The Federation of Automobile Dealers Associations (Fada), an association of the automobile dealer fraternity, has issued a legal notice to UM Lohia Two Wheelers Pvt Ltd and its joint venture promoters for allegedly cheating its dealers. The company has completely stopped its operations in the country.
According to Fada, these dealers have incurred a total estimated capital loss of around Rs 150 crore, and around 2,500 jobs have also been affected. The company's product has a price range of around Rs 1.75 lakh and a customer base of 10,000.
An email sent to the company had not been responded to as of the time this report was published.
UM Lohia, a joint venture between UM Motorcycles and Lohia Group, was formed in 2015. It claimed to manufacture and sell "American style, American Made" motorcycles under the brand UM Motorcycles and attracted dealers by showcasing its models at an automobile exhibition.
US-based UM Motorcycles, promoted by the Villegas Family, produces several models of motocycles and cruisers, including the Renegade range of motorcycles.
Soon after the India JV’s dealerships were signed, it emerged that the motorcycles were made using Chinese components assembled at a manufacturing plant in Kashipur, Uttar Pradesh, allege dealers. This resulted in the brand losing its value and customers avoiding purchase.
Besides, the company launched vehicles compliant with BS-III emission norms in the second half of 2016, even as the regulation mandating BS-IV was already scheduled to come into force from April 2017.
The dealers were not able to sell once the deadline was crossed and the company allegedly refused to take back the vehicles. Amid mounting pressure, the company later agreed to come out with BS-IV compliant vehicles, and collected further deposits from some dealers. However, the vehicles produced later were substandard and unfit to ply on roads, with basic components like gear breaking down within a few days of use.
"To make the matters worse, UM Lohia has now surreptitiously folded up its operations and shut down its warehouse for spare parts, making it impossible for dealers to service the warranty claims on defective UM motorcycles. As a result, many dealers have been exposed to litigation from customers," Fada said.
It also alleged that the company, while agreeing to launch new products, later wound up operations and the partners started other businesses, including in the electric-vehicle industry and pre-owned bike business, looking out for dealers for new businesses.
In order to protect the interests of customers and dealers, Fada, through its counsel Khaitan & Co, has issued a legal notice to UM Lohia and its management, calling upon them to redress all grievances and take steps to ensure maintenance and servicing of motorcycles already sold under warranty.
"If UM Lohia and its management do not respond to our legal notice, Fada will have no other option but to take appropriate legal measures against the company, its management and all others concerned with this matter. Simultaneously, Fada will also update and involve government authorities in this matter," added a statement issued by the association.