FADA President's Message October 2004 A Mixed Bag Jayendra Kachalia, President Dear friends, Developments that have taken place and the reports that have come in since my previous message are a mixed bag for automotive industry and trade. Let us look at the upside first. The report that the Indian Economy is doing well and that the GDP grew by 7.4% in real terms in the first quarter of the current fiscal against 5.3% for the corresponding period of the previous year must have brought in cheers to the industry in general and automotive industry and trade in particular. The report comes with a rider that the higher growth rate has partly to do with relative buoyancy experienced by the farm sector last year. The icing on the cake is that the industry grew by 6.9% and manufacturing sub-sector within industry notched up a healthy 8.1% growth during the first quarter. The second report which is a music to the ears of automotive industry and trade is recent NCAER survey, according to which, percentage of households in urban areas with an annual household income of Rs. 90,000/- were 35.4%. Rural income in this category is also projected to grow from 17.8% to 36.9%. The report also reveals that national average of middle income households by 2009-10 will be a healthy 48.8% against 28% in the year 2001-02. The rich comprising those who earn over Rs. 10 lacs a year will grow from a paltry 02% to 1.7% and the middle class who earn between Rs. 2 to 10 lacs will rise from 2.8% to as much as 12.8% by end of the decade. This will obviously result into a handsome growth in the auto business. The downside is that GDP recorded in the first quarter might not be reflective of the things to come, as unlike the financial year, agricultural year runs from July to June and therefore the first quarter had the advantage of robust agricultural growth recoded in the previous fiscal. With the monsoon officially coming to an end, the country remains rain deficit according to the Indian Meteorological Department. The rainfall recoded in the entire country was 13% below normal. The impact of rain deficit, which was more severe in the northern and central regions, is likely to be felt with a lag in the subsequent quarters of the current fiscal. Another uncertainty and anxiety looking large over the horizon is the spiraling international crude price. The oil prices going through the roof have already breached $50/ barrel mark. The rising oil prices resulting mainly from political turmoil in various parts of the world, are threatening to dampen the sprits and upbeat mood of Indian industry. All forecasts painting a rosy picture of the road ahead for Indian automotive industry are likely to go haywire if the oil prices do not fall in the immediate future. Indian automotive industry has had a good run so far in this fiscal, as reflected in the sales performance and the half yearly financial results of major companies. However, slippage in monsoon and the rising oil prices are the cause of worry and we must keep out fingers crossed. Hopefully, the clouds of uncertainty will blow over soon and we shall carry forward the buoyant sentiment witnessed in the last tow years, in the remaining part of this fiscal. Adverting to the activities of FADA during the last one month, the new team of office bearers, who look over last month, has got down to the business in right earnest. The programmes set in motion by my predecessors for the benefit of the automobile dealer fraternity are being carried forward with a sense of urgency. To address various issues of mutual concerns like service tax, VAT, rationalistion of excise duty, customs duty, road tax and multiplicity of taxes on motor vehicles at the local, State and national levels leading to cascading effect, a dialogue with SIAM FICCI and other chambers of commerce, has already been set in motion. FADA’s B2B website for transaction of obsolete/dead spare parts inventory among FADA members will be in place soon. Also, FADA website will soon have a new look. With the help of Indiacar, the website is being redesigned to make it more useful & informative to the members with monthly updates, data and statistics on auto industry. A regional summit of automobile dealers is proposed to be organised some time in January 2005 at Mumbai. The idea is to rotate major conferences and events in various parts of the country so that members at far off places, who are not able to attend the biennial Auto Summit at Delhi can avail the opportunity of participate in deliberations to equip themselves for the challenges arising from changing paradigm of automotive business and, at the same time, meet other fellow dealers and exchange their ideas and experiences. A global conference on automobile retailing is also proposed to be organised some time in April next year. The audit task entrusted to ‘Avalon Consulting’ on compiling dealer best practices, as a part of FADA G-10 program is also in full swing. Initial findings and observations of the study are very interesting and exciting. As you are aware, we have twenty State/Regional level associations of automobile dealers. We have observed that few of such associations functioning in non-metros are not very active. We are trying to revive them so the FADA could be in touch with automobile dealers spread across the country and be posted with issues and problems at local, state and regional levels through medium of theses associations. We have to organise ourselves to channelise our collective strength for the benefit and growth of retail automobile trade. I count on your support and co-operation in this task. I shall welcome your suggestions, if any, aimed at strengthening FADA & its activities and promoting the interest of retail automobile trade as a whole. The festive season has set in. I hope, all of you must be having booming sales and good times. Wishing you a very Happy & Prosperous Dussehra and Diwali. Yours sincerely, Jayendra Kachalia President