“OEMs can contribute to dealer sustainability by being judicious in growth projections” – FADA President

Founded in 1964, the Federation of Automobile Dealers Associations (FADA) is the apex national body representing automobile dealers of India. It protects and promotes the interests of the Indian retail automobile market. Today, it has 15,200 dealers who operate around 25,000 dealership outlets between them across two-wheeler, PV and CV segments. Ashish Harsharaj Kale, FADA President, spoke to Rajesh Rajgor about long-term sustainability of dealerships, OEMs’ contribution in growth projections, policies framed by the government, and various activities conducted by FADA that enhance dealerships across India

- Rajesh Rajgor

What according to you should be done to ensure long-term sustainability of the dealers across India given the current challenging times in the automotive industry? What role do web-based platforms play in enhancing sales?

The last 18 months have been very challenging for the Indian automotive industry and in particular for the automotive dealers and we have seen more than the usual number of dealerships shut down in this period. One of the key reasons amongst others has been financial viability. On the cost front, employee compensation, interest cost, and rent are skyrocketing whereas sales and dealer margins have not matched the rise in expenses. Indian automotive dealers operate on the lowest margins possible when compared to peers globally. Dealership sizes will need to be pruned down drastically as real estate is not cheap and dealerships of large scale are becoming unviable day by day.

This is especially so with the increasing compliances as well as the ever-increasing cost of operations. The entire business model needs a relook as the earlier business model was of wealth creation with manifold increase in the value of the prime real estate on which dealerships were set up on, and would compensate for the low operational profitability. With real estate now not being the fast appreciating asset that it was, we have to move to a high operational profitability model if we have to sustain our businesses. FADA is advocating a 5% PBT on turnover to be a good profit level, which will allow dealers to strengthen themselves for the future, reinvest in businesses, and make it a sustainable business for the long term.