FADA urges Centre for Franchisee Protection Act as Ford India halts sales

Following Ford India’s announcement today that it is stopping manufacturing of vehicles for sale in India with immediate effect, automobile retail body FADA (Federation of Automobile Dealers Associations) has once again urged the government to roll out the Franchisee Protection Act to protect the dealer community.

Commenting on Ford India’s decision, FADA president Vinkesh Gulati said: "The auto retail fraternity is really shocked to hear that another US auto major, Ford India's announcement that it will shut down production with immediate effect. While trying to handle dealer anxiety, Ford India president and MD, Anurag Mehrotra has assured that they will adequately compensate dealers who continue to offer vehicle service to customers. Though this is a good beginning, it is not enough as there are around 170 dealers who have around 391 outlets and have invested Rs 2,000 crore for setting up their dealerships. While Ford India employs 4,000 people, dealerships employ around 40,000 people without displacing them from their home locations thus being continuously skilled and up-skilled all this while.”

Gulati added that Ford India dealers currently hold around 1,000 vehicles, which amounts to an estimated Rs 150 crore via inventory funding from Indian banks. They also carry demo vehicles numbering in hundreds. He pointed out that Ford India has appointed multiple dealers as recently as five months ago and these would be hugely impacted.

It may be noted that FADA has been urging the government of India to roll out the Franchisee Protection Act. Due to the law not being in place, automobile dealers are not adequately compensated like their counterparts in Mexico, Brazil, Russia, China, Indonesia, Malaysia, Japan, Italy, Australia, Sweden and many other countries, where this law exists. Gulati pointed out that after General Motors, MAN Trucks, Harley-Davidson, UM Lohia and a number of fly-by-night electric vehicle players, Ford India is the fifth biggest exit from the Indian markets since 2017.

According to Gulati, the Parliamentary Committee on Industry, in its report number 303 released in December 2020, had recommended Ministry of Heavy Industries that the government should enact the Franchise Protection Act for automobile dealers, so that it is a win-win for both, the Original Equipment Manufacturers (OEMs) as well as dealers, but will also be beneficial to customers in the long run.

ALSO READ: FADA bats for 'Franchisee Protection Act' amidst Harley-Davidson's India exit