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June 2017 issue of FADA Journal

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Published by FADA Journal, 2017-07-25 03:09:30

FADA Journal - June 2017

June 2017 issue of FADA Journal

Office Bearers contents

President PRESIDENT’s MESSAGE 7 In the Thick of Action

JOHN K PAUL INDUSTRY TRACK 8 Vehicle Sales in May - A Mixed Bag
Popular Vehicles & Services Pvt Ltd
Kuttukaran Centre, Mamangalam, Kochi - 682 025 SURVEYS & STUDIES 11 Toyota Tops in J D Power Dealer Satisfaction Study
Tel: +91-484-234 1134 / 7872 / 5013 for 7th Consecutive Year
E-mail: president@fada.in;

johnkpaul@popularv.com

Vice President OPINION 14 GST Impact on Automobile Sector - ICRA

ASHISH KALE INSIGHT 17 The Future Depends on Improving Returns on Capital
Provincial Automobile Co. Ltd TECHNOLOGY - Strategy&, PwC
Kingsway, Near Railway Station, Nagpur - 440 001 COMPETITION LAW
Tel: +91-712-391 1129 / 1150 20 Building the Digital Car Company of the Future
E-mail: vicepresident@fada.in; - Boston Consulting

ashish@provincialauto.com 24 Competition Law Updates - G R Bhatia

Secretary General & Editor, FADA FADA NEWSLINE 25 FADA Delegation Meets Union Minister of Road Transport & Highways
Journal
FADA ALBUM 26 FADA’s Seminars on Decoding GST in Pictures
GULSHAN AHUJA
Federation of Automobile Dealers Associations NEW ON WHEELS 30 • Volkswagen Introduces Tiguan in Premium Car Segment
805, Surya Kiran, 19, K G Marg, New Delhi UPGRADES & VARIANTS • Mercedes-Benz AMG G 63 ‘Edition 463’ and AMG GLS 63
Telefax: +91-11-6630 4852, 2332 0095 Drive into India
E-mail: fada@fada.in • Web: fada.in
32 Renault Launches New Duster Petrol with CVT
ADVERTISERS’ INDEX
60 NEWS FROM REGIONS 33 Interactive Session on GST with Government of Delhi
Back Cover
V E Commercial Vehicles 2 KNOW OUR MEMBER 35 Profile of MCS Auto Pvt Ltd, Kanpur

Front Inside Cover 59 NEWS BASKET 36 • Maruti to Set Up Auto Skill Enhancement Centres at 15 ITIs
Tata Capital Financial Services • Mahindra First Choice Wheels Inaugurates India’s Larges Multi-
3 FUEL WATCH Brand Pre-Owned Vehicle Showroom in New Delhi
Back Inside Cover 4 BLOG • Mercedes Inaugurates Refurbished ‘3S’ Dealership in Mumbai
Tata Motors 6 • Ducati India Expands Network with a New Dealership in Kochi
12 CONSUMER CASE STUDIES • Toyota Wins ‘Best Kaizen Award’ at CII
Inside Pages 13 SALES REPORTS
• Mahindra & Mahindra Financial Services 23 40 Shale Producers Won OPEC’s Oil Price War
• Bagga Link 25 - Steve Austin for OIL-PRICE.NET
• HPCL 34
• Carazoo Online Solutions 38 43 The Changing Automotive Landscape
• Marikar Group 48 - Stefan Issing, Global Industry Director-Automotive, IFS
• Prime Honda 48
• HPCL 51 44 NCDRC : Reliance General Insurance Co. Ltd - Petitioner
• Exide Industries 54 Versus Jivabhai Maldebhai Godhaniya - Respondents
• AMPL 55
• Olympia Honda 49 Vehicle Sales & Exports and Y-o-Y Growth - May 2017
• Maurya Motors
• SKF Group 56 Major developments affecting Automobile Industry in US
• Force Motors
• Shriram Transport Finance

NADA MUSINGS

For Advertisement query, please contact Printed and Published by G K Ahuja on behalf of Federation of Automobile Dealers Associations,
Ankush Sethi at fada@fada.in 805, Surya Kiran, 19, Kasturba Gandhi Marg, New Delhi-110001.
Printed at Sita Fine Arts P Ltd, A-22, Naraina Industrial Area, Phase-II, New Delhi-110028.
Editor: G K Ahuja


