Home Promising Next Decade for Automotive Business Automotive industry and trade in India can look forward to better days ahead. This is what the distinguished guests at the 41st Annual Session of Federation of Automobile Dealers Associations (FADA) held on 31st August 2005 at New Delhi, concluded. Echoing the bright future for automotive business, R Seshasayee, Vice President, CII & MD, Ashok Leyland Ltd, who was the Chief Guest on the occasion, said that the threats of WTO and competition arising out of the entry of auto majors into India from across the world have proved to be a blessing in disguise for Indian industry. The competition has made India realise its potential. The Indian industry has been able to cut costs, improve efficiencies and bring in new technology and innovative ideas by converting threat of competition into an opportunity. The developed countries have discovered India now thanks to India's all-round capabilities, be it vast reservoir of technical and skilled manpower, entrepreneurship or innovation. He likened Indian industry to legendary Hanuman who had the potential to cross the sea but had to be made to realise that he could do it. However, sounding a note of caution that players in automotive business cannot take things for granted, Seshasayee said that with the product differentiation getting blurred due to globalisation and extensive technological advances, it is the uniqueness of service and service brand that will drive the growth. He exhorted automobile dealers to strengthen and leverage their alliances with other service providers in automotive business chain for sustained growth. He stressed on four key factors that will help automobile dealerships retain competitive edge, namely: (i) Providing distinctive and unique experience to customers; (ii) Value add-ons at dealerships and quality thereof; (iii) Quality of manpower; and (iv) Increasing use of technology for all-round efficiency and developing customer database for tapping allied business opportunities. Referring to the changing relationships between manufacturers and their dealers, Seshasayee observed that in the fast changing scenario where competition is the buzzword, the role of manufacturers and dealers couldn't be segregated into watertight compartments. He felt that both need to make space for each other, adding that the customer ownership is going to be the space where both the dealer and the manufacturer need to co-exist. The same way, automobile dealers should also be involved by the manufacturer in the planning process and product development, as it is the dealers who can provide the valuable customer feedback. Dr R K Shukla, Senior Fellow, NCAER - the Guest of Honour, in his presentation on Changing Income Demographics and its Implications for Automotive Sector, said that the Indian economy is poised to be the third largest economy by 2050. It is therefore important for automotive industry to look at the Indian economy as a whole in order to plan and predict the future of the industry. He added that the rapid rise in the country's middle and upper classes, more than overall GDP growth per se, is likely to lead to a dramatic hike in demand for vehicles in the next decade. Demand for all automotive categories except commercial vehicles, which grew by under 10% between 1995-96 and 2001-02, will grow by 1 .5 times between 2005-06 and 2009-10. As a result, the number of households owning cars will more than double from around 4% now to over 9% by the end of the decade. While percentage of households owning scooters will remain stagnant at around 8%, the households having motorcycles will climb to over 28%. Dr Shukla said that the share of demand from the rural areas is also projected to rise steadily by the end of the decade. At the aggregate level, nearly a tenth of all urban households owned a car/jeep in 2001-02 compared to mere 0.3% in rural areas. However, by the end of the decade, while urban usage will grow to 26%, rural usage will increase to 1.2%. In 2001­02, the urban to rural usage of cars was 7.3 but by 2009-10, this is predicted to fall to 5.3 in the top income group. Therefore, while roughly 2% of 1995-96 demand came from rural areas, which rose to 8% in 2001-02, it is expected to rise to about 11 % in 2009-10. According to NCAER study, India's rich and middle class are doing well, but it is the Indian middle class (income Rs. 2-10 lakh p.a.), which is growing at about 13% annually will actually drive the market. As it has been rightly said by Aristotle, "A good society is one where the middle class outnumbers everyone else." Earlier, Jayendra Kachalia, the outgoing President of FADA in his welcome address, observed, "Somewhat quiet performance of the automotive industry in this financial year is a temporary phase and with resurgent Indian economy poised for a big leap forward, the future holds out a promise for all stakeholders in automotive business, including automobile dealers." Listing various initiatives undertaken by FADA for sustainable growth & development of retail automobile trade, Jayendra Kachalia said that in view of the widespread shortage of trained manpower arising out of the phenomenal growth of auto industry and expansion of dealer network, FADA is going to start training courses in association with other reputed institutes, for training Sales Executives, Spare Parts Supervisors and Service Supervisors, with a view to catering to the manpower needs of automobile dealerships and their workshops, To begin with, such courses will be started at Mumbai and Pune from February 2006. Based on the experience of this pilot, the programme will be extended to cover all major towns and cities in the country.