FADA urges for greater digitisation and dynamism to deal with Covid-led disruption

The 56^th Annual General Meeting (AGM) of the Federation of Automobile Dealers Associations (FADA) was held virtually today.

Speaking at the inaugural session, Dr Pawan Goenka, MD & CEO, Mahindra & Mahindra said, “The way dealers have opened after the pandemic needs appreciation. The recovery in the passenger vehicles and two-wheelers were in the V-shape and is at a faster rate than we expected. And, this recovery will continue until Diwali.

The other eminent speakers include Uday Kotak, President CII and MD & CEO, Kotak Bank Limited., Dr Pawan Goenka, MD & CEO, Mahindra & Mahindra, Vinkesh Gulati, newly appointed president, FADA, Saharsh Damani, CEO, FADA, Ashish Harsharaj Kale, President FADA and Imtiaz Ali, film writer, producer and director. 

Adding more, Goenka said, “After Diwali, there might be a lull which is common and the real test of the sustainability of demand will come from the first of January. This would positively surprise us. Although, the pain will remain in M&HCV segments and is likely to continue for some time.” 

During the pandemic, the supply chain was badly affected. But, with the confirmation from Union Minister Prakash Javadekar that the days of local lockdown are over, the auto industry is expecting the supply vows to be over from next month. “The Covid-19 has shattered many mental barriers. Things we thought we couldn't do were now possible and this will lead us to a new normal,” he mentioned.

But what has changed according to him in the new normal world? The biggest change is Digitisation. OEMs are developing in the digitisation space which makes it easy for the end consumers. According to him, the dealers would have to adopt the new age of digitisation. Even after the pandemic, salespersons will have to move away from the traditional way of sales and adopt digital methods to add more value to their customers. This requires re-orientation and re-skilling of sales, where they can sell more for less. 

“Another change is the seamless integration between OEMs and dealers. Sales review, monthly planning, ordering and many more have changed. This translates to a significant reduction in inventory. Pre-Covid, a dealer will have the inventory for 30-35 days. Today, it is 15 days and we may settle in 18- 20 days. I would love to see when the vehicle goes into the assembly line the moment the customer orders and no one has any inventory. We have to wait for a few years to achieve it. The dealership is the backbone, which connects us to customers and their contribution is huge.” he stated.

Challenging times for the industry
Delivering his last address as the president of FADA, Ashish Harsharaj Kale, said, “We are living in the most challenging times our country and industry have ever seen. The slowdown of last year followed by the pandemic has changed the entire thought process of the auto eco-system and dealers. The revenue was at zero for the first time during the lockdown. It was a big lesson to learn in terms of financial prudence and low-cost high margin business model to the extreme importance of future sustainability of dealerships. Dynamism and disruption will be the order of the day in the near future. We are at the crossroads of uncertainty and how the future will shape the future business model.” 

Due to pandemic and lockdown sales were hampered. FADA made the necessary moves to make the extension on the sale of BS IV vehicles. Around 3.54 lakh vehicles were registered in the month of April which were BSIV. Otherwise, we would not have seen this happening. “Many of the dealerships and workshops fall under MSME. Despite qualifying for it they have not got the benefits. We have given the best efforts and are awaiting the result. Recently the Union Minister has said this will soon become a reality,” he mentioned.

Dealer dependence
Assuring the support to dealerships on bringing the Atmanirbhar Bharat, Uday Kotak, President CII and MD & CEO, Kotak Bank Ltd said, his tryst with the car industry and dealerships started in late 1980s. He mentioned that they are a long term believer in the car dealership and the general dealership industry. 

“We need to understand the importance of the dealership. 49% of India's manufacturing is automobile manufacturing and the country depends on dealerships as they are the front line workers. They know the pulse of the customers. And, 49% of them depend on this narrow road. There is a huge difference in sales between the month of April and August. There are still pockets in the CV that face challenges. But many two-wheeler and passenger cars have come back to normal,” the CII president said.

Adding more he pointed out four main challenges namely, the short-term vs long-term, strengthening the financial foundation of the dealerships. industry structure changes in dealerships and industry changes in auto OEMs. “There is always a pressure on the immediate bottom line and returns. There is a need to build a sustainable business and avoid quick short term benefits temptations. There are many players in finance as they come, disrupt, tempt the dealerships, give quick returns and leave. Dealers have to deicide on having a long term partner. This is an important time to re-enforce ethical practices” Kotak, stated.

Need for a two-wheeler vertical
Vinkesh Gulati, President-Elect, FADA stated that despite all the struggle the market has faced, India can still become the third largest automobile market in the world if the ecosystem works in unison. He mentioned that he will be establishing a two-wheeler vertical in FADA to address various needs. 

“This year had a plethora of changes and these changes bring us a lot of opportunities. The auto industry has been faltering since 2018, and we have been hoping for a revival. The ongoing economic slump has dampened our hopes and has become more challenging.  FADA will continue to dialogue with SIAM and OEMs advocating better margins to ensure sustained profitability. I will be establishing a two-wheeler vertical in FADA, which will work to address the quirks of two-wheeler sub-dealers etc. There are franchise regulations in the US and other countries supporting dealer fraternity. FADA endorses the franchise act in India and will involve various other retail associations as well. This will ensure the dealers are better assured and safeguarded by law,” he said.

Imtiaz Ali Writer, Producer and Director, Indian Film Industry gave his thoughts from a non-auto perspective and pointed out the similarities between FADA, automotive industry and the film industry. Manish Raj Singhania, Secretary, FADA and Nikunj Sanghi, Past President, FADA were also present at the event while C S Vigneshwar, Treasurer, FADA delivered the vote of thanks.