Exits by automotive companies from India over the last five years have resulted in 64,000 layoffs and a dealer investment loss of Rs 2,485 crore, data shared by the Federation of Automobile Dealer Association (FADA) to the Heavy Industries Ministry reveal.
Six major automotive companies and brands – Ford, General Motors, MAN Trucks, Fiat, Harley Davidson, UM Motorcycles – a number of electric vehicle companies and a joint venture of Eicher Polaris have ceased sales operations in India since 2017. More than 464 dealers have been affected by these exits.
Vinkesh Gulati, President, FADA said, “Sudden exits by these MNCs cause great distress to the entire auto retail industry and hamper the entrepreneur’s zeal to do business and the customer's interests, by leaving the customers high and dry with no proper after-sales support. Crores of rupees go down the drain as it kills an entrepreneur’s vision to get into the business again.”
The letter was addressed to Mahendra Nath Pandey, Minister of Heavy Industries, who had attended FADA’s third auto retail conclave held in August.
According to FADA, auto dealerships’ annual turnovers range from Rs 5 crore and upwards, with the majority of dealerships being family-owned small, mid-sized businesses, partnership firms operating in every corner of the country.
“I would request that your Ministry work on protection of auto dealers’ rights, possibly through legislation as suggested by Parliamentary Committee on Commerce and Industry in Report No.303 and create a sense of equilibrium in the industry as an increasing number of international players are entering the Indian auto market. This will not only safeguard the Dealers’ and customers’ interests in India but would also protect the interests of people employed by the dealerships,” Gulati added.
Ford India exit
After trying fruitlessly for several years, Ford called it quits on September 9, 2021, bringing curtains on all manufacturing and sales operations in the country in a phased manner. More than 4,000 of its own employees, most of which are employed at the two manufacturing plants, will be jobless as a result.
According to FADA, Ford India was forcing its dealers to first sign a Non-Disclosure Agreement (NDA) latest by September 14, 2021, before any compensation package is worked out. “We found that the definition of ‘confidential information’ (in the NDA) is extremely broad and does not explicitly mention the scope of the discussions that Ford intends to undertake with the dealers,” Gulati added.
FADA claims it is unclear at this stage if Ford’s discussions with its India dealers would include damages towards costs of idle establishment and infrastructure, maintenance, employee retrenchment claims, damages towards loss of opportunity, and restrictions in availing dealerships of new OEM in the existing infrastructure.
Other concerns include damages arising out of a compulsory restricted nature of business imposed viz. stopping of sales and only continuation of parts and service and damages owing to loss of reputation and goodwill coupled with loss owing to the expense of re-establishing customer base and goodwill.
“Such coercive efforts on Ford's part to get their channel partners to sign an NDA with the imposition of unreasonably tight timelines, under economic duress is not the right approach and adversely impacts dealer interests. Taking this into consideration, we have also written to Ford India President & MD, Anurag Mehrotra requesting him to share the broad contours of the compensation package which they would have already decided upon. We await his response,” Gulati added.
FADA has requested the heavy industry’s intervention which includes the creation of a taskforce that takes a day-to-day update from Ford India to monitor the compensation plan for automobile dealers and dealership employees and make sure that Ford India indemnifies dealers from various consumer and civil cases, both under pendency and against any future cases that may arise directly or indirectly out of Ford’s restructuring announcement.