Federation of Automobile Dealers Associations calls for an overhaul of dealership contracts, calls them lop-sided

Even as the latest sales data highlights that the auto sector is yet to shake off the COVID-19 jitters completely, Federation of Automobile Dealers Associations (FADA), which represents auto dealers, has called for an overhaul of dealership contracts.

FADA feels that the current dealer agreements are lop-sided, highlights that the termination obligations are one-sided and against their interests.

Talking about lop-sided agreements Vinkesh Gulati, the President of FADA, said, “As a dealer if I go to the government or court, they say that you have signed an agreement and this is a business-to-business agreement. So obviously, whatever is written in the agreement will be eligible. When we signed the agreement, there is no say from all sides. We invest a lot, there is a lot of manpower employment, which we created, but the agreement is totally lop-sided."

He said MNCs that come to India have a different type of agreement when they are signing with a dealer in the US or Europe or Brazil. "But when they come into India, they have a different agreement, which is totally lop-sided and imbalanced," he said.

Electric bicycles — why?

Gulati said he feels some basic regulation is required. "You have already seen how it has happened with GM, Ford, Harley, UML. There are a lot many more stories which have not yet come into the limelight, because those weren't as big as Ford or something.”

He added, “There are a lot of things which are not been taken into consideration when government supports it and as of today, the way government is pursuing or motivating electric vehicle sales, they are just putting a black eye on all these problems which are happening. See what happened with EV fires. After all these fires, now government is working on getting around regulation, how they can control battery quality or battery management software.”

He said there is a mushroom growth of EV manufacturers. "They are just coming in as a startup, as they get a lot of benefits from the government as startups. They take all the benefits, work for a year or two and if they don't get valuation, they just rush out. They aren't fined too. If they get valuation they grow big," he said, adding that the chances of getting a valuation or PE are not so high.

Also with sales of several electric vehicle companies languishing in single digits or a few hundreds, the dealers are complaining of financial stress.

Rahul Govil, a dealer for Veanco Automotives, said that the EV sector is growing and is new for them as well as the sector itself. "New EV players are coming up in the market, but they are competing with the older and reputed IC engine manufacturers," he said.

Also Read: Nitin Gadkari says alternative fuel is the future, will soon have electric tractors and trucks

Govil said one-sided dealer agreements are affecting the dealers. "What companies are doing – they are coming up like mushrooms and selling their poor products to the dealers and ultimately the dealers and the customers and financers also have to suffer. Mainly, there is no check on the quality of product companies are selling.”

Dinesh Arora, Dealer, Okaya Automotive, too said the agreements between dealers and manufacturers are one-sided.