President’s Message

In the Thick of Action

Dear friends,
You will glad to know that the activities of FADA have gained momentum
and attained feverish pitch.
As I write this message, it is more or less clear from the recent meeting of
GST Council that Goods and Services Tax (GST) - a revolutionary tax reform,
which will bring about a huge disruption and sea change in business
practices, is set to be introduced with effect from 1st July 2017, unless
technical glitches and/or unforeseen contingencies constrain the
Government to postpone the GST implementation by a couple of months.
In any case, we, in retail automobile trade, have to be geared to stand up
to this gigantic challenge.
FADA, as the apex national body representing the retail automobile trade
in India, is alive to the challenge, the implementation of GST is likely to
pose for members of the automobile dealer fraternity. As such, an initiative
was taken to organise series of seminars on GST in various parts of the
country to guide and educate automobile dealers on the implications of
GST and the preparedness required on their part for smooth transition.
I am happy to inform that as a part of this initiative, 12 seminars on GST have already been held under the banner of FADA in
Mumbai, Delhi, Raipur, Lucknow, Nagpur, Aurangabad, Kochi, Chennai, Bangalore, Vijayawada, Kolkata and Guwahati. What is
heartening is that the seminars received massive response, with each seminar attracting over 100 participants. I have been
receiving congratulatory messages and very good feedback from my fellow dealers, who participated at the seminar. I must
compliment the local associations that pitched in with their all-out support to make the seminars a tremendous success.
Let me assure you, FADA’s role is not limited to organising seminars alone. The concerns and queries arising out of the seminars
are being collated and suitably taken up with the appropriate authorities. We are open to organising more seminars on GST in
other places, if the members or their associations in these places, approach FADA. While FADA disseminates the information
through its website, mail and FADA Journal and provides guidance, it is the local members who have to orchestrate the efforts
and make arrangements at the local level to organise the programme.
As far other activities of FADA, we, in FADA Council, are continuing our endeavours to strenthen and deepen relations with all
stakeholders. To build this connect, we have held series of meetings with SIAM, individual OEMs and Government authorities,
including the Hon’ble Finance Minister and Mr Ashok Lavasa, Finance Secretary, Government of India.
On the heels of meeting with Mr Ashok Lavasa on 2nd May 2017, a 4-member FADA group held meeting with Mr Nitin Gadkari,
Union Minister of Road Transport & Highways on 29th May 2017, wherein a number of issues of concern, including GST, vehicle
scrapping policy, according industry status to auto retail and provision for auto clusters along national & state highways were
discussed. I am happy to inform that the Hon’ble Union Minister of Road Transport & Highways was quite receptive to the
suggestions made at the meeting.
Adverting to the auto market, I am sorry to note that the commercial vehicles have not been able to recover from the body
blow dealt by the order dated 29th March 2017 of Hon’ble Supreme Court banning sale of BS III vehicles effective from 1st April
2017. We, in FADA as responsible corporate citizens, welcome the measures aimed at promoting clean environment and road
safety. However, there is an imperative need for a holistic approach to tackle this twin-problem. The isolated knee-jerk reactions
not only lead to uncertainty and disruption but also do not yield the desired results.
Look forward to your inputs and suggestions.
With best wishes,
Yours sincerely,

John K Paul
President

7 June 2017


Industry Track

Vehicle Sales in May - A Mixed Bag

The month of May 2017 turned out to be a mixed bag for units). The domestic sales tally was majorly contributed by
auto market in India. The sales of passenger vehicles and two- the company’s UVs that accounted for 19,331 units in May
wheelers remained on course, riding on new models and 2017.
upbeat sentiment as a result of the gradually improving
economic environment and forecast of a normal monsoon. Another domestic auto player, Tata Motors saw a healthy
However, commercial vehicles and 3-wheelers could not 32.2% surge in its domestic passenger vehicles sales, including
recover from the shock of Supreme Court order abruptly cars, UVs and vans, which stood at 12,499 units in May 2017
banning sale of BS III vehicles from 1st April 2017. Total vis-à-vis 9,456 units in May 2016. The sales were driven by
domestic sales encompassing 2 & 3-wheelers, passenger the new-generation cars - Tiago, Tigor and Hexa.

vehicles, pick-ups, buses and trucks at 2,035,490 units in May Ford India recorded sales of 6,742 units in the domestic market
2017 grew by 10.1% vis-a-vis 1,849,542 units in May 2016. during May 2017, which translated into growth of 16.6% over
5,780 units in May last year. The company’s exports stayed in
Passenger Vehicle Sales Stay on Growth Trajectory fast lane, soaring by 45.8% y-o-y to 16,761 units during the

Driven by the new cars and compact SUVs, passenger vehicle month.
sales in domestic market remained steady, growing by 8.3%
to 251,642 units in May 2017 from 231,640 units a year ago. Meanwhile, Honda Cars India Ltd (HCIL) sold 11,278 units in
UV segment continued to make big strides, with domestic sales the domestic market during May 2017, clocking a 13.3%
witnessing a healthy 18.8% increase y-o-y to 69,845 units increase (May 2016: 9,954 units). Honda City continued to be
during the month. the top-selling car for HCIL in the Indian market with a tally of
4,046 units, followed by the recently launched WR-V crossover,
Maruti Suzuki India (MSI), a pacesetter in the Indian car which saw 2,814 units being sold in May. Yoichiro Ueno,
market, powered the domestic passenger vehicle sales, President and CEO, HCIL, said: “We are happy to have achieved
accounting for130,248 units in May 2017 (+15.10%). positive growth in May. We continue to receive strong demand
Interestingly, thanks to surging demand for the Baleno and for the new City and the WR-V. The government’s plan for
Vitara Brezza, the company has increased its PV market share timely rollout of GST and a better monsoon forecast will aid
by 3.2 percentage points from 48.60% to a handsome 51.8% in sales growth in the coming months.”
percent within a year. MSI’s entry level duo of Alto and WagonR
sold 39,089 units in May 2017, up 18.1% (May 2016: 33,105 Domestic sales of Toyota Kirloskar Motor (TKM) at 10,914
units). The sextet of compact cars comprising the Swift, Ritz, units in May 2017 were down 13.5% (May 2016: 12,614 units).
Celerio, Ignis, Baleno and Dzire witnessed domestic sales of N Raja, Director and Senior Vice-President, Sales & Mktg, TKM,
51,234 units, growing by 10.1% over 46,554 units in May 2016. commented, “The Innova Touring Sport, launched in May, has
been appreciated by customers for being the first mover in
Hyundai Motor India Ltd (HMIL), the 2nd largest car player in the MPV segment with an SUV styling. With the ambiguity
the Indian market, registered domestic sales of 42,007 units surrounding the upcoming GST proposed tax structure,
in May 2017, crawling up by just 1.6%, compared to 41,351 customers are postponing their plan of purchasing the vehicle
units in May 2016. HMIL’s exports fell sharply by 30.1% y-o- after the GST implementation. We expect this impact to
y to 8,257 units in May 2017 from 11,805 units a year earlier. magnify in June 2017, until the customers have a clear
Commenting on the sales numbers, Rakesh Srivastava, understanding of the final pricing after the GST rollout.”
Director, Sales & Mtkg, HMIL, said,
“Hyundai volumes at 42,007 units Sales (Domestic + Exports) during May 2017 viz-a-viz May 2016

maintain the growth momentum in
passenger vehicles on the strength of
the demand pull created by the Grand
i10, Elite i20, Creta and the newly
launched new Xcent.”

Homegrown UV major, Mahindra &
Mahindra sold 20,270 units in the
domestic market during the month of
May 2017, registering a marginal
growth of 3.2% (May 2016: 19,635

June 2017 8


Industry Track

Renault India recorded a 3.5% uptick in domestic sales, which market in May 2017, down 13.0% y-o-y. The company’s two-
aggregated 8,639 units in May 2017, as against 8,343 units a wheeler exports were also in negative terrain, declining by
year ago. 5.4% y-o-y to 120,592 units during the month.
Nissan India saw its domestic sales go up by 5.7% y-o-y to India Yamaha Motor recorded domestic sales of 69,429 units
3,707 units in May 2017. The company’s exports at 6,830 units (including Nepal) in May 2017, which marked a 10.6% growth
in May were down 36.9% y-o-y. over 62,748 units in May last year. The company continues to
expand in tier II and III cities with its service network and is
Two-Wheeler Market Steady working to ensure availability of spare parts across its national
footprint.
Thanks to the gradually improving sentiment in rural market Continuing its dream run, Royal Enfield witnessed a healthy
and demonetization impact tapering off, two-wheelers double-digit growth of 24.2% in domestic sales at 58,647 units
sustained the sales momentum. Total domestic sales of two- in May 2017, compared to 47,232 units in May 2016.
wheelers adding up to 1,694,325 units in May 2017 grew by
11.9% over 1,514,334 units a year ago. M&HCV Sales Remain Under Stress
Two-Wheeler market leader, Hero MotoCorp, posted
domestic sales of 613019 units in May 2017, up 8.0% vis-à-vis As in April, the sales of Medium & Heavy Commercial Vehicles
583,117 units in May last year. The exports at 20,865 units (M&HCVs) remained depressed in May 2017, with domestic
increased by handsome 36.7% y-o-y during the month. sales declining steeply by 33.0% y-o-y to 16,716 units. LCVs,
Hero MotoCorp also commenced commercial production at on the other hand, clocked 14.3% growth y-o-y in domestic
manufacturing facility of its subsidiary HMCL Niloy sales that added up to 36,741 units during the month.
Bangladesh Ltd. This plant, located at Jessore in Bangladesh, Tata Motors, citing the global supply constraints of fuel
has an installed capacity of 150,000 vehicles per annum. This injection pumps for BSIV engines as a major reason for dip
is Hero’s second manufacturing facility at an overseas in sales, reported a massive 37.2% fall in its domestic
location. M&HCV sales that stood at 8,