The Federation of Automobile Dealer Associations (FADA) has appealed to the Ministry of Heavy Industry (MoHI) to protect automobile dealers from sudden exits, and give auto retail business an industry status.
At the third auto retail conclave organised by the automobile dealer body, Vinkesh Gulati, President, FADA said the sudden exit of dealers 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. “Crores of rupees go down the drain as it kills an entrepreneur’s vision to get into business again,” he said.
It is to be noted that the MoHI gives permission to automobile manufacturers to set up business in India, and once these companies begin operating, they appoint dealers as their long-term partners.
Auto dealerships usually start with a small turnover, with the majority of dealerships being family-owned small, mid-sized businesses and partnership firms.
“An entrepreneur invests his entire savings to get into the auto trade business with a long-term horizon, but the agreements that he has to do with his principal are on some occasions on yearly basis only,” he said.
Gulati requested the MoHI to work on the 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.
The automotive retail segment, dealers in particular, act as a bridge between the manufacturers and the retail customers. They employ over 45 lakh people and contribute INR 95,000 crore in direct & in-direct taxes and other levies to the Central & State exchequers. The sector has a minimum set-up cost of INR 150,000 crore; 60,000 acres of own land and an investment of INR 225,000 crore.
“The enormous size and potential of the retail sector can be gauged from the fact that auto retail is three times the size of the rest of the organised retail. An industry status will get us better financing options since the sector is capital intensive in nature,” Gulati added. In fact, the auto retail sector is the largest sector in the country and every state’s economy.
According an industry status will benefit dealers in various ways, such as priority lending from banks, external commercial borrowings, financing from top lenders, private equity investments, easier access to domestic and global funds, and more tax benefits. This will boost confidence in the sector immensely and will result in the scaling up of infrastructure bringing in new investments, Gulati argued.
Addressing the third Auto Retail Conclave, Dr Mahendra Nath Pandey, Union Minister of Heavy Industries acknowledged the significant contribution made by the dealers’ community to the auto industry and economy. He urged the automobile industry to continue making efforts to make India an Atmanirbhar manufacturing hub not only for India but globally and to contribute to the success of the government's Automotive Mission Plan 2026.
FADA represents around 8,500 dealers with over 15,000 dealerships and 26,500 outlets in the country. Among many others, the conclave was attended by Amitabh Kant, CEO, NITI Aayog; Kenichi Ayukawa, President, SIAM and Sunjay Kapur, Vice President, ACMA.