of Automobile Dealers Associations (FADA) is the apex body of automobile
dealers engaged in the sale, service and spares of two/three-wheelers,
passenger cars & multi-utility vehicles, commercial vehicles, and tractors. FADA was founded in 1964 by four regional
auto retail associations with Late T.S. Santhanam of TVS Group as its founder
President, to protect and promote retail automobile trade in India. Currently,
FADA has on its rolls, around 1,600 members comprising 21 state/city level associations
of automobile dealers and over 1,500 individual automobile dealers from across
the country in addition to four founder members.
FADA has recently entered its 50th
year. How has it evolved over the years?
The automobile retail has come a
long way in India as its dynamics are changing very rapidly. The dealers are
equipping themselves to stand up to the changing dynamics of the automotive
industry. Gone are the days when dealers were merely distribution houses. Now
it is a buyer’s market and a lot of marketing efforts need to be put in by
sellers to remain viable in business owing to intense competition in the
How many dealers are registered with
FADA? And how many are there in the organised sector?
FADA represents around 6,000 dealers
while the total strength of automobile dealers in the country would be around
8,500-9,000 nos. In terms of revenues, FADA represents over 80pc of the auto
retail business in India. The remaining
20pc are small dealers who are yet not registered with FADA.
Recently, the FADA president said
that less than 50pc of his fellow dealers expect to make profit during the FY
2013-14. Are these tough times for the
The dealers’ margins in India are
miserably low. The current slowdown, which is happening for 18 months, has
aggravated the existing problems faced by automobile dealers. The problem is
that automobile dealers cannot play around with the cost structure. They cannot
reduce their workforce simply because when there is a slowdown of sorts, more
marketing efforts are required. So on one hand their (dealers’) expenses are
shooting up, on the other hand their (dealers’) manpower costs are not going
down. In addition to that, they (dealers) have to spend more on inventory
holding by way of warehousing costs, etc. So it is a double whammy for them in
the current situation. So most of the
dealers are talking to OEMs to come up with incentives and increase margins.
One of the OEMs is offering an interest-free credit for inventory procurement.
In this difficult
time when the footfalls and the retails sales at the showrooms are on the
decline, the automobile dealers have to cut costs and plug leakages to stay
afloat. To enable dealers do that, FADA is organising training and development
programmes across the country. These programmes focus on processes and systems
with a view to improving efficiency & productivity of automobile
dealerships and, thereby, cutting costs.
With auto sales plummeting to an
all-time low, (FADA) has said it wants average margin on sales of vehicles to
go up to 5pc from 2.5 per cent at present. When do we see that happening?
The sales margins worldwide range
from 5-10pc. What we expect is that manufacturers should come forward and raise
the margin to atleast 5pc if not 10pc. It is a continuous process. However, I
don’t think the end buyers will get affected because of this move. It doesn’t
really mean the entire hike will be borne by the customers.
Why is FADA opposed to the idea of
FDI in multi-brand retailing? Don’t you think it will be a boon than a bane?
No, we are not opposed to it. At the
same time, it (multi-brand retailing) has to be commercially feasible. The
margins (on a car sale) are so poor that it is inconceivable for any
multinational multi-brand retailer to foray into such a business here. No such
company could be here for the long haul as it is not a profitable proposition.
Are used car or bike outlets also
under FADA’s ambit?
I think all automobile dealers are
running a used vehicle vertical within its existing business. Since they are a
part of the sales outlets run by dealers, it definitely comes under FADA’s
There has been a series of massive
recalls in the last two years. How are dealers coping with them considering the
fact that it involves no additional cost to buyers?
I really don’t think it matters much
to the dealers. It’s a part and parcel of their business and they have to do
it. I would say it’s a hazard of a business and they really have no choice.
The Competition Commission of India
(CCI) has claimed that carmakers are using their dominant position to sell
spare parts only through authorised dealers, leading to exorbitant prices in
the market. What is your take on it?
We don’t have any particular view on
this. The authorised dealers don’t have any problems if the spare parts are
freely available in the market. But there is a downside to it. Some of the
manufacturers feel that they would not like to compromise with quality of their
parts as well as its fitment. The roadside garages will not be competent enough
to undertake and replace the sophisticated parts that are used in present-day
vehicles. The OEMs are of the view that their authorised centres have the
technical competence to deal with their products. They are apprehensive that
once their high-quality components are readily available in the open market,
there may be rampant piracy (of their vehicles’ parts).
Do we see more
dealership outlets being established in tier-II and tier-III cities than tier-I
cities as most of the OEMs are expecting a higher uptake in the countryside? If
yes, will they me merely touchpoints rather than dedicated 3S facilities?
It’s a natural progression that once
the dealership network gets ramped up along with the expansion of any
vehiclemaker, more tier-II and tier-III cities are explored. As the penetration
levels are so low, most of the automakers would like to have a wider footprint
in the country. And yes, there will be an enhanced focus by OEMs in the