64,000 Indians Lost Jobs In Last 5 Years As 6 Big Auto Companies Exit India: Who Is Responsible?

You would be surprised to know that over the last five years, the exits by automotive companies from India have resulted in 64,000 job losses.

It has resulted in a dealer investment loss of Rs 2,485 crore, as per the data shared by the Federation of Automobile Dealer Association (FADA) to the Heavy Industries Ministry reveal.

Automotive Brands Exit Form Indian Market

So far, six major automotive companies and brands including General Motors, Ford, MAN Trucks, Fiat, Harley Davidson, UM Motorcycles and a number of electric vehicle companies have ceased sales operations in India.

 Besides this, a joint venture of Eicher Polaris has ceased sales operations in India since 2017.

Automotive Brands Exit Affecting Dealers

This has affected more than 464 dealers.

“Sudden exits by these MNCs cause great distress to the entire auto retail industry and hamper the entrepreneur’s zeal to do business and the customer’s interests, by leaving the customers high and dry with no proper after-sales support. Crores of rupees go down the drain as it kills an entrepreneur’s vision to get into the business again,” according to Vinkesh Gulati, President, FADA.

Basically, this letter was addressed to Minister of Heavy Industries, Mahendra Nath Pandey, who had attended FADA’s third auto retail conclave held in August.

Need For Protection For Auto Dealers

Further, Gulati said, “I would request that your Ministry work on protection of auto dealers’ rights, possibly through 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,”.

Ford India Exit Affecting Dealers And Job Losses

The most recent exit is from Ford India, which after trying fruitlessly for several years, Ford called it quits on September 9, 2021.

The carmaker has closed all manufacturing and sales operations in the country in a phased manner. 

This has caused more than 4,000 of its employee’s job loss, who are employed at the two manufacturing plants.

Actually, Ford India was forcing its dealers to first sign a Non-Disclosure Agreement (NDA) latest by September 14, 2021, before any compensation package is worked out, according to FADA. 

Gulati added, “We found that the definition of ‘confidential information’ (in the NDA) is extremely broad and does not explicitly mention the scope of the discussions that Ford intends to undertake with the dealers,”.

At this stage, it is unclear if Ford’s discussions with its India dealers would include 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, according to FADA.

Apart from this, there are other concerns that include damages arising out of a compulsory restricted nature of business imposed viz. stopping of sales and only continuation of parts and service and damages owing to loss of reputation and goodwill coupled with loss owing to the expense of re-establishing customer base and goodwill.

According to Gulati, “Such coercive efforts on Ford’s part to get their channel partners to sign an NDA with the imposition of unreasonably tight timelines, under economic duress is not the right approach and adversely impacts dealer interests. Taking this into consideration, we have 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. We await his response,”.

Considering the scenario, FADA has requested the heavy industry’s intervention.

FADA is asking for the creation of a task force that takes a day-to-day update from Ford India to monitor the compensation plan for automobile dealers and dealership employees.

This way, they want to make sure that Ford India indemnifies dealers from various consumer and civil cases, both under pendency and against any future cases that may arise directly or indirectly out of Ford’s restructuring announcement.