Gearing for Ups and Downs Nikunj Sanghi, President Dear friends, Even as the performance of auto market in April and May was bereft of excitement, I am afraid, the sales numbers for June 2011 are not enthusing either. What is discomforting is that the straws in the wind do not inspire much confidence that the buoyancy would return soon. Since my previous message, the RBI, as was apprehended, has increased the Repo Rate for the eleventh time since the beginning of 2010. The 25 bps increase is expected to lead to further hardening of interest rates, which has been one of the major factors for the slowdown in vehicle sales. As if the hike in petrol prices by Rs. 5 per litre was enough to dent the auto market, the Government has delivered another punch by raising the diesel price by Rs. 3 per litre. The diesel price hike is likely to fuel all-round increase in prices. This is a body blow to the efforts to combat inflation that continues to hover at over 10% much to the discomfiture of the Government, RBI, industry and common man alike. While the taming of inflation through monetary measures has, virtually, been a single-point agenda of the apex bank for some time, soaring commodity prices in the global market have put paid to such efforts. The volatility in crude oil prices, to my mind, is due largely to the uncertainty and strife in the Middle East and may not be the indicator of surge in demand. While the Government may not be in a position to do much when the commodity prices are rising internationally, it can definitely contain the food inflation by correcting the demand-supply mismatch. As it appears, more than supply mismatch, it is the storage, marketing and distribution management, which is the bane of the problem. It is a double whammy for automobile dealers. Footfalls and vehicle sales volumes have been declining on one hand, the costs under various heads of dealership operation have been rising with each passing day, on the other. Since there are no signs of the scenario improving dramatically, we would expect that vehicle manufacturers would take some steps to mitigate the hardships of their dealers. Immediate action warranted is: (i) Trimming the inventory levels at the dealerships; and (ii) extending interest free credits for holding the inventory that is piling up at most of the dealerships. My fellow dealers also cannot do much when the whole economic scenario is somewhat downbeat. However, they can, on their part, take some in-house measures to beat the slowdown blues. The measures could include (a) Improving productivity & efficiency and (b) cutting costs by replicating best practices and innovative ideas adopted by other members of auto retail fraternity. That was precisely the reason why FADA had constituted Group 20 comprising non-competing dealers. The idea underlying constitution of Group 20 within FADA was that my fellow dealers could share their ideas & experiences and exchange data to identify benchmarks for various areas of dealership management for adopting & practising at their dealerships. There are over 170 such groups functioning with NADA. Automobile dealers in US have to wait for their turn and pay heavy fee to get entry into a group. While this idea is a roaring success in the USA, I am sorry to say that the response and participation in Group 20 and later Group 10, constituted by FADA from time to time, has been lukewarm to say the least. Due to poor response, FADA had to abandon this activity that was started with all fanfare. The participation in Group 20 discussion brings forth loads of information and ideas, which, if appropriately used, can help my fellow dealers immensely in steering through crest and trough effectively. Personally, I have gained a lot through such discussions and exchange of information. In this highly competitive market full of uncertainties, we cannot take things for granted. We have to remain on our toes and be geared to stand up to the ups and downs in the business. I would, therefore, urge my fellow dealers to actively participate in the seminars, workshops and conferences organised by FADA. Experience and ideas gained through such discussions and interactions will stand you in good stead in case the going gets tough. We have to take time off the routine day-to-day running of the business to participate in the meetings that are an enlightening and educating experience for all of us. Given that the auto market has been switching from one end to another like a pendulum, the ability of an automobile dealer lies in steering through the highs and lows of the market unbruised. Gearing for 'ups and downs' is what the deliberations at our most prestigious biennial event, viz. Auto Summit 2012, scheduled for 9th & 10th January 2012 will centre around. Keeping in view the changing dynamics and uncertainties, the theme of Auto Summit 2012 has been decided as "Shifting Gears - Terrain Ahead". There is no gainsaying that it is not a smooth drive all the way for auto market that encounters bumps and potholes every now and then. The slowdown, of late, after two years of buoyancy exemplifies the theme chosen for the convention. Therefore, to my mind, we could not have had a more appropriate theme. Another issue that is of prime relevance to most of my fellow dealers is the succession planning. In India, a preponderant majority of automobile dealerships are family-owned. The experience has shown that most of these family-owned dealerships hardly survive by the time second or third generation takes charge due largely to the family disputes and lack of planning and grooming of the successor. In view of the importance of the subject, Auto Summit is going to have a full two-hour session on Succession Planning. The session will have senior industry leaders, experts on family business, young leaders who have made a mark in public life and motivational speakers addressing and interacting with the participants. The idea is three-fold: One, to emphasise the need for careful planning of the successor well before the current incumbent hangs up his/her boots; two, to prepare the young family members of the dealer-owners for effectively managing their dealerships in order to ensure smooth transition without any hiccups; and three, to identify and prepare young automobile dealers to assume organisational responsibility and leadership within FADA. Besides, Auto Summit 2012 is going to deliberate upon a host of other important issues of concern to automobile dealer fraternity and the whole gamut of dealership management. To cap it all, the Auto Summit offers an opportunity to all my fellow dealers from across the country to meet and share their experiences. I, therefore, urge my fellow dealers to participate at the Auto Summit 2012 in large numbers. Simultaneously, another important activity that has been set in motion is the 3rd edition of Automotive Dealership Excellence Awards for the Year 2011 (ADEA 2011). The awards presentation will take place in the evening on 9th January 2012 as a part of the Auto Summit 2012 programme. As you all know, ADEA has been instituted by FADA jointly with Auto Monitor magazine to recognise and reward those excelling in various areas of dealership management, CSR and community service. The intent of these awards is to bring to the fore the innovative ideas and practices adopted by members of automobile dealer fraternity as well as the CSR and social activities being carried out by them for the benefit of society at large. Other automobile dealers can learn and assimilate such ideas and practices at their dealerships, thereby, promoting all-round excellence in auto retail. CSR and community welfare activities undertaken by automobile dealer fraternity becoming visible through the medium of these awards bring in loads of goodwill of the Government and the society for the trade. Such CSR and community welfare activities ultimately make a business sense, as no business can survive without the goodwill and support of the society. Preparations for both these events are afoot and moving at a fast pace. These two events engaged much of the attention of FADA Council at its meeting held recently at Chennai. FADA Council is also seized of the core issues confronting automobile dealerships. We are intending to do a comparative study of the cost increase for automobile dealerships over the last 5 years for presentation at appropriate forum. In case you have any input or suggestion, kindly feel free to send it to FADA Secretariat or me for our consideration. With best wishes, Yours sincerely, Nikunj Sanghi