Looking Forward to 2017 with Renewed Hopes

Dear friends,

It needs no reiteration that we usher in the New Year on a cautious note with shadow of uncertainty and apprehensions in the market caused by demonetisation looming large on the horizon. When the year 2016 started off, there was a great deal of enthusiasm and hope amongst the automobile dealer fraternity, with buoyancy in vehicle sales gradually returning. However, at the fag-end of the year, the demonetisation of large currency notes virtually played the role of a demon, causing a widespread disruption in the economic activity, including auto market.

As I write this column today, i.e. 15th January, the auto market is yet to gain traction seen pre-demonetisation. Rural market is the worst hit, as seen from the two-wheeler sales that have declined by as much as 40%. The truck segment has been equally hit hard by the disruption fuelled by demonetisation. While the extent of damage in the case of passenger vehicle is not as massive as in the case of CVs and two-wheelers, there has been sharp drop in the passenger vehicle sales as well.

With currency supply improving gradually, we are sanguine that the auto retail market will be back on track soon. Our expectations are not unfounded. Economy, especially the organised sector, has been doing reasonably well, demonetisation notwithstanding. Bucking demonetisation, factory output measured in terms of Index of Industrial Production (IIP) grew by 5.7% in November 2016 due to better performance of manufacturing, mining and electricity sectors, coupled with larger offtake of capital goods, considered a barometer of investment. Secondly, the inflation sitting at below 5.0% is within the comfort zone. In fact, December CPI is at a two-year low. Thirdly, the oil prices by and large remain stable, although fuel prices in India have witnessed significant increase of late

Regarding the activities of FADA since my previous column, after series of individual meetings with a number of industry leaders, followed by an interaction with SIAM Executive Committee, FADA team was invited by the Hon’ble Union Finance Minister for a meeting in response to a representation made to him in the wake of demonetisation. I am happy to inform that all these meetings with OEMs, SIAM Executive Committee and the Hon’ble Union Finance Minister were quite meaningful.

The key points of discussion with individual OEMs and SIAM Executive Committee were: (a) Inventory control; (b) manpower rationalisation; (c) shortage of skilled manpower suiting the requirements of automobile dealerships; and (d) provision of fair dealer exit policy. In the meeting with the Union Finance Minister, which was held on 2nd January 2017, FADA team, while emphasising the importance of auto retail trade & service industry in terms of employment and revenue generation in the national and state economies, took up the issues of (i) Grant of industry status to the auto retail trade business for access to credit; (ii) Automatic route for FDI in automobile dealerships; (iii) increased depreciation for motor vehicles in the context of shrinking lifecycle of vehicles; and (iv) incentives for renewal and modernisation of transport fleet.
It is heartening to note that all the suggestions made by FADA to OEMs and the Hon’ble Union Finance Minister were well-received.

The new team FADA office bearers is really thinking big and contemplating many changes, including creation of a legal cell within FADA for the guidance of automobile dealers in order to make the body more useful for its constituents. A number of other initiatives are also on the anvil. You will hear about them, as we go along.

Please feel free to send your inputs and suggestions, if any.

With best wishes,

Yours sincerely,

John K Paul




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