In the last few years several multi-national automotive companies have shut shop in India. Vinkesh Gulati, the president of the Federation of Automobile Dealers Association says the dealers were left high and dry due to these sudden exits and wants the government to step in. FADA not just wants the ministry of heavy industries to intervene and mediate between Ford—the latest car maker to exit—and the dealer fraternity to ensure dealers get a fair compensation, but on a wider scale the government should enact legislation for the protection of the rights of dealers, which would act as a deterent in future cases.
Driving in India has been tough for several automobile companies. General Motors decided to leave in 2017 having failed to succeed in the market, Man Trucks packed up in 2018, the UM-Lohia partnership ended a year later and Harley Davidson pulled out last year. Just a day before Ganesh Chaturthi, and barely a month ahead of the festive Navratri, Diwali period, Ford said it was shutting down its factories in India and stopping manufacturing vehicles for sale in India immediately as a part of its restructuring plans.
"It was a very bad timing for Ford to announce its exit. Usually, people get hired a few months ahead of the festive season. I doubt the manpower that is left redundant due to the closure will get employed anywhere at this time. Think of the people who are not sure about their jobs just when the festive season is approaching. What will their families do," Gulati told THE WEEK.
Many dealerships are family-owned and small and mid-size businesses with turnover of around Rs 5 crore or more. According to FADA, there were close to 170 Ford dealerships and close to 40,000 job losses are expected.
He feels the dealers should have been given some signal and time for them to liquidate their stocks and plan for their future.
The Ford management has held meetings with several dealers and more meetings are planned with others. But, Gulati says the dealers had to sign a non-disclosure agreement as a precondition for the negotiations.
Furthermore, Ford India's managing director Anurag Mehrotra, who was leading the negotiations, has also reportedly stepped down.
Gulati says there needs to be more transparency.
"Our expectation is simple. Even, if I bought a glass, if you asked me to do it, it should be compensated by you. Every brand has a unique design for its dealerships. So, what ever investments dealers have made in the showrooms need to be compensated for," said Gulati.
He says it's not clear if there will be compensation for 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 among other things.
"If you have committed something, the commitment has to be valued and compensated as required in the situation," said Gulati.
Therefore, FADA feels there is a need for the government to bring in a Automotive Dealers Protection Act.
This will not only safeguard dealers’ and customers’ interests, but would also protect the interests of people employed at dealerships. A protective legislation would also ensure that adequate information is available to the customers, protect dealers from sudden exits by companies and ensure protection form unfair termination of dealership agreements, said Gulati.
He agrees that one can't stop any company from shutting down. But there should be proper rules and regulations for the exit, so that the interests of the wider ecosystem, including dealers is protected.
"There needs to be a set of protocols a company must go through," he said.
