FADA President's Message January 2004 Consolidating Partnerships for Prosperous Road Ahead Deshnidhi Kasliwal The much awaited event of FADA, viz. Auto Summit 2004 concluded on a happy & optimistic note. Virtually all speakers, including industry leaders and professionals who addressed the participants were of the view that the road ahead for Indian automotive industry & trade is promising. However, as the Indian industry grows, it will bring in tandem new challenges for all of us. In nutshell, we cannot rest on our laurels. The message for automobile dealerships coming out of the Summit is loud and clear. Automobile Dealers will have to live with wafer-thin margins. Customer Relations Management will have to receive prime importance for retaining competitive edge. With product differentiation becoming blurred, as the intensity of competition gets acute, dealerships will have to gear to provide value addition at their end and to create service brand of their own to retain and own the customers. The task of automobile dealers on the road ahead is the most difficult one. Dealers, particularly volume dealerships, are working on virtually negligible margins, notwithstanding the fact that the car sales have increased by leaps and bounds in this financial year. The reasons are not far to seek. While companies in high volume game, understandably, want to increase their share of market and, in pursuit of this objective they, at times, want to push the sales with aggressive discounts and freebies, for dealers in this segment of business, it means further erosion of their margins. Compounding the dealers' woes is the appointment of parallel dealerships, without corresponding increase in sale volumes, leading to a situation where automobile dealers have to face the increased competition not only from rival brands but from the company's own dealer network. For companies, the network expansion is important to drive sales and offer greater footprint to its customers. For dealers, however, it means eating into their margins and resultant undercutting. The Summit could not have been better timed. The economy is booming and is set to achieve a GDP growth of over seven per cent. The automobile industry is buoyant and there is a 'feel good' sentiment all around. The Indian automobile sector is set to become a major player in global market. The task of sustaining the growth momentum is, however, challenging and calls for a partnership approach on the part of all stakeholders. This is what the Summit sought to achieve. The Summit provided enough food for thought to all players in value chain. Challenge for Automobile Dealerships, in particular, is more daunting than ever before, as they are the link between manufacturers and customers, whose expectations continue to rise unabated. The Summit threw up a number of issues for introspection and a lot of new ideas for being practised at the dealership level. An important view that came out of various presentations made at the Summit was that dealers should not consider themselves just as an extended arm of the manufacturer, but as an important player in a value chain. We must build brand equity of our own in terms of value addition and services to our customers. In a scenario in which sale margins are shrinking, we should look at new streams of income, such as, used car business, car & 2wheeler rentals, vehicle financing, vehicle insurance and other downstream services. Another innovative thought that came up at the Summit was looking at the opportunity of setting up dealerships abroad. It gives me a sense of satisfaction that the event was a grand success in all respects, be it the scale of arrangements, fanfare and the quality and standard of deliberations. We had the participation of nearly 800 delegates representing dealerships, allied businesses and the Government from all comers of the country. It was a pleasure to have at the platform of Auto Summit 'who is who' of the automobile industry and other renowned speakers representing Government, allied businesses, media and professionals. We were privileged to have in our midst, none other than Major General B C Khanduri, Union Minister of Road Transport & Highways, whose credentials as a man, who has given a massive boost to the road infrastructure development in the country, need no introduction. I take this opportunity to express my sincere thanks and gratitude to Major General Khanduri; and other distinguished speakers, namely, Mr Jagdish Khattar, President SIAM & MD, Maruti Udyog; Mr Madhur Bajaj, Vice President SIAM and Vice Chairman, Bajaj Auto; Mr R Seshasayee, Immediate Past President SIAM & MD, Ashok Leyland; Mr R Gopalakrishnan, Executive Director, Tata Sons; Mr Aditya Vij, President & MD, General Motor India; Dr Amit Mitra, an economist and Secretary General, FlCCI; Mr Lalit Suri, MP and President, Hotel Association of India; Dr Mohan Agarwal, Management Professor, California Polytechnic State University; Ms Rama Bijapurkar, Management Consultant; Mr V Vaidyanathan, Sr General Manager & Head Retail Group, ICICI Bank; Mr Naveen Kshatriya, MD, Castrol India; Mr Gurmukh Singh, Management Consultant, Mr Sam Balsara Managing Director, Madison Communications; Mr R Dinesh, ED, TVS & Sons; Mr Sridhar Venkiteswaran, ED, Avalon Consulting; Mr R C Bhargava, Director, Maruti Udyog & Consultant; Dr V Sumantran, ED, Tata Motors; and Mr Geoff Dalton, Canadian Automotive Institute, for their making it convenient to address and interact with participants at the Summit and giving us the benefit of their vision and thought. A day prior to the Auto Summit, we had an Interactive Session on Dealer-Manufacturer Partnership. It was moderated and chaired by Mr Madhur Bajaj, Vice President, SIAM and Vice Chairman, Bajaj Auto Ltd. The manufacturer representatives at this Session were: Mr K Saito, Director (Marketing & Sales), Maruti Udyog; Mr Ramesh Adige, Director, Fiat India; Mr Rajeev Chaba, COO, General Motor India; Mr Vinay Piparsania, Vice President (External Affairs), Ford India representing 4-wheeler segment; and Ms Sulajja Firodia Motwani, Jt Managing Director, Kinetic Engineering; Mr S K Taneja, Executive Director, Yamaha Motor India; Mr Deepak Mokashi, General Manager (Sales) - representing 2-wheeler segment. Mr Murad Ali Baig and Mr Adil Jal Darukhanawala, both eminent auto journalists and analysts represented the media. I am grateful to all of them for sparing their precious time for interaction with Automobile Dealers and their appreciation of the concerns of automobile dealers. We also had the opportunity of interaction with senior officials of allied businesses, namely, Mr S Ramakrishnan of HDFC Bank, Mr A S MukheIjee of Bajaj Allianz General Insurance Co, Mr Mukesh Kumar of HDFC Chubb General Insurance Co, and Mr G Suresh of Standard Chartered Bank, at a Session on Opportunities of Automobile Dealerships. Consolidating partnerships with allied businesses can do wonders for automobile dealerships. Our sincere thanks to all of them for their excellent presentations and giving an insight into opportunities awaiting automobile dealerships. I shall be failing in my duty if I do not acknowledge the contribution and support of sponsors of Auto Summit. On behalf of FADA, I place on record our profound thanks and gratitude to ICICI Bank, Ashok Leyland, Castrol India, Hero Honda, Maruti Udyog, National Insurance Company and TVS Motor Company - the lead sponsors; and Bajaj Allianz, Bharat Pertroleum Corporation, Eicher, Fiat India, HDFC Chubb, LML, Piaggio, Standard Chartered Bank, Hindustan Motors and Fucon Technologies - the co-sponsors, but for whose support and co-operation, it would not have been possible for us to arrange such a mega event. Overwhelming support received from industry and allied businesses also goes to show that all players in automotive business want to consolidate partnerships in larger interest. Friends, I am sure, you would have found the Summit a fruitful event. It has given us ample innovative ideas to do some thinking and introspection for cheerful road ahead. My sincere thanks to all of you for making the Auto Summit a grand success. All of us must continue to work together to scale new heights of growth & prosperity. I am confident that working together, we shall make it happen. With best wishes, Deshnidhi Kasliwal President