Into
the Year 2006-07 with a Buoyant Sentiment
Binod Agarwal, President
The year 2005-06 is past us. It is satisfying to note that
2005-06 ended up scripting a reasonably good performance
by the automobile industry for the third year running. The
year-end numbers are all the more satisfying, especially
because the industry got off to a quiet start witnessing
virtually flat growth in the first 3 months. The sales started
gathering momentum from July 2005 and, happily, all the
segments of the industry have moved up the growth curve
with 2-wheeler segment stealing the show yet again.
The economy is doing pretty well with key indicators suggesting
a good growth prospects for the year 2006-07 and the Economic
Survey targeting GDP growth of 10% in the not-too-distant
future. However, we cannot allow complacency to set in as
the industry has time and again slipped into cyclic slowdown
and, at times, recession in the past.
The excise duty cut in the case of passenger cars should
act as a big boost for the passenger car sales in the days
ahead. Buoyed by the robust economy, hopefully, other segments
of the industry can also expect healthy sales unless the
volatility in international crude oil prices plays a spoilsport.
Barring a major turmoil, all indications point to a double-digit
growth in this fiscal.
It is ironical to note that while there has been a gradual
rationalisation of taxes at the central level with a view
to simplifying the tax regime, obviating litigation and
disputes, ensuring better compliance and driving growth,
the State governments appear to be moving in diametrically
opposite direction, which tends to negate all that the Government
at the centre seeks to achieve. The recent proposals of
the Rajasthan Government and the Gujarat Government effecting
steep hike in already high level of road tax and other fees
prevailing in these states are the cases in point. Delhi
Government effected a sharp increase in road tax on passenger
cars two years back and many other State Governments have
taken recourse to increase in taxes on motor vehicles to
raise their revenues. Faced, as many State Governments are,
with financial crunch, motor vehicles seem to be a favourite
whipping boy for the State governments.
Post-budget, the scenario was looking bright. However, action
of some of the State Governments increasing the taxes on
motor vehicles has somewhat dampened the spirits. FADA has
all along maintained that there should be uniformity in
road tax, particularly life-time road tax, across all the
States and that it should be pegged at a maximum level of
1.5% of dealer invoice value. I hope, the Union Ministry
of Road Transport & Highways will consider this suggestion
in all earnestness. I think that it can be achieved, especially,
when we have gone through the similar unpleasant experiences
in the case of Sales Tax and now VAT. VAT is, barring a
few aberrations, by and large, uniform all over the country,
thanks to the Empowered Committee of State Finance Ministers.
A similar committee of State Transport Ministers can be
constituted to work out the uniformity in vehicle registration
procedures and taxes.
Another major issue of concern is the location of automobile
dealerships within the metro cities. While FADA is all with
the Government and Hon'ble Courts for the planned growth
of cities with proper infrastructure in place, automobile
dealers are in a cleft stick. Take the case of Delhi, where
Hon'ble Supreme Court and High Court have passed orders
for sealing of residential premises being used for commercial
activities. As we all know, automobile dealerships are large
set-ups involving huge investments. An automobile showroom
requires at least 300-400 sq mtrs of space to display and
stock vehicles and for office purposes. There are no commercial
spaces available in Delhi, which are big enough to accommodate
automobile dealership showrooms, nor has any provision been
made therefor in any of the commercial centres planned by
DDA.
Moreover, international trend is the provision of 3-S facility,
i.e. Sales, Service and Spares under one roof, which is
not only convenient for the customers but also leads to
efficient and cost effective use of resources and space.
The world over, sales, service and spares of automobiles
are considered a composite activity. The automobile dealers
find themselves in a piquant situation. While automobile
workshop is not allowed to be run in a commercial area,
having a sales showroom along with workshop is not permitted
on an industrial plot. Automobiles are the lifeline of any
city today and cannot be brushed aside like that. To tide
over this problem, our suggestion is five-fold:
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Allow
automobile showrooms to operate from residential
premises abutting major roads on some charge for
use conversion; |
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Permit
composite activity of automobile sales, service
and spares in industrial areas; |
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Earmark
spaces in commercial centres for automobile dealership
showrooms; |
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Create
auto malls in various parts of the city for automobile
dealerships to operate with 3-S facility; and |
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Provide
for godowns/warehouses on the periphery of city
for storage of vehicles received from manufacturers. |
While the Central Government has by amendment in the Delhi
Master Plan notified certain areas along major roads for
mixed land use, the confusion abounds. Adverting to the
activities of FADA since last month, I am happy to inform
that FADA Academy programme is shaping up very well. Training
courses launched under the aegis of FADA Academy and in
association with IndSearch - a reputed technical and management
institute, at Pune in February this year to train Service
Supervisors, Spare Parts Supervisors and Sales Executives
for meeting the manpower requirements of automobile dealerships,
are progressing well.
As informed through the medium of this Journal, the pilot
project covers the cities of Pune and Mumbai. I am delighted
to inform that FADA recently signed an agreement with Joshi's
Kohinoor Technical Institute to start courses at Mumbai
shortly. I have visited a number of places and met my fellow
dealers. I have been told that the shortage of skilled &
trained manpower is a major problem facing automobile dealerships
virtually across the country. Let me assure you that we
are also exploring similar tie-ups with reputed institutes
in other parts of the country to kickoff this activity all
over India. As suggested in this column in the previous
issue, automobile dealers already running training institutes
or owning land/premises and interested in partnering with
FADA to start training courses in different areas of dealership
operations in their cities/towns may send their proposals
to me or FADA office for our consideration and firming up
the arrangements.
FADA has always endeavoured to build and foster relations
with other stakeholders in automotive business chain in
the interest of sustainable development of automotive business
as a whole. In keeping with this policy, a team of FADA
members including myself had separate meetings with ICICI
Bank and HDFC Bank officials at Mumbai recently. Major issues
that came up during the discussion were: Service tax on
the amount received by automobile dealers for arranging
vehicle finance; hardening of interest rates; and shrinking
options and availability of vehicle finance. The meetings
helped in understanding various issues in their proper perspective.
We intend to continue the dialogue with all stakeholders,
including manufacturers, so that various problems and issues
impeding the growth of automotive business are tackled and
thrashed out collectively and in a concerted effort.
Please feel free to send your suggestions and inputs, if
any.
Wishing you all the best in the New Financial Year.
Yours sincerely,
Binod Agarwal |
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