With the implementation of BS-IV norms across the country starting 1 April 2017, many automobile manufacturers still have unsold vehicles worth Rs 4,500 crore lying at their dealership outlets that are no longer compliant with the latest emission norms.
Gulshan Ahuja, secretary general, Federation of Automobile Dealers Association (FADA), tells BW Businessworld about the precarious situation among other issues and challenges.
Edited excerpts:
How has the last financial year been for the auto retail sector and what are your projections for this fiscal?
Last financial year has been reasonably good for the auto industry owing to favourable monsoons after two consecutive years of drought and positive consumer sentiments. We witnessed upward growth even though the industry was marked by disruptions such as demonetisation in November affecting the rural market and thereafter Supreme Court proceedings resulting in the ban on sale of BS-III vehicles from 1 April 2017. Had these roadblocks not emerged, the overall volumes would have been much higher. This financial year will also be reasonably good for the auto market because of normal monsoons prediction and forward looking policies by the government.
The auto industry is also eagerly awaiting the goods and services tax. What are your views on its implications on vehicle sales?
In principle, we support it wholeheartedly and believe that this is a step in the right direction. Even though it is going to avoid cascading effect of multiple taxes, there are some apprehensions that it is going to bring in a lot of complexities. GST is not only a reform in tax administration, but also a reform in how we do our business. It is hard to predict whether the volumes will perk up after GST. However, I do foresee that market will be slightly subdued.
Do you witness some changes in the mobility space with the influx of cab aggregators like Ola, Uber, etc.? Most importantly, will vehicle registrations be impacted?
This is one of the disruptions that automobile dealers are prepared to deal with. Although these cab aggregators may not be denting sales at the retail level, there would be changes in the buyer profiles. So, instead of a customer buying for personal usage, there maybe someone who is walking in (at dealer outlets) for commercial purposes. So the vehicle registrations will not be significantly impacted.
It was widely reported in the media that auto dealers were saddled with a huge inventory of BS-III vehicles when the Supreme Court order was passed. What is the current status and are all stocks sent back to OEMs now?
At present, there is unsold inventory worth more Rs 5,000 crore at the dealers’ end. Out of the total inventory of around 100,000, vehicles, around 40,000 are commercial vehicles followed by PVs and two-wheelers. The Supreme Court order has led to a lot of confusion. FADA is in talks with SIAM and dealers are also individually talking to their OEMs. We are yet to come out with a resolution. Every state is interpreting the order in its own way.
For example, in Delhi, there are two kinds of dealers. While some are registering it online, a few of them are doing manually and submitting the files to the RTOs for registration at their end. For those who are not able to ally with the transport department, vehicle registration becomes a challenge.
Does the boom in online sales worry offline sales by brick-and-mortar stores?
Not really. We don’t see any significant impact of e-commerce players. While customers may make enquiries online, they would definitely like to have a touch-and-feel experience of the vehicle. For that, he needs to go to a dealer.
BW Reporters
The author is a Principal Correspondent at BW Businessworld.
