A Cup of Joy Nikunj Sanghi, President Dear friends, Close on the heels of the Union Budget presentation, we had a historic event that gripped the entire nation - the rich and the poor, the old and the young, the men and the women and the urban and the rural people alike, for about six weeks. Since the world cup triumph in 1983, the India of 2011 had turned from being outsider to favourites to win the 10th ICC Cricket World Cup. Cricket has become a metaphor of India's changing global and domestic profile, where the country aspires to be world leader and where small-town boys can earn fame and fortune. Cricket reflects the vibrancy of Indian auto industry and economy. The rise of Indian cricket and auto industry in the last 4 years, in particular, has happened in tandem. Sample this. While the Team India lifted the ICC World Cup, the Indian auto industry capped off its excellent run during this financial year with a robust performance in March. What is comforting is that the Indian auto industry continues to grow steadily defying all odds and bucking various forecasts and experts' opinion. To my mind, there is enough space for Indian auto industry and, for that matter, Indian auto market to grow at a decent pace in the next ten years, considering the low level of motorisation in the country and the huge development potential of Indian economy. No wonder then, even as the experts and analysts have been talking of the growth rate stabilising at 15-16%, the Indian auto market keeps scaling new highs. Nothing explains it better than the performance of Indian auto market in March 2011 when inflation, commodity prices and interest rates were sitting pretty high. While these headwinds continue to pose a major challenge, I am hopeful that the Indian auto market will continue to scale new peaks, taking these challenges in its stride. My enthusiasm is not misplaced given that the Indian economy continues to perform decently triggered by strong macroeconomic fundamentals. Though industrial growth has not been something to rave about, it has still managed to record a growth of over 8% in the first three quarters of this fiscal. Exports have been showing upward trends, clocking robust growth. Trade deficit is a cause of concern though. Rising crude prices due to uncertain conditions and turmoil in West Asia have been managed reasonably well so far and there is no sign of alarm or shock amongst the Indian industry, the Government and the people. All this goes to show the resilience and confidence of Indian people and our self-belief that nothing can stop us in our quest for growth and prosperity. While the sentiment is buoyant and there is a buzz all around, it should not lead us to conclude that everything is perfect and fine. The challenges of unrelenting inflation and rising commodity prices & interest rates continue to dog us. The fact that we have been able to stand up to these challenges so far should not lull us into a false sense of complacency. There is no gainsaying that the auto industry has been hogging the headlines for some time for its impressive growth. However, the manufacturers' performance in terms of their profitability and sales may not necessarily find reflection at the retail level. The sales figures normally reported are the despatches from the manufacturers. It may not necessarily mirror the scenario at the retail level. I understand from my fellow dealers that while the mood is upbeat, there has been an inventory build-up at the dealerships in the last two months, may be, due to anticipated hike in excise duty on motor vehicles in the Union Budget 2011 and upward price revisions announced by most of the manufacturers to meet rise in the input costs. With the expanding vehicle portfolios of manufacturers, inventory management cost has been increasing over the years and presents a major challenge for automobile dealers. I am hopeful that the inventory pile-up at the dealerships will get liquidated sooner than later. Managing macroeconomic challenges may be beyond our control at times, there are a number of issues between OEMs and dealers inter se, which can derail the growth momentum, if not addressed with a sense of purpose and urgency. Therefore, there is an imperative need for continuous dialogue and engagement between OEMs and automobile dealers. Adverting to the activities of FADA since my previous column, we had a breather somewhat after a very hectic schedule in February. It was a time for us to review what we have done so far and to reflect on what more needs to be done in the short, medium and long runs. I do not mean to say that there was a lull in the activities on the ground during this period. J D Power Asia Pacific has come out with a report on its Dealer Satisfaction Study that was undertaken by them in association with FADA. A summary of findings is published elsewhere in this issue. J D Power is going to make a detailed presentation of its findings at the next meeting of FADA Council. The detailed presentation, as and when made, will also be published in FADA Journal for the information of my fellow dealers and other interested persons. This Dealer Satisfaction Study by J D Power comes on the heels of a similar study by TNS Automotive about 4 months back. These studies by two internationally reputed survey agencies, which have been released one after another at a short interval, go to prove that auto retail has come to be viewed as an important stakeholder and link in automotive value chain. I do realise that a lot more needs to be done to secure a rightful place and due recognition for the enormous contribution made by the auto retail to the national and State economies in terms of investments made, employment and revenue generation as well as its far-reaching spin-off on other allied businesses, such as, banking, finance, insurance and oil industry. The importance of auto retail can be gauged from the fact that auto retail is four times the size of rest of the organised retail trade. We are constantly working to create visibility and to highlight significance of auto retail in the economy. We would like to see that auto retail in India enjoys the same kind of recognition and importance as the auto retail in USA and other developed countries does. Service tax has been a bugbear of the automobile dealers. As a result of quite a few grey areas in this indirect tax, the Department has slapped demand on many of my fellow dealers without properly appreciating the spirit and intent of law, even in cases where it is not due. One particular complaint refers to the cases where the Department is demanding service tax on the total bill including the value of parts/goods sold during the service/repair. FADA has represented to CBEC to issue a clarification at the earliest so as to put uncertainty and confusion to rest. FADA was invited at CII's ASCON meeting for a discussion with Mr Arun Maira, Member, Planning Commission on Approach Paper to the 12th Five-Year Plan. I, along with Secretary General of FADA, attended the meeting. The meeting gave us an opportunity to highlight major issues of concern to auto retail. Rest assured, we are working in right earnest for removal of impediments in the interest of sustained growth of auto retail. Look forward to your inputs and suggestions. With best wishes, Yours sincerely, Nikunj Sanghi