Dear Friends,

After a month of spike in sales in January which was largely due to year end stock clearance being extended and a Few New Launches which generated some excitement, the Industry is once again witnessing downward trend as February turns out to be the trickiest month this year. It looks like as if we are staring at a Prolonged Slowdown in Sales as immediate Positive triggers appear few.
 
Last Entire Month and to the day I write this message to you, I have received numerous Calls as well as messages from Many of You on Our State WhatsApp group and in private, Expressing Concern and anguish regarding the High Inventory situation and the levels being at an all-time high, may it be Passenger Vehicles, Commercial Vehicles or Two Wheelers. In fact, Two-Wheeler inventory levels are as high as 12-14 weeks in some pocket is the feedback given by some of you and this is a matter of great concern to the Dealer Community and to us at F A D A.
 
F A D A is fully aware of the pain all of You are going through because of the High Inventory and all the Complications that come with it, in terms of Logisitcs, high interest Burden, Higher Discounting for liquidation and Vintage Vehicle issues. We are in process of starting a formal discussion with SIAM and through them with all our OEM’s on the current business scenario and how it is increasingly becoming unviable for us to sustain, as Dealers are already facing Huge Spike in Operational Costs in recent times and Such Huge Inventories just adds to that Burden and in Fact is the Back Breaker. 
 
We will help to create an EcoSystem, mutually agreeable to all Stake holders which would not require more than a month inventory, as Inventory beyond 30 days does not Help anyone in Our Ecosystem, Not Our Principals, who would not want their Dealer to become Unprofitable, not the Financier, who despite getting more interest is worried more for the financial health of his Customer, which is us and it definitely does not help Us, the Dealer, who has to bear the complete cost of this additional Inventory.
 
I know, given the current stock and retail situation, a month’s inventory level appears to be a dream situation, but we have now taken it as the Highest Priority amongst all the Tasks  We have taken up at F A D A and we will work towards the same with all stakeholders  and work with them to get to this level at the earliest.
 
Prime Minister Modiji’s Government presented its last budget (interim budget) on 1st February. Even though, there were no direct benefits to the Auto Sector, with the new tax rebate for individuals of income up to Rs. 5 Lakhs & assured income for farmers, there will be an anticipated surge in the positive customer sentiments with more liquidity coming into the system. This will hopefully push up the demand for 2W, Light CV and Tractors. Government's focus on rural roads with an allocation of Rs. 19,000 crores under Pradhan Mantri Gram Sadak Yojna should have a rub off effect on sales uptick for Construction Equipment Vehicles and Commercial Tractors Segments.
 
As per the notification of Road Transport Ministry, implementation of High Security Registration Plate has to begin from 1st April 2019. F A D A has already written to the Ministry stating that the onus of purchasing the HSRP Machine for embossing and hot stamping should be kept out from the  purview of the Dealers, as both, the capital expenditure and operating expenditure runs into Rs. 2,000+ crore for the entire Auto Dealership Industry. Moreover, there has been no compensation formula which the notification talks about. As I write, OEM body SIAM has already approached Honorable Supreme Court and has prayed for a stay on the notification by taking a stand that HSRP should be manufactured and the process of embossing and hot stamping should be with HSRP Manufacturer without involving OEMs and its dealers.
 
In another notification which comes into effect from 1st April 2019, is the compulsory manufacturing of ABS/CBS Vehicles. Since we were receiving a lot of queries from our members whether sales and registrations of non-ABS/CBS vehicles will be stopped, we once again met MoRTH Jt. Secy. Mr. Priyank Bharti. Jt. Secy has assured us that a clarification on the subject will be released soon stating that this notification only relates to Manufacturing and there will be no impact on sale/registration of non-ABS/CBS vehicles post 31st March'19.
 
Regarding TCS on GST, Government issued a corrigendum on March 7, 2019 stating clearly that TCS on GST is not applicable. For this, F A D A and SIAM followed up with GST Principal Commissioner very rigorously and due to this we have been successful in getting this clarification.
 
On the issue of IGST, where Amendment has been made in Section 49 of CGST Act with the Introduction of Section 49A, IGST credit has to be first utilized and when such credit is exhausted, and only then the credit of CGST and SGST/UGST if any shall be utilized against output tax liability. The reason behind introducing this system in addition to the sequence of credit utilization already mentioned in section 49(A) is to minimize fund settlement on account of IGST. Even though this seems like a simple method, this will be a major change. This new amendment in GST Law will be a very big blow for the Auto Retail Sector. The amendment will impact on the method of tax payment and therefore, have major impact on the cash flow of Our Members while discharging their tax liability.
 
To take up this matter on an urgent basis, we have submitted our representation directly to PM Shri Narendra Modiji because if the changed provision, as understood by us comes into effect, it will add a Huge Burden to Our Working Capital Needs in such troubled times. I am hoping that the PMO will give urgent attention to it before the announcement of elections. We have submitted Copy of our appeal to Our Finance Minister, Shri Arun Jaitleyji and to all GST Council Members coming from Each State as well as to the GST Commissionerate.
 
Continuing in the events department, F A D A organized Vyapar Karnataka in association with KADA on 8th February 2019 in Bengaluru. The event witnessed Dealer Principals participating in huge numbers and the total footfall crossed 150+. I am sure that the Dealers who were present, had a good time networking with their co-dealers, discussing Industry Issues and witness best practices from other Industry Leaders which they would have taken back with them and have implemented at their set-up’s. Also, as a unique opportunity, Dealers got a chance to participate in Open House Discussions where they could discuss their queries directly with F A D A and KADA Office Bearers. Events like these bring a sense of oneness among dealers and I am sure that we will keep the ball rolling in times to come. 
 
The next Vyapar, Vyapar Tamilnadu will be held on April 24.
 
I hope that the long sales slump which we have witnessed since the beginning of September, ends soon and we are back on the growth trajectory.
 
Despite the Current Retail Sales, Fundamentally nothing has changed and India will be the fastest growing Auto Market in the World.
 
Do use This Slowdown to keep a control on your costs and Look at Opportunities Within to maintain profitability, as we await our return to Vibrant times, which I am sure would be Soon.
 
Happy Selling and a Happy Holi to all celebrating the Festival of Colours.
 
Warm regards,
 
Ashish Harsharaj Kale
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