Weathering the Current Slowdown Binod Agarwal, President Dear friends, The auto sales figures for the month of June 2007 do not pass for a happy reading. However, going by what auto analysts & experts and even our own judgement point to, we should not be unduly worried. This is what the panel discussion with Regional Managers of 2-wheeler and 4-wheeler manufacturers organised recently at Chandigarh also concluded. We have had cyclic slowdown and recession in the past and therefore, should be able to take the current sluggish phase in our stride. While the inflation rate that touched a peak of 7% in the previous year is gradually climbing down, the global crude oil prices continue to head northward. With the easing of inflation, interest rates should, hopefully, come down sooner than later. There is, indeed, a silverlining that the sales will pick up shortly. However, since RBI is not willing to take chances to ease monetary curbs at present, we have to keep our fingers crossed as to how soon the interest rates will soften. The higher interest rates not only play spoilsport for the auto sales leading to higher discounts and greater marketing costs, but also increase the inventory costs. It is a double whammy for the automobile dealerships. All these negative factors working in combination put tremendous pressure on the dealerships. The 2 wheeler and the commercial vehicle dealerships, in particular, are hit hard, as they cater to the segments of the market, which are more sensitive to the interest rate changes. This is finding reflection in the sales performance of these segments in the current year. However, the scenario is not all that frightening. I am of the view that the current slowdown is a passing phase, viewed against the backdrop of continuing good performance of the economy. The Regional Managers of two-wheeler and four-wheeler manufacturers, who participated at the interactive sessions at Chandigarh were also of the view that the Indian auto market has reasonably good prospects in the second half of the current year. A rosy picture of the industry in the medium and long terms emerged at the discussion. Other industry experts and analysts also concur with this view. The report that Prime Minister's Economic Advisory Council expects the economy to clock 9% growth and the inflation to stabilise within 4% in the current financial year is comforting for us in automotive business. Therefore, we need not despair at the moment. As for FADA's activities since my previous column, we had a Council Meeting at Chandigarh on 6th July 2007. Following the Council meeting, three separate interactive sessions with Transport Authorities of Haryana and Punjab and with Regional Managers of 2-wheeler & 4¬wheeler manufacturers were held at Chandigarh on the same day. The interactive sessions were quite lively and meaningful. FADA also organised a Regional Meeting at Jalandhar the next day, which witnessed a very useful interaction with the local Service Tax officials. The report of these meetings is published elsewhere in this issue and, therefore, I would not like to dwell on the proceedings or the outcome thereof. However, among various issues facing automobile dealerships, the availability of trained manpower for dealership operations in today's competitive environment is a major concern, which came out loud and clear from discussion at the Council meeting and interactive sessions with the 2/4-wheeler manufacturers. I express my sincere thanks to Mr M K Mahajan, Additional Transport Commissioner Haryana and Dr Karamjit Singh, Additional Transport Commissioner, Punjab, as also the service tax officials in Jalandhar for sparing their precious time to interact with the Automobile Dealers at Chandigarh and Jalandhar. I am also thankful to the Regional Managers of General Motors India, Tata Motors, Mahindra & Mahindra, Honda Motorcycle & Scooter, and TVS Motor, who provided an insight into the current and emerging automotive scenario. My thanks are also due to my fellow dealers in Chandigarh and Jalandhar, especially, Mr Ashish M Gupta, Mr Varinder Saluja, Mr Pradeep Mittal and Mr S K Agarwal, who took time off from their dealerships to organise the meetings at Chandigarh and Jalandhar. Needless to mention, such regional meetings enable automobile dealers to gauge automotive scenario at the regional and national levels. Simultaneously, the meetings also help identify problems and challenges for appropriate action. As such, automobile dealers at various places in the country must organise themselves and hold regular meetings in order that they are equipped, through sharing of experiences and interaction, to take on the current and emerging challenges effectively and squarely. I would like to reiterate here that office bearers of FADA would be more than willing to participate at such meetings. Please feel free to send your suggestions and inputs, if any. With best wishes, Yours sincerely, Binod Agarwal