Text : J Srikant
The first victim of a downturn in the auto industry is not the OEM or the component manufacturer, but the dealer. A drop in vehicle sales adversely impacts the already tight margins of dealers. However, when the industry begins to revive, the dealers are the first to give an indication of change. Federation of Automotive Dealers Associations (FADA) recently held its 50th Annual Session in New Delhi, titled ‘Auto Retail – Cautious Optimism,’ pointing to a change in the sentiments of the customer.
Mohan Himatsingka, President, FADA, in his welcome speech said that the Indian automobile market offers a tremendous opportunity in the long-run. “FADA and its members remain committed and willing to work alongside government, manufacturers and other stakeholders to improve the environment, road safety and impart driver and manpower training in the interest of sustained growth of the economy and the auto sector.”
Chief guest to the event was Shekar Vishwanathan, Vice Chairman & Whole Time Director, Toyota Kirloskar Motor. He touched upon various aspects of dealerships starting from skill development to keeping track of the changing trends in the industry. “While the IC engine technology will continue to improve and is here to stay, dealerships should also embrace new products such as EVs and HEVs as they will also grow substantially in the future.” He also said that at dealerships, there is a need for people who can talk the language of emissions, fuel efficiency and safety, the norms of which are going to get tougher. On the policy front, he said that taxation on vehicles should be based on the performance and efficiency of the car and not on its length. He was referring to the sub-4m clause under which a car less than 4m in length gets a tax benefit. This hampers the export possibility of these cars as the looks are not accepted in other countries.
Rahul Gangal, Principal, Roland Berger Strategy Consultants said that India is at a cusp of huge growth in purchasing power where consumption is expected to go up significantly. Dealer intensity is very low in India compared to other countries. The rural market will become more and more important. He emphasised the need for enactment of auto franchise laws to regulate relationships, rights and obligations between OEMs and dealers.
It was brought to the notice of the audience that nearly 42% of the dealerships at present are not profitable and that the dealers have to be find more avenues to improve profitability. Dealerships will have to provide additional services to improve customer relations and increase footfalls, not just vehicle sales. This point was also focused upon by Neeraj Bhatia, Sr Vice President – Business Development, Shell India Markets who said that small activities with simple and interesting ways to connect with customers will create more revenue opportunities.
In his presentation, Gaurav Kapur, Head of Industry (Automotive) at Google India, highlighted the importance of the internet and recommended that automobile dealerships increase their presence and footprint through the digital media, which would ensure more footfalls. He suggested that dealership visibility would be more pronounced if interactive virtual showrooms are created on the internet. To strengthen his point, he cited a survey that Google had conducted where the respondents were people walking out of showrooms, which showed that nearly 50% of the people searched about the dealership on the net and a similar number were on the net when inside the showroom as well.
Sunil K Chaturvedi, CEO, Automotive Skills Development Council (ASDC), who spoke about manpower in the industry, said that dealerships would require 1.5 million more employees in the next 10 years. The organisation, which is a joint collaboration between ACMA, SIAM and the government to speed up skill development in the industry, hopes to engage with 100 universities within the next few years. ASDC was already working with 1,25,000 personnel in the automotive sector, of which 75,000 were in the retail segment.
