FADA seeks legal protection against sudden exits by auto cos
Times of India | 12 March 2025
Kolkata: The Federation of Automobile Dealers Association (FADA), representing more than 15,000 automotive dealers across India, is lobbying with Centre and state govts for legislative protection to prevent automobile manufacturers from suddenly withdrawing from the country.
"We need a law to protect not just Indian consumers and Indian businesses but Indian capital from the disruption caused by sudden exits like the one that happened when Ford Motor Co suddenly pulled the plug in Sept 2021. The move left dealers, employees and customers in the lurch," FADA president C S Vigneshwar said during an interaction in the city on Tuesday.
Since India's economic liberalisation in 1991, numerous foreign automobile manufacturers entered the market. However, several companies have discontinued operations, including Korean manufacturer Daewoo, Italian firm Fiat, Japanese brands Datsun and Mitsubishi, and American companies General Motors and Ford Motor Co.
GM ceased operations twice, initially with Opel and subsequently with Chevrolet. Ford was the most recent departure. Harley Davidson, the American motorcycle manufacturer, departed in 2020 but later established a partnership with Hero MotoCorp.
Beyond the leading six automobile manufacturers, other companies have less than 5% market share and are struggling to survive in the competitive Indian automotive sector.
"Ford's exit was the worst as the company did not disclose its intention to dealers. We learnt of it from regulatory filings to the Securities and Exchange Commission. And it happened on the auspicious occasion of Ganesh Chaturthi when dealers had made advance bookings and were to deliver cars," recounted FADA chief executive officer Saharsh Damani.
The association seeks assurance that departing companies will repurchase unsold inventory, including vehicles and components, whilst compensating dealers for investments in showrooms and workshops.
A two-wheeler dealership typically requires an investment of Rs 75 lakh to Rs 2 crore, while car dealerships need Rs 15 crore to Rs 30 crore.
"Many overseas automakers insist on using their vendors to do showrooms. Thus, one has to purchase everything, from tiles to furniture, from these vendors. If the company exits and the dealer moves to another company, fresh investment is required because the company wants uniformity," Damani said.
JSW MG Motor India has fully accepted FADA's Model Dealer Agreement, and Honda Cars India has agreed to 83% of the model pact's clauses.
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