Demonetisation Throws A Spanner in the Works

Dear friends,


The Auto market having shown signs of resurgence & buoyancy in the current year is back in slow lane. Demonetisation has dented the vehicle sales more than what we had initially anticipated or bargained for. It now appears that the cash crunch is going to persist for some time to come.


While the long queues at the banks and ATMs leads us to conclude that the demonetisation has hit the common man severely, current slowdown in auto market, to my mind, has more to do with the sentiment. I am not discounting the adverse impact of currency shortage, though. The cash crunch has cast its shadow over the entire chain of business activities.  As a result of this all-round slowdown and downbeat business sentiment, the people are keeping their purchases on hold.

The normalcy is going to take time, as the new currency supply improves and the people, particularly in the countryside and rural areas, get used to doing transactions through the banking channel and the digital platform. I have strong belief in the adaptability and resilience of the Indian people, who, I hope, will, once again,prove that they are above any challenge. I still hold the view that the move to demonetise Rs. 500 and Rs. 1,000 notes is laudable and will stand the economy in good stead in the medium and long terms, the immediate pain notwithstanding.

Regarding the challenges faced by the automotive retail trade, I wish to assure my fellow dealers that FADA is doing all it can possibly do under the circumstances. FADA has written to all manufacturers for their support in reduction of huge inventories built up at the dealerships due to the slowdown as a result of the demonetisation and also making available enhanced credits from the banks to the dealers. FADA has also taken up with the banks and NBFCs seeking increase in credit limits for the dealers and the vehicle buyers, including 100% funding for the vehicle purchases. Likewise, the Government has also been requested to take steps to reduce the service charges on credit card transactions to promote the wide use of credit cards.

It is satisfying to note that the OEMs, banks, NBFCs and the Government have responded favourably and come up with some of the measures with a view to alleviating the demonetisation pangs.

Since my previous column and as a sequel to the series of meetings already held, the office bearers of FADA have met more OEMs individually. The FADA team also made a presentation to the Executive Committee of SIAM on issues and concerns of automobile dealers. These meetings were held as a part of the agenda for the next year drawn up by the new FADA Council, which includes stepping up interaction with SIAM and individual OEMs.

I am happy to inform that the response to most of the matters taken up and discussed at the meetings with various OEMs has been positive. The interactions with SIAM and individual OEMs have led to the better understanding and helped identify the areas of mutual interest.

I wish to assure that these interactions are not one-off. We, at FADA, wish to sustain and carry forward the dialogue in the interest of healthy OEM-dealer relations and sustainable growth of automotive business as a whole.

While FADA takes the initiative to appraise our partners in business with our problems, we must be fully aware that there're numerous actions that we too are  responsible for. Keeping our house intact, taking a legitimate and reasonable stand and above all convincing others of the difficulties we face are our sole responsibility.

Let us be optimistic !

Wishing You All a wonderful season ahead and a Happy & Prosperous New Year !

Yours sincerely,

John K Paul

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