Vision 2015: Young India to Drive Growth

Road Infrastructure, Rising Fuel Prices and Availability of Trained Manpower Major Challenges

Indian automotive industry is at a take-off stage and is poised for an explosive growth in the next ten years. Managing this tremendous growth is a big task and confronts us with a host of challenges in the form of infrastructure development, availability of trained manpower, energy security and rising fuel prices extensive use of Information Technology, quantum jump in technology and management practices, and customizsing products and services to the changing needs and preferences of customer, who has become the supreme entity and is being wooed by all vehicle manufacturers and automobile dealers inter se in this fierce competitive market. This was the unanimous view that emerged from the deliberations of Auto Summit 2006, which had the presence of a wide spectrum of eminent speakers representing the Government, industry, academia, internationally renowned management consultants and retail automobile trade associations abroad.

Auto Summit 2006 - the 4th biennial convention of automobile dealers was held on 13th & 14th Jan'06 at Hotel Taj Palace, New Delhi. Over 750 delegates from all over India and other countries like USA, UK, Sri Lanka, Nepal, Vietnam, etc, attended this premier event organised by FADA, in association with SIAM, to discuss and chart out future growth directions.

The Summit on the theme: "Changing Face of Auto Retailing - A Global Perspective" was ceremoniously inaugurated on 14th January 2006 by Praful Patel, Hon'ble Minister of Civil Aviation, Government of India with Madhur Bajaj, President, SIAM & Vice Chairman, Bajaj Auto, delivering the keynote address. Ravi Kant, Vice President, SIAM & Managing Director, Tata Motors and John Thomas of National Automobile Dealers Associations (NADA) - USA were the other distinguished speakers at the Inaugural Session. In addition to the Inaugural Session, three Business Sessions on the topics: Relationship Management; Competitive Challenges - An Opportunity; Expanding Horizons of Auto Retailing; and a Valedictory Session: Vision 2015, as also the interactive sessions with foreign participants and a panel of manufacturers representing various segments of industry, witnessed engrossing deliberations on various aspects of automotive business.

Addressing the delegates and the members of the media, Praful Patel said, "I am personally very happy to be associated with this function today and would like to compliment FADA and SIAM for bringing together an important gathering of like minded individuals to discuss and chart out the road ahead. India is now on a great march...it's all about movement and we all have to collectively make a great change to make India a great place. Since isolation has now given way to inclusion, Indian automobile manufacturers and retailers should be ready for the world. I believe that events like this would go a long way in establishing our nation firmly on the world stage."

He further added, "We need to have designated automobile areas within the cities just like we have specialised vegetable markets, shops etc." He emphasised the need of professional training of manpower & better road infrastructure, adding that high cost of fuel is the key area of concern for the economy as a whole.

He said that Auto industry being one of the important means of economic development of the country, should strive for global recognition of its services and products. He also stressed on the need of multi-brand dealerships where the customers can choose and try different vehicles under one roof.

Earlier, welcoming the guests and delegates, Binod Agarwal, President, FADA, said, "Radical changes are sweeping the automotive business, including the retail automobile trade, within India and elsewhere. The developments in one part of the globe have far-reaching implications for the rest of world. The theme of Summit, therefore, could not have been more appropriate."

He added, "FADA is alive to the widespread shortage of trained manpower. One of the major challenges the tremendous growth has brought in its wake is the phenomenal expansion of dealership network across the country and consequent shortage of trained manpower. FADA has taken initiative to start 6/3-month certificate/ diploma courses, in association with reputed institutes across the country, for training Service Supervisors, Spare Parts Supervisors and Sales Executives to cater to the manpower needs of automobile dealerships in these areas. A pilot project covering the cities of Mumbai and Pune has been launched and the courses ace expected to start in these cities from February/March 2006. Based on the experience of pilot, the courses will be extended across the country in a phased manner." He also informed the participants of another major initiative of FADA, viz. "Helpline" service for its members to clarify queries on various issues relating to taxation, environment laws, vehicle registration & taxes, etc.

Giving .an insight into the future of the Indian auto sector, Vinay Nevatia, Convention Chairman, FADA, said, "The Summit is, in fact, set to be a pathfinder and to show the road ahead for all concerned in automotive business."

Madhur Bajaj, President, SIAM in his keynote address tracked the long journey of Indian automobile industry from the era of shortages due to highly regulated economy and the seller's market, which encouraged non-virtuous circle of inefficiency, premiums and black money, to the liberalised regime and the buyer's market today where customer is the king. He said, "Segmentation & customisation are the need of hour and may be, separate retailing will have to be considered to cater to different segments of the market." He cited the example of Bajaj's 'Probiking' showrooms equipped with dynamometer, especially created for high-end customers. Underlining the importance of trained manpower and role of e-connectivity, he lauded FADA's initiative of starting a Helpline for its members.

