Home Driving into New Year in Top Gear Binod Agarwal, President Dear friends, At the outset, a Merry Christmas to all of you. By the time this issue reaches your hands, we would be on the verge of entering or would have entered the Year 2007. No doubt, we, in the automotive business including industry, trade and other players connected with the automotive business, are stepping into the New Year with a lot of confidence and upbeat mood. The auto industry continues to scale new heights in tandem with the Indian economy. The industry has once again stolen the limelight with its stellar performance in November 2006. The fact that the 10-million-unit bar has already been crossed in the first 11 months of the calendar year 2006 is indicative of the better things in store for the auto industry in the financial year 2006-07. Small wonder then, we are headed for records of sorts. Simultaneously, the Indian economy continues its triumphant march and is continuing to perform beyond our own expectations and projections. Recent estimates released by CSO suggest that the GDP grew by 9.2% in the 2nd quarter - July to September 2006 as against 8.4% in the year-ago quarter, riding on the back of a strong performance by the manufacturing and services sectors. Taken along with 8.9% growth in the first quarter of the current fiscal, the growth for the first half of the year comes to 9.1%, which is the highest growth since 1991-92 when the economic reforms were set in motion. India's growth story, which is getting better with each passing day, is making the economists and experts revise their GDP forecasts. If the present momentum is maintained, there is no reason why GDP should not be growing close to 9% in the year 2006-07. Another positive factor for the automotive industry is that the international crude oil prices are, by and large, stable, although somewhat upward movement in crude prices is visible of late. The second production cut of crude oil by 2%, announced by OPEC in less than 3 months, has led to oil prices hover over $60/barrel of late. I feel that the small increase is manageable and should not be a cause of concern. All other positive factors conducive to growth should naturally delight all of us engaged in automotive business. The moot point, however, is whether the robust performance of industry is translating into higher profitability for retail automobile trade. While the larger volumes of sales provide succour and hope that the road ahead is leading to a bright future, most of the automobile dealerships are currently facing a tremendous pressure on their viability and profitability. In other words, bottomlines are not necessarily the reflection of the healthy toplines. Rising infrastructure, manpower, inventory and interest costs, coupled with unbridled discounting, are eating into the margins of automobile dealerships. Non-availability of trained manpower giving rise to the poaching and high manpower attrition levels, has further aggravated the situation for automobile dealers. FADA views the trained manpower shortage as a major challenge in the growth path and has, therefore, taken an initiative to launch training courses at various places in the country. While the response and return so far have not been commensurate with the massive investments made by FADA by way of consultation fees, fees for developing curricula and costs of manpower engaged for the purpose, we are continuing with the programme. In fact, two new places, viz. Kolkata and Kolhapur have been brought within the ambit of programme. The training courses at these places, as also at Mumbai, are set to commence from January 2007. G20 programme launched five years ago received a tremendous response initially for about a year. The group came up with its first set of findings on benchmarks in workshop operations. The programme has, however, failed to keep pace thereafter. We have been constantly making efforts without much success to revive the programme, which offers immense benefit to automobile dealerships and help them benchmark their management practices and systems against the best in the trade. A small group of 10 automobile dealerships, called G10, constituted at Kolkata has got going of late and made a steady progress in its work. Hopefully, the deliberations and sharing of data within this small group will throw light on the best practices and benchmarks in automobile retail trade and workshop operations, benefiting all its members. Needless to mention, there are around 180 Group 20's operating within NADA in the USA, which goes to show that the automobile dealerships there see a lot of benefits through their participation in such groups in spite of hefty fees charged by NADA from the participating dealerships. FADA is making all efforts to strengthen its Secretariat. Once, we have adequate staff in our Secretariat, a number of new services and activities aimed at benefiting automobile dealers at large, will set rolling. Regarding the specific activities of FADA since my last message, FADA held its Council Meeting, an Interactive Session with a Service Tax Consultant, and an Open House Session in a day-long programme on 2nd December 2006 at Mumbai. The report of these meetings is published elsewhere in this issue for the benefit of our readers. I am grateful to Ms Puloma Dalal, Tax Consultant; Mr Sachin KhandelwaL, Head - Credit Cards, ICICI Bank; Mr Rajesh Jejurikar, MD, Mahindra Renault & Executive Vice President, M&M Automotive Sector; and Mr Shyam Mani, President - Sales & Marketing (CVBU), Tata Motors for having participated in the discussion and shared their wisdom and experiences with the participants at these meetings. I count on your support and feedback for further strengthening FADA and its activities. Hope, we shall be talking many nice things in the year 2007. I wish you, your families and businesses a Very Happy, Healthy & Prosperous New Year. Yours sincerely, Binod Agarwal