Automobile dealers should consider to improve vehicle penetration in rural areas, says Mohan Himatsingka of FADA

Expressing confidence on the growth prospects of Indian automotive aftermarket industry in the years to come, Mohan Himatsingka, president of Federation of Automobile Dealers Associations (FADA) explored various opportunities and challenges available in the Indian automotive market during an exclusive interview.

 

He elaborated on the issues like opportunities available in automobile dealership business, green tax in diesel cars, burgeoning spurious auto parts market in India and FADA's proactive role to boost the automobile dealership market.

 

 

 

 

What is current status of Indian automotive market ?

 

Mohan Himatsingka: The situation is uncomfortable. All OEMs had been ramping up their capacity, thinking that the industry will grow at around 15 to 17% over last year. With virtually flat growth, suddenly we find that there is more production than sales and in turn either the inventory of manufacturers are increasing or they are reducing their production. Similarly with dealers inventory is also increasing and also, because of pressure from competitive Co-Dealers / Manufacturer, selling expenses and discounts are also increasing which in turn is eroding the dealership’s margin.

 

 

 

Many automobile dealers now find that one dealership of a product / company or only one enterprise dealing in automobile business will not be sufficient to take care of their social status and either they are switching from these businesses or are adding more businesses to their dealerships.

 

 

 

Manufacturers and dealers are now required to learn and prepare themselves for a situation where sales of vehicles alone will not keep them economically viable. Now Dealers has to undertake virtually all allied activities and have to put serious efforts in developing allied business for survival. This industry is currently passing through troubled period where dealer will have to learn to increase their delta profit from all other activities other than sale of vehicle, they will also have to ensure that profit from other activity of dealership continuously increases apart from the improvement in margin on vehicles. I foresee a lot of consolidation in near future among the dealership fraternity like larger dealership will be opening up more branches, so they cover their territory better and small dealership will be closing down their set up, if OEMs does not create support system /hand holding system in their favour.

 

 

 

What role FADA plays to help auto dealers in boosting profits. What sorts of training and consulting services FADA provides to the dealers for healthy growth ?

 

Mohan Himatsingka: FADA is National Body of automobile dealers with prime objective to protect their interest and ensure healthy growth of automobile dealer fraternity. It had been regularly taking up the dealership profitability issue with manufacturers but has not been very successful in past, so FADA is now organizing many activities for automobile dealership, so that they remain economically viable and relevant to the society. Some of the subjects on which training is being imparted / organized in last year is described below:

 

 

 

A. Effective Management of Auto Dealership

 

B. Simplifying Finance

 

C. Improving Aftersales Profitability

 

D. Maximizing Sales

 

So that at different regions of India, dealership personals are equipped to face the challenging and changing situation and in spite of pressure from all corners, survive the down turn successfully.

 

 

 

What are the current projects being undertaken by FADA?

 

Mohan Himatsingka:

 

a. FADA is working with Society of Indian Automobile Manufacturers (SIAM) and ACMA to improve automotive related skill of nation. SIAM, ACMA and FADA has collaborated and have created automotive skill Development Council with 9 Crores budget to ensure fast improvement in automotive related skill of the nation. Training courses and syllabus are being designed for classes in ITI, few ITIs has been identified for imparting automotive related skills. This will improve the individual’s serviceability and an individual will be able to generate more revenue for himself in automobile aftersales service area.

 

 

 

b. To encourage automobile dealers to improve their performance in customer’s satisfaction from sales and services and fulfill social responsibilities towards the country as a whole, FADA has instituted award for excellence given annually. This award is an All India Award for excellence in various activities given to automobile dealers.

 

 

 

c. FADA has recently entered into an agreement with IndiaFirst Life Insurance Company, which is Joint Venture amongst Bank of Baroda, Andhra Bank and European entity. Now automobile dealers can also insure life of vehicles owners and drivers and also will be able to create awareness in the society as whole on road safety.

 

 

 

d. FADA is also studying the dealer’s satisfaction with the respective OEMs, so that manufacturers can be encouraged to adopt the best practices available in the industry on dealer’s commission, inventory, warranty policy, spare parts return, vehicle margin, spare parts margin etc.

 

 

 

e. FADA is also organizing business to business meet where manufactures of accessories, workshop equipments suppliers, gift items manufacturers, office furniture manufacturers, lubricant manufacturers, Insurance Company, finance company etc. will be able to interact directly with the dealers and negotiate to close the deal which is mutually beneficial to dealership as well as to them.

 

 

 

f. FADA is organizing training classes as mentioned above, so that the dealership’s ability to run their business improves. FADA is also organizing courses for next generation of dealership owners, so that the next generation is interested and also able to manage their family business in a more efficient way.

 

 

 

g. FADA is also organizing study tour for Automobile Dealers, so that they study, they spent time learning with the best dealers of India or outside.

 

 

 

h. FADA is also trying to ensure that the dealership agreement between manufactures and dealers are balanced. The dealership agreement at present is in favour of OEMs.

 

 

 

i. FADA Journal a monthly magazine is very informative and keep the dealership owner enlightened on recent decision of Consumer Courts, Service tax laws etc. It has published few book which are of interest to automobile dealers.

 

 

 

Do you think entrepreneurs can reap profits in auto dealership?

 

Mohan Himatsingka: Now automobile dealership business is a complex activity, an automobile dealer has to compete in sales of vehicle, spare parts, accessories finance, insurance, extended warranty, value added services etc. Every activity gives different challenge, virtually each line of business is a separate business and different competitor and the dealer has to compete with entirely different set of people. Today the automobile dealers by stand alone sale of vehicle is not in profit but to be in profit, a dealer has to undertake many of the above activities with full zeal. The dealership future will be secured and they will be in profit only if he gives one window service to customers. Now vehicle selling is buyers market, and for customers delight the dealer principal’s involvement, organizational culture and system driven approach is required. The dealership is required to consistently put in a part of revenue into expanding the business and reach, so that rural penetrations improve then only dealer can be economically viable in the long run.

 

 

 

FADA is helping new comers to learn from the experience of older dealers, so that there is an improvement for the performance and profitability of new automobile dealership.

 

 

 

What major challenges currently posed before FADA? How are you dealing with them?

 

Mohan Himatsingka: Being involved in virtually many activities simultaneously FADA is becoming the respected brand amongst the manufacturers and Government bodies. FADA has to ensure the initiatives taken by it continues and it remains relevant to automobile dealers and community as whole. FADA is the only National Body representing the interest of automobile dealers, it has to ensure that that more than 80% of the two-wheelers, four-wheelers and Commercial vehicle dealers should be its member. Seeing the diversity of our country, its geography, language barrier, size of dealership etc. protecting interest of all section of dealership becomes a challenge for FADA. A new dealership has different challenge than an old dealership. Similarly the dealership of two-wheelers has different challenge than dealership of four-wheelers. FADA has to take care of all its member and stake holders. As a FADA President I have to ensure that FADA works in the interest of all and do something more for rural areas dealership, so that they also catch up fast in sales and profitability.

 

 

 

According to CII-McKinsey report, the Indian automotive aftermarket industry may grow to Rs.370 billion by 2015. What is your take in this?

 

Mohan Himatsingka: I fully subscribe India growth story. I am confident that if not by 2015, by 2017 Indian automotive aftermarket industry will grow to Rs 370 billion. The industry is passing through bad patch of time, but this is cyclic. This cyclic down turn has come after many years, so the industry should not fear. Dealership and industry should try to consolidate and put more efforts to reach out to the customers. I would suggest that the automobile dealers should reduce their take home and invest and redeploy the money in their business in creating necessary service related infrastructure in the rural areas, so that vehicle penetration can improve in a rural area. Automobile dealers are not traders, they are rather entrepreneurs. They have many business under one banner. They should be prepared to take more challenges. Probably manufactures have shown more entrepreneurship, than automobile dealers. We have to prepare the dealership fraternity to face this challenge, so that Indian Automotive aftermarket industry grows to the desired level.

 

 

 

In your opinion is it required to put green tax on diesel cars?

 

Mohan Himatsingka: No, diesel is less polluting and less hazardous than petrol. Gradually Govt. should increase the price of diesel, so that the subsidy is reduced, instead of putting tax on manufacturers of diesel car. Govt. should ensure that badly maintained vehicle or matter more than 12 years old vehicle are condemned. They should encourage exchange policies, so that fuel efficient cars are on Indian road. This will create opportunity of business for manufacturers, dealers and also improve the revenue of Govt. Govt. should put a part of excise duly received on new cars for such exchange programme, which will ultimately reduce fuel consumption save - foreign currency and reduce road accident.

 

 

 

What according to you major reason behind the growth of spurious auto parts market. Do you think, the government should come up with a concrete policy so as to curb the growing menace.

 

Mohan Himatsingka: We find that automobile manufacturers keep the price of genuine parts very high, there is huge difference between their dealer price vrs. the price which they purchase the parts from their venders. The manufacturers should keep the spare parts margin low, so that their volume can increase. Consumers are not interested in buying bad and riskier non-genuine parts from the grey market, but when they find that spare parts manufacturers are buying the parts from the same vendors whose parts are available with the local retail shop at much lesser price, the customer gets incline to purchase such parts. Our suggestion will be that manufacturers should reduce their price of spare parts in general and particularly those parts which are related to vehicles safety. Parts needed for vehicle safety should be sold at no profit, so that at least with immediate effect, such spurious parts are out of market. They should also create awareness in the market regarding advantages of the genuine parts. Lot of money is being spent by them on advertisement the features of their car, new introduction, monthly scheme etc., a part of advertisement should also be directed to reduce nuisance of non genuine parts. Govt. has already a policy against spurious auto parts, so more support from Govt. may not be possible but NGOs who are involved in road safety should also be encouraged to campaign against spurious parts and they should also play a role in convincing general purchase for not using spurious parts.

 

 

 

Please share some of the major targets FADA aims to achieve in the upcoming fiscal (2013-14).

Mohan Himatsingka: FADA will be trying to increase its member base, so that it becomes more relevant to automobile industry as a whole. It will also coming forward in support of manufacturers during this recessionary time in getting the Govt. policies evolved in benefit of automobile industry. As a whole it will be working with banks that they should finance more and enlarge their budget for financing of cars and commercial vehicle, two-wheelers and three-wheelers to public etc.