Need protection from sudden MNC exits: auto dealers to government.

FADA urges Centre to evolve a framework to help protect vehicle retailer’s rights

The Federation of Automobile Dealers Associations (FADA) on Tuesday urged the Centre to set up a framework to help protect the rights of auto dealers in cases of sudden exits of manufacturers from the market.

Participating in the Auto Retail Conclave, attended by the Union Minister of Heavy Industries Mahendra Nath Pandey and SIAM President Kenichi Ayukawa, FADA also sought industry status for the auto retail sector to aid in better financing options.

Stressing the need for OEMs and dealers to work together as partners in order to ensure a “win-win for all”, Mr. Ayukawa called for dealer workshops to be allowed to function as inspection and certification centres under the vehicle scrappage policy. He said SIAM was also requesting the government to start the fitness testing process much earlier in the life of a car, noting that the current 15-year or 20-year period appeared too long.

Addressing the minister, FADA President Vinkesh Gulati observed that his ministry gave permissions to MNCs such as OEMs to set up businesses in India, and with the government’s ‘Make in India’ initiative many new players were likely to come to India.

‘High and dry’

"Once they begin their journey, they appoint dealers as their long term partners. It is their sudden exits which hamper both, an entrepreneur’s zeal to do business with them and the customers who are left high and dry with no proper support for after sales," he said.

Mr. Gulati said these exits not only tarnished the dealers’ names, as they were the face of the brand, but also Brand India’s value. He further pointed out that an entrepreneur invested his entire savings to get into the auto trade business with a long-term horizon, but that the agreements with the principal were on some occasions only on an annual basis.

“I will humbly request that your Ministry works on protection of auto dealers rights and hence create a sense of equilibrium in this industry since more and more international players are entering the Indian auto market,” he said.

Speaking at the same session, Mr. Pandey asked the automobile industry to support electric vehicles. “I would like to give advice as well as request the auto industry to support electric vehicles…This sector is emerging and is a big opportunity for us…dealers, OEMs and auto component manufacturers are an important part of this,” the minister said.

However, he acknowledged that EVs faced challenges such as charging infrastructure and charging time, adding that the government’s departments were working to address the issues and sought industry’s cooperation as well.

Observing that green fuel, EVs and hybrids and other technologies for safety were all coming in the near future, and several fuel and powertrain options were being explored by all OEMs, Mr. Ayukawa sought the retail trade’s commitment to the coming changes. “All these will surely involve changes at the retail end also. Please deeply understand these and be prepared to handle such variations which may have direct and indirect impact on your businesses,” he told the dealers.

He added that SIAM had also requested the government for support to the dealer partners, including extension of the moratorium for loans by RBI, and digitising the processes at RTOs in all the States.

“We are requesting the government that in the scrappage scheme, the dealer workshops should be allowed as Inspection and Certification centres. This is because the dealer organisation already has equipment, investment and expertise in testing the automobiles. Also, dealers are located close to the customers,” Mr. Ayukawa said.

He added that if the government starts new inspection centres, such centres may not be commercially viable and may take a long time to develop across India. “If the government accepts our request of using existing automobile dealer facilities, it will be a big statement of trust by the government on automobile dealers,” he added.

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