Dealers and automakers have a tumultuous relationship, says FADA President

Says manufacturers' financial clout has led to inequitable contracts between the two

Auto dealers and automobile manufacturers have a tumultuous relationship as the latter’s financial might has led to inequitable contracts between the two, said Manish Raj Singhania, president, Federation of Automobile Dealers Associations (FADA) on Tuesday.

To address this issue of so-called lopsided contracts, FADA has prepared a model dealer agreement (MDA) that seeks to establish balance and equity in the relationship, Singhania said while addressing the delegates at the 4th Auto Retail Conclave.

Through this MDA, the association has tried to address the key issues the Indian dealers face, such as the lack of protection when an OEM (original equipment manufacturer) exits the market, lack of clear repurchasing obligations on the OEMs, and lack of clear indemnity for dealers, Singhania mentioned.

MDA, which was launched at the conclave, was shared with the senior executives of OEMs.

Singhania asked Society of Indian Automobile Manufacturers (SIAM) to give its “wholehearted support” to get this MDA studied and implemented by the OEMs.

“The dealers and automakers have a tumultuous relationship given the latter’s financial might and the relatively small size of dealers, who usually use their life savings to set up their dealerships,” he mentioned.

He said that FADA conducted comparative analysis of agreements signed between dealers with auto companies all across the world.

“What we found that the OEMs (original equipment manufacturers) in India exercise tighter control over dealers' businesses,” Singhania noted.

FADA represents over 15,000 automobile dealers having 26,500 dealerships across India.

He proposed that there should be quarterly meetings between the three industry bodies – FADA, SIAM and Automotive Component Manufacturers Association of India (ACMA) – to cohesively deal with the issues of the auto industry.

After the death of former Tata Sons Chairman Cyrus Mistry in a car accident, auto dealers across the country will soon run a “Buckle Up India” campaign, he said. This will be done to encourage customers to buckle up (seat belts) before starting their cars and wear their helmets before riding their two-wheelers.

“This campaign will run every quarter across the country in one form or the other. We want customers to become safety conscious,” Singhania noted.

Mistry was killed in a car accident in Maharashtra’s Palghar on September 4. Though he was in the rear seat of the ill-fated Mercedes SUV, according to the police, he wasn’t wearing a seat belt at the time of the accident.

At a Business Standard event on September 7, Union Minister for Road Transport and Highways Nitin Gadkari had said that the government will soon announce penalties for those who are found not wearing seat belts while sitting on the rear seats.

At the event, the auto companies shared a positive outlook about the demand during the next 6-8 months.

Shashank Srivastava, executive director (sales) at Maruti Suzuki, said as per his calculations, the domestic sales of passenger vehicles in India is likely to be around 3.9 lakh during this year.

He said the demand is there, but the ability to convert bookings to deliveries depends on how companies are able to manage their production in the coming months.

Hyundai Motor India's director (sales, marketing and service) Tarun Garg said that the demand outlook continues to remain positive but the companies need to keep a tab on geopolitical risks.

Ashutosh Varma, National Sales Head, Hero MotoCorp said that the company is confident that the sales will continue to grow.

He said the demand to replace the old two-wheelers -- which went down during the peak of the pandemic -- has started to come back.