As Ford Exits, Auto Dealership Seek Govt Intervention
With Ford’s exit, a total of 464 dealers (excluding those dealing with Fiat, Mitsubishi) are said to have pumped in Rs. 2,485 crore with nearly 64,000 people employed thereof who were either axed or are about to be axed, claims FADA, industry association of auto-dealers in a letter sent to the Minister for Heavy Industries.
After US-based Ford Motor Company exits the India operations, the 170-dealer network under the aegis of its industry association—Federation Of Automobile Dealers Associations or FADA—has sought clarification on the contours of the compensation package. The association has also written to Minister of Heavy Industries wherein it has reinforced its plea to bring in a law which would make sure that auto OEMs don’t exit the market overnight and leave their dealers, employees and customers high and dry.
FADA President Vinkesh Gulati has written the plea in a letter to the Minister of Heavy Industries Mahendra Nath Pandey, a copy of which was shared with the media on 23 September 2021.
Ford India, which has invested about US$ 2.5 billion at its Chennai and Sanand (Gujarat) plants, has already announced that it will stop selling vehicles like the EcoSport, Figo and Aspire manufactured from these factories. On 22 September 2021, Ford India management met its principal dealers to work out a compensation formula as it prepares to exit India's automobile market.
FADA mentioned in the letter that it has 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 and his response is eagerly awaited by the association.
However, FADA asserted that despite the tall claims made by Ford India, the modalities of the so-called restructuring of Indian operations suggest otherwise. The association claims that nearly 170 Dealers who in-turn have 391 outlets and have invested Rs 2,000 crore for setting up their dealerships and have around 40,000 people on its roll will be done away with.
The dealer association claimed that auto dealerships’ turnovers that range from Rs. 5 crores and upwards, largely are family owned small, mid-sized businesses, partnership firms operating all across the country. With Ford’s exit, the 464 dealers (excluding those dealing with Fiat, Mitsubishi) have pumped in Rs. 2485 crore and nearly 64,000 people employed there are either axed or are about to be axed (see table below).
“A Dealer invests his entire savings to get into auto trade business with a long-term investment plan but the dealership agreements to effectuate this business only happen on a yearly basis. I would request that your Ministry work on protection of auto dealers’ rights, possibly through a 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. A protective legislation would also ensure that adequate information is available to the customers, protect dealers from sudden exits by OEMs and ensure protection form unfair termination of dealership agreements, as mentioned by FADA President Vinkesh Gulati, in its letter to Minister of Heavy Industries Dr. Mahendra Nath Pandey.