The Federation of Automobile Dealers Association (FADA) plays an important role in supporting the fraternity of 15,000 automobile dealers. With 26,500 dealerships, it engages in the sale, service and supply of spare parts of all vehicles and employs four million people. Vinkesh Gulati, president, FADA, speaks to S.M. Boothem about the association’s role, activities and current challenges
What is FADA’s view on Budget 2021-22?
The budget focussed on the overall growth of the economy and put a stress on making India an Atma Nirbhar Bharat. It also brought a smile for the auto industry as our age-old demand of bringing Vehicle Scrappage Policy (voluntary) saw light of the day. The final contours of the policy, though awaited, will decide its attractiveness and popularity. This – an announcement to induct more buses in public transport, increased infrastructure spending and building national highways – will play a pivotal role in reviving the commercial vehicles segment over a longer period of time.
How has the association been making efforts to support the dealer business?
The past few months have been a challenge to us. We worked in adverse conditions with months of marginal business or even zero business, zero earnings, along with high operational costs. We wrote to Prime Minister Narendra Modi about the dealers’ issues, and also to the OEMs and SIAM, to review dealer margins and take all possible steps to reduce operational costs.
How has the industry been surviving in the wake of the Covid pandemic?
Almost every facet of our lives has been turned upside down. For the retail industry, it was even more difficult, considering the sector was already going through a slowdown for 18-20 months before Covid-19 hit us. However, we are a resilient industry and had to make some tough choices such as cost reduction, cost control, inventory monitoring and corrections and rightsizing the infrastructure. All these measures helped the dealer fraternity to survive.
What were the challenges faced with Covid-19, BS IV inventory and transformation from BS IV to BS VI?
As the sunset date of BS IV drew near, auto sales started picking up and we thought the worst was behind us, without knowing how the pandemic would hit us in the following months. Towards the end of March, when sales were at their peak, the government announced a nationwide lockdown. Dealers, at that point of time, were sitting on high levels of BS IV inventory thinking that the same would be sold off in the next few days.
To minimise the negative impact, which would be in thousands of crores of rupees, as BS IV vehicles would become junk, FADA went to the Supreme Court to save the dealer fraternity from getting hit with this huge loss. While many industries issued pink slips, for us, our employees are assets in which we continuously invest in terms of training. We didn’t issue any pink slips, but countered this with a reduction in salary. Since the BS IV inventory was taken care of and with very limited BS VI inventory, our interest component, which is a big-ticket expense, was in control.
Since the BS IV inventory was taken care of and with very limited BS VI inventory, our interest component, which is a big-ticket expense, was in control
What is the FADA’s stand on the Franchisee law in India?
FADA has been advocating the enactment of the Franchise Protection Act (FPA). The Parliamentary Standing Committee (PSC) for industry called it to give a presentation in September 2019, when the auto industry was seeing a major dip in sales. During that presentation, it strongly argued for bringing in FPA for auto dealers. I am really glad to share that the PSC headed by K. Keshava Rao has recommended that the government come out with the Act. India does not have a Franchisee Law at present due to which OEM-dealer agreements are highly skewed towards manufacturers. There are various examples where auto manufacturers suddenly announced their exit from India, leaving dealers high and dry with their investments going down, resulting in massive capital loss. The act will not be just a win-win for both OEMs and dealers, but will also be beneficial to customers.
Would you elaborate the importance of digitisation in the dealership business?
Before Covid-19, online presence was a mere formality, whereas in the Covid era, it has become one of the critical elements of the entire ecosystem. Every dealer has made an effort to maintain a presence on digital platforms. FADA, in association with its dealer members, has initiated several digital campaigns to train employees. It also initiated an exclusive digital marketing and operations training for over 100,000 dealer employees across India with support from ASDC and Google India.
What is the FADA vision for 2021?
India will once again gain its momentum to achieve the third position globally in the passenger vehicle (PVs) segment, as the entire industry will work towards achieving this goal.