A Guarded Optimism

Mohan Himatsingka, President

Dear friends,

As I write this message, India s long auspicious festival season culminating in Diwali is over. I am sure, you must have had a lot of fun, gaiety and blast during the festivities. This festival of celebrating the victory of good over bad is awaited eagerly by one and all in India. With the Government and companies, generally doling out incentives and bonuses to their employees during the period, the people are on spending spree. The festival is, therefore, a bonanza and a god-send opportunity for the business in general and auto market, in particular, to cash in on.



The month of October 2012 has turned out to be reasonably decent for the auto market that had been witnessing sluggish sales since the advent of FY 2012-13. Although the month brought in cheers, by and large, for all of us in auto retail, in the backdrop of lacklustre performance in the previous six months of the current fiscal, I must confess that the festive spirit did not exactly deliver a cracker. What I understand from my fellow dealers is that while there has been a pick-up in sales volumes in October, the uncertainty whether the green shoots of revival witnessed during the festive season will sustain going forward, continues to haunt the market.

The reasons for lukewarm enthusiasm are not far to seek. Major indicators affecting Indian economy and auto market are not something to write home about. After rekindling hopes in August 2012, albeit with a meagre growth of 2.3%, the Index of Industrial Production (IIP), contracted for the second time in the quarter, declining by 0.4% in September 2012 mainly on account of a poor show by the capital goods and consumer durables. The contraction was despite the eight core industries, with a combined weight of 38 per cent in IIP, growing by a robust 5.1 per cent in the same month. The muted IIP numbers are likely to have a bearing on the GDP. This goes to show that the sluggish market conditions and consequent investment inertia persist and are not ebbing away to restore the much needed business confidence.

There are a series of equally distressing reports on other key indicators. The stubborn inflation is not showing any sign of subsiding to a comfort level. Retail inflation inched closer to the double-digit mark in October, largely driven by rising prices of food and other essential household items. This puts the RBI in a cleft stick on the issue of reduction in interest rates. Needless to mention, high lending rates, coupled with inflation and soaring fuel prices, have been the main reasons for the slowdown in vehicle sales.

What is disheartening is that the crude oil prices in the international market remain volatile. Adding to more worries is the fact that the rupee, after displaying resurgence in the last two months, is witnessing a free fall against the dollar once again. Although the petrol price has been reduced marginally of late, the uncertainity prevails.

The depressing news does not end here. International business environment remains a cause of concern
with Euro zone, in particular, continuing in economic & debt turmoil. Shockingly but not surprisingly, India's exports fell for the sixth month in a row, with shipments declining 1.6% to $23.25 billion in October 2012 from the corresponding figure of $23.6 billion last year. On the other hand, increased oil purchases led to a 7.4% increase in imports to $44.2 billion during the month, leaving the trade deficit at a record high of 21 billion.

All the same, while a spate of reports on economic front make a distressing reading, the month of October
Mohan Himatsingka, President A Guarded Optimism 2012 has come as a whiff of fresh air on the back of festivities. I am confident that the auto market will build on this momentum to end up with decent growth numbers during this fiscal year. Personally, I remain optimistic,though somewhat guarded. My confidence stems from the fact that the Indian economy and, for that matter,the Indian auto market have shown remarkable resilience under severe adverse conditions in the past. I see no reason why we should not be able to steer through the rough terrain unscathed once again.

Adverting to FADA s activities, I would like to assure you all that we, in the new council, have got down to the task in right earnest. A number of new activities for the benefit of automobile dealer fraternity are on the anvil for rollout. However, our first priority at the moment is the Automotive Dealership Excellence Awards for the year 2012 (ADEA 2012), which will be presented to the proud winners at a glittering function, as in the past, sometime in the last week of February or the first half of March 2013 in Mumbai. As you are aware, the awards for the automobile dealers excelling in auto retail business and community service were instituted, jointly by FADAand Auto Monitormagazine in the year 2009. There is no gainsaying that ADEA is getting better and bigger with each edition. This is the fourth edition of ADEA and we are hopeful that the latest edition will see new highs in participation.

The nominations for those wanting to be considered for the awards for the year 2012 are open. The applications and details can be downloaded from the websites www.fadaweb.com or www.adea.in. I would urge my fellow dealers to participate in the awards in large numbers to make the awards truly representative of excellence in auto retail. The idea underlying the institution of ADEA is not only to recognise and reward the individual automobile dealerships who have set new benchmarks in various areas of dealership management and social work, but also to spearhead a movement of excellence in auto retail as a whole.

The objective of adding weightage for CSR in adjudging automobile dealerships for the awards is to highlight and to make visible the outstanding work being done by automobile dealerships across the country for the betterment of society. The auto retail business contributes enormously in terms of contribution to the national & state economies and employment generation. Simultaneously, a large number of members of auto retail fraternity are also engaged in community & social work. However, it is regrettable that such a tremendous contribution hardly gets noticed and recognised. The awards present a unique opportunity for my fellow dealers to get noticed and be counted.

It needs no reiteration that no business can survive and sustain for long, unless it enjoys the goodwill of society at large. Building bridges with the society through community service and socially relevant activities is, therefore, imperative. Automotive Dealership Excellence Awards aim at, among other things, securing from the Government and the society, the attention and recognition the auto retail deserves.

In addition to the ADEA, we are working on an ongoing FADA Academy programme for the training and leadership development for the owners and managers of the automobile dealerships. In the context of rapid changes taking place in auto retail scenario and paradigm shift in the automotive business, the importance of training & development programmes cannot be overemphasised.

We are also mulling the commissioning of a study by an internationally renowned consulting firm on the
comparative benchmarking of the practices of car manufacturers in India in relation to their dealers. The
objective of study is to bring out the best practices for adoption across the industry.

The list of new initiatives and activities under our consideration does not stop here. You will be hearing a lot, as
we move along.

Please feel free to send your inputs and suggestions, which will be of immense help to us in devising and
making the activities more meaningful for the constituent members of FADA.

With best wishes,

Yours sincerely,
Mohan Himatsingka

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