Open House Session and Council Meeting at Mumbai

An Open House Session of FADA members was organised at Mumbai on 9th June 2006. The Open House Session was followed by a meeting of FADA Council in the afternoon.

Sundeep Kumar Bafna, Chairman, Automobile Dealers Association of Maharashtra (ADAM) welcomed the distinguished guests and participants at the meeting. He, in particular, extended a warm welcome to S P Thakur, Jt Commissioner (Transport) and officiating as Additional Commissioner (Transport), Government of Maharashtra; and Kamesh Goyal, CEO, Bajaj Allianz General Insurance Company Limited, who had been invited to address and interact with the participants. V Vaidyanathan, Head - Retail Group, ICICI Bank joined the Session later.

Binod Agarwal, President, FADA, adding his own words of welcome, said that interaction with various stakeholders at such Open Forums helped in clearing the mist on a number of nagging questions and in understanding the scenario from a wider perspective. Such interactions also went a long way in promoting co-operation among various players in automotive business and in tackling various problems and issues in a concerted manner.

He observed that the size of Indian automobile market currently was about 9.5 million, which according to various projections and forecasts by reputed experts and consulting firms was likely to reach 18 million in the next 5-6 years. The major drivers of the growth were: boom in the services sector, construction activity, stepped-up manufacturing & industrial activity and overall buoyant economic growth. At the same time, there were a host of challenges in the form of volatility in oil prices, road and parking infrastructure, clean environment and road safety to contend with. He felt that a holistic approach and concerted effort of various stakeholders can help overcome these challenges.

Addressing and interacting with the participants, Kamesh Goyal, CEO, Bajaj Allianz General Insurance Company said that the insurance industry was emerging out of the terrible experience of the last year when flash floods ravaged Mumbai. He pointed out that detariffing would come in place from 1st January 2007. Freedom of pricing and product features would differentiate detariffing from the current tariff regime. As per the scheme being worked out, initially for the first six months, only the difference in pricing would be allowed; thereafter, product differentiation would also be permitted. In short-term, the premiums under the new regime were expected to go down. Innovative pricing and product features, like: Allowing 100% claim on slightly higher charge; making available insurance cover for longer duration, say 3 to 5 years, on upfront payment; different premiums for different cities and regions for the same make depending upon the claim experiences in the respective cities/ regions, etc., would emerge on the scene.

He expressed the view that under the new dispensation, the existing tie-ups between insurance companies and manufacturers might not hold good after some time and that the dealers would have to go their own way. Dealers offering bundled insurance packages would be able to ward off competition from the finance companies, banks and DMAs who have aggressively ventured into this activity. The concept of ‘compete and co-operate’ would take root in the sense that 3-4 dealers might enter into some sort of loose tie-up to create common facilities, like common towing vehicle, and share revenue.

S P Thakur, Jt Commissioner (Transport), Government of Maharashtra observed that there were 1 crore vehicles registered and about 1.5 crore driving licences issued in Maharashtra. 3,500 odd employees were taking care of not merely registration of vehicles and motor licensing but also various other activities, such as, overloading, pollution, safety, roadworthiness and fitness checks. Responding to the suggestion of registration of non-transport vehicles by dealers as in Delhi and Rajasthan, he stated that since 1984, the Transport Department, Maharashtra had adopted a system in Mumbai, whereby inspectors visit to inspect the vehicles at the dealerships instead of the vehicles being taken to RTOs for inspection. For a brief period in between, dealers were also aurthorised to register the vehicles at their end, but it did not work out for some reason and was withdrawn. He revealed that the dealers’ concern over massive increase in life-time road tax, which was as high as 21% for vehicles registered in the naes of corporates, was being addressed at the highest level in the Government.

Welcoming V Vaidyanathan, Head - Retail Group, ICICI Bank, who joined the meeting at this stage, Binod Agarwal, President, FADA expressed his concern over rising interest rates, which, he felt, might dampen the upbeat mood in the industry and trade following the reduction in excise duty on passenger cars in the last Union Budget.

Vaidyanathan stated that ICICI Bank was the first Indian bank to match and even exceed the level of sophistication and magnitude of operations of foreign banks. He assured that in spite of liquidity crunch and hardening of interest rates, ICICI Bank was committed to serve the vibrant, growing auto sector because of its spin-off effect on the Bank's other portfolios and product offerings. With massive expansion of its distribution network, ICICI Bank had been able to get a price advantage and to reduce the turnaround time from 3-4 days to 1 day. ICICI Bank had all along adopted a positive Risk Management approach, the essential ingredient of which is to say ‘yes’, if possible.

He observed that the interest rates depended on various factors including the international situation and was not within the control of ICICI Bank. However, the bank and automobile dealers could bring on the table a value addition to the relationship, for example, Less margin money, easy & on-the-spot availability of loans and sanction, in order to stay on the growth path. Hardening interest rates notwithstanding, he sounded confident and optimistic about the growth prospects of auto industry with tremendous GDP growth and rising income levels being the key drivers.

The Open House Session concluded with a Vote of Thanks by Pradip R Kamdar, Vice President, FADA.

After lunch, 228th meeting of FADA Council was held at the same venue. Major items considered and reviewed at the meeting were:

▪	Training courses launched by FADA at Pune and Mumbai under a Pilot project to cater to the manpower needs of automobile dealerships and starting the courses at other places in the country;
▪	The progress of other major initiatives of FADA, viz. (i) Helpline Service to FADA members and (ii) Exchange of dead inventory of spare parts among FADA members through circulation of information;
▪	Proposed Auto Convention at Chennai some time in January 2007;
▪	Presentations prepared by FADA on FBT, VAT and Service Tax for the education of FADA members;
▪	Start of G 10 programme at Kolkata;
▪	Proposed visit of a small delegation of FADA to NADA in USA as a study mission; and
▪	Proposed seminar, in association with FICCI, on matters relating to vehicle registration procedures and motor vehicle taxation some time in September 2006.