activities during the year gone by, is a part of the FADA’s Golden Jubilee Celebrations function. It is all the more a compelling reason for my fellow dealers to participate on this special occasion in large numbers and be counted as one of the major contributors to the growth & development of the society at large.

There is a palpable excitement within the dealer community and my colleagues in the Council, who along with the members of Organising Committee, are sparing no effort to make the FADA’s Golden Jubilee celebrations worth tons of gold. I am looking forward to meeting all my dealer friends from across within and outside the country.

Please feel free to send your inputs. If any of my dealer friends is willing to take up any responsibility/role, I shall welcome that kind ownership.

Sharing a piece of good news with FADA members, I am glad to inform that FADA has purchased additional office space to take care of its ever increasing activities and expanding role in tune with the growing expectations of its constituent members. Double celebrations, as it coincides with Golden Jubilee of FADA.

Before signing off, I would like to inform that I, along with few members of FADA Council, attended the J D Power Awards presentation ceremony held on 4th March 2015. Among the winners in various categories, it was good to see Toyota bagging the Dealer Satisfaction Study award for the 4th time running, which speaks volumes of the dealer friendly practices of the company. It was in fitness of things that the award for the Dealer Satisfaction Study to TKM was presented by the undersigned as the President of FADA. The idea of such a study is to bring forth the best practices so that they become industry standards across OEMs. I hope, other OEMs will initiate measures to further improve OEM-Dealer relations in the interest of sustainable growth of automotive business, benefitting all stakeholders.

With best wishes,

Yours sincerely,

K V S Prakash Rao




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