The Federation of Automobile Dealers Associations (FADA) has been vocal about laws and regulations governing the auto industry. In an interview with businessline, Manish Raj Singhania, President, FADA, talks about formulating progressive legislation such as Dealer Protection Act, as has been the practice in many other countries. FADA is also demanding reduction in GST for two-wheelers from 28 per cent to 18 per cent. Excerpts: -
What kind of challenges are automobile dealers looking at?
The automotive retail industry has shown remarkable resilience, recovering well after the challenges of transitioning from BS4 to BS6 emissions standards and the impact of Covid-19. The passenger vehicle and tractor sectors achieved record-breaking sales last year. However, two-wheelers continue to struggle, lagging behind pre-Covid levels by approximately 19 per cent, while the commercial vehicle segment is gradually improving.
Moving forward, there are a few key areas that require attention. First, inventory management is crucial, particularly for passenger car dealers who face imbalances between fast-moving and slow-moving stocks. Second, adequate liquidity in financing is necessary to support dealerships as they replenish their inventory levels. Third, the rise of the electric vehicle industry presents both opportunities and challenges across various segments. Lastly, the implementation of a Dealer Protection Act, similar to those in other countries, is essential to safeguard the interests of dealers and establish a level playing field between them and original equipment manufacturers (OEMs). FADA has developed a Model Dealer Agreement (MDA) and has engaged with multiple OEMs to promote fair practices and protect dealers’ interests.
There are companies which are also getting into direct to customer dealings. So do you see any impact in the traditional dealerships?
Dealers have their own order of operation. If a dealer is operating from a certain city, he has got his own area of influence that the manufacturer needs and would like to encash on. Besides, there are a lot of things in India a business has to face on a continuous basis on a local level that the dealer can attend/ address on behalf of the OEMs. The OEMs, who were initially talking about 100 per cent digital, have already opened experience centres in India. These experience centres are like dealerships, just owned by the company or an outlet that’s been managed by the OEMs instead of transferring the right to others. India is a developing country and al larger section of the community still gets influenced with local contact, local touch points, etc. The dealer who has a strong local connect has to meet and influence the customer on local level to transform his buying decision. So, I think it is very pertinent for OEMs to have a dealership model in India and it delivers a lot of value.
What is the share of online sales now because a lot of companies also getting into online marketing? Is that also affecting the traditional dealer networks?
We do see a lot of customers getting into online booking of the vehicle, and while doing so, they might have experienced the vehicle beforehand, but still the final decision comes post visiting the dealership which might be again an online booking of the vehicle...the complete online sales is still a long way to go in India. Car buying is a personal decision and the customer makes a prominent investment. So nobody wants to go for just a trial and error method. They want to be certain what they are going to invest in, what they’re going to buy what they are going to own or drive.
The retail sales of the industry has not yet reached the pre-Covid levels. By when do we see the sales surpassing the pre-Covid levels or at least come to the similar levels?
The industry is still down by 2 per cent in May, compared to pre-Covid level. But actually what is dragging down the complete automobile sales is the two wheeler segment. It’s been only in the festive months or the marriage season that we see a spike in two-wheeler sales. To revive the two-wheeler market and regain buyers’ confidence, we need to support our rural market and the government needs to take necessary steps to bring back the region on revival. One of the key mode for the revival of the segment is reduction in GST rates from 28 per cent to 18 per cent making it affordable to all. Knowing India is a price-sensitive market, two-wheeler prices has gone up by almost 50 per cent post transformation from BS4 to BS6, and continuous rise in input cost, supply chain changes, and semiconductor issues have added to the price.