Ravi Kant, MD, TATA Motors said that Indian automobile industry has seen considerable growth in the last 5 years and the projections estimate that the industry size will be more than 36 mn in the next 10 years, which would call for enormous changes and effort in auto retailing. He revealed that about 75% of the population lives in rural India and, therefore, the industry and trade must improve their penetration and reach by adopting innovative new concepts in Auto-retailing. Retailing chain needs to adopt & invest in appropriate technologies and IT enabled solutions & systems to enhance and improve customer satisfaction & retention, performance, service levels, competitiveness, cost effectiveness and reach, he added.

Giving an insight into the Amercan automotive scenario and working and core structure of National Automobile Dealers Association, which represents 93% of the 21, 000 odd car dealers in the USA, John Thomas of NADA, revealed that in an effort to improve dealer-manufacturer relations, NADA conducts Dealer Attitude Survey and presents data to the manufacturers. NADA has started programmes such as AYES (Automotive Youth Educational Systems) and STAR (Standards for Technology in Automotive Retail) to address the need of qualified technicians and to promote development of effective dealership IT systems by reducing the development time and cost for dealer-manufacturer computer applications and reducing the complexity of dealer IT systems, respectively.

Dr Pawan Goenka, President & COO, M&M (Automotive Division) in his presentation at Business Session-I stressed that CRM is not about software or hardware but about 'Heartware'. He added that Indians who have believed in the philosophy of 'Atithi Devo Bhava' for ages, need not look to the West for learning CRM that is already ingrained in our genes. He gave the example of a panwala who in spite of being illiterate welcomed the customer with respect and love. He also briefly touched upon the CRM process called 'Ingenious Rishtey', which has been created and customised for business at M&M and its dealerships. As a result, M&M is the most improved company in JD Power Surveys, he added.

Dealers and end-consumers are the two main stakeholders in automotive business and a manufacturer's marketplace success is driven by its ability to motivate and manage expectations of both, observed Chris Bonsi, Regional Director, TNS Automotive, Singapore in his presentation at Business Session-I. He observed that automotive dealers form an integral link and are in a unique position from the standpoint of managing the end-customers, particularly during the sales and after-sales stages of the ownership experience.

Demographics and financing will be the key growth drivers for the auto industry, opined Ajay Dwivedi, CEO of CRIS INFAC in his presentation at Business Session-II. India ranks low on auto sales per person, indicating vast untapped potential. He added that as transaction volumes per dealership increase in metros, managerial challenges will increase, space in and around cities will come at a premium and further geographical expansion beyond major cities will necessitate use of robust criteria for selecting the new locations.

Rajiv Chaba, MD & President, GM India in his presentation at the Business Session III, emphasised that favourable demographics, growth in real disposable incomes, easy availability of finance at competitive rates, and changing mindset with greater exposure to international lifestyles - fuelled by media proliferation, resulting in reduced ownership cycle, would continue to drive the growth.

Dealers should emerge out as marketers, exhorted Chaba. Dealerships will have to be partners in business for manufacturers and have to make well-informed decisions and not depend on intuition. A new breed called "cyber dealers" will be in a position to use their IT knowledge base to demand a greater say in decisions on national, regional and local advertising and marketing campaigns and even for market research. They will collect and interpret local market information about customer wants and retail trends to influence car manufacturers in designing, modifying and customising new or existing products. Dealers will have to gear themselves to sell multiple products in different segments, he added.

M Takedagawa, President & CEO, Honda Siel Cars in his presentation highlighted the profit model of a Honda car dealer in India, which comprised: New car sale - 47%, after-sales - 23%, in-house finance - 21%, insurance - 6%, extended warranty - 2% and used car sales - 1%. Honda treated the dealers and the suppliers as extended arms of the company, said Takedagawa, adding that the focus of Honda's philosophy has always been the customer.

Abhay Firodia, Chairman & MD, Force Motors at the Valedictory Session: Vision 2015 expressed the view that the dealer community should shake off its old mindset and look beyond country's frontiers for new opportunities. They should not be mere distributor but enhance value by being innovative and creating a distinct service brand of their own. He said that India has the capability to become a vehicle manufacturing & component manufacturing hub and a powerhouse of distribution.

"Auto industry is in for a tough competition in the future", said Venu Srinivasan, CMD, TVS Motor. Referring to 60s, 70s & 80s as the First Wave and the post- liberalisation era as the Second Wave, he said that future would experience a Third Wave wherein the country would see:

▪	The age of rampant consumerism - Desire driven market.
▪	New competition - The best international brands will enter.
▪	The era of Internet, telephony, GPS and other new technologies - Confluence of new technologies with automotive technology (electronics, communication, entertainment).
▪	China and India emerging as low cost manufacturing centres - Chinese products may threaten Indian industry.
▪	Retail makeover - Multibrand Store, Only SUV or Bikes Store, All Luxury Cars Store, etc.

 
The face of retail will change in future as products & features will increasingly converge and the retail experience will become a crucial differentiator, as a part of the overall brand package.

He predicted that new segments such as women, youth, the rich 'hobby' riders and senior citizens which are not being paid much attention currently, would emerge. The customer's mindset has changed irrevocably and the 'service economy' consumer will expect: 'You come to me, I will not come to you', 'Give it to me NOW and I want it in My shade', 24X7 Service Stations and Door delivery & pick ups.

Visualising the scenario in 2015, he pointed out that the industry would experience a big leap in IT, which would revolutionise stocking, economics & information flow, and after-sale servicing of the vehicle. Internet would emerge out as a significant channel of commerce and up to 30% of sales in future is expected to be Internet-generated. Also, there would be online booking of slots for service. Similarly, technology, manufacturing, financing, pre-owned vehicle market, retail formats and exports would also witness a quantum jump.

Baba Kalyani, Chairman, Kalyani Group, painting a rosy picture of the vibrant auto component industry, said that the Indian component industry had the potential to capture $33-40 billion of the opportunity by 2015 with exports accounting for $20-25 billion.

Proposing a Vote of Thanks for the distinguished guests, speakers and participants, Rakesh Jain, Past President and Director - Conventions, FADA, said "We hope that this bi-annual event becomes a beacon for all players in automotive business to rally their thoughts and marshall their skills to make India ready for global competitive challenges."

Other distinguished speakers at the Business Sessions included: Antony Jacob, MD, Royal Sundaram Alliance; G Seshadri, M&M; S K Mutneja, GM, New India Assurance; Sachin Mathur, CRIS INFAC; Arvind Saxena, VP, Hyundai Motors India; A P Arya, President (M & HCV), Tata Motors; and Kamesh Goyal, CEO, Bajaj Allianz. Virtually, all speakers depicted a bright future for the Indian automobile industry & trade.

Day one of the Summit, i.e. 13th January 2006, commencing with an interactive meeting with foreign delegates from USA, UK, Nepal, Vietnam, and Sri Lanka also witnessed fruitful deliberations. Foreign Speakers present at this Session made presentations on the auto scenario, business practices and opportunities for auto industry, in their respective countries.

Another notable feature of the programme on 13th January 2006 was the action-packed Dealer-Manufacturer Interface. Panelists for this Dealer Manufacturer Interface, representing 2-wheeler & 4-wheeler segments of industry and media, comprised: R L Ravichandran, CEO, Royal Enfield; Atul Gupta, Associate Vice President (Sales & Mktg), Yamaha Motor India; Deepak Mokashi, Head - Sales, Hero Honda Motors; K S Grihapathy, GM (Mktg), Bajaj Auto; N K Ratan, Head - Sales & Mktg, Honda Motorcycle & Scooter; K Saito, Director (Mktg), Maruti Udyog; Rajiv Dube, Sr Vice President (Mfg & Commercial - PCD), Tata Motors; Nalin Mehta, Mahindra Renault; V Sivaramakrishnan, Vice President - Mktg, Sales & Service, & External Affairs, Ford India; Ankush Arora, Vice President (VSSM), General Motors India; Hormazd Sorabjee, Editor, Autocar India; and Yogendra Pratap, Editor, Overdrive.

Issues that came to the fore during the lively interaction were:

▪	Multi-brand dealerships
▪	Rising competition and customer expectations
▪	Territorial infringement and discounts
▪	Promotional offers from manufacturers cutting into dealer margins
▪	Dealer Margins & Viability
▪	Dealer-manufacturer Relationship
▪	Dead parts Inventory
▪	Transparent Dealer Policy
▪	Exit route for dealers
▪	Targets and Incentives

 
The theme of Auto Summit 2006 and topics chosen for various business sessions could not have been more relevant. The deliberations addressed some of the complex issues facing retail automobile trade in the current & emerging scenario. The summit provided an exhilarating and learning experience for all players in automobile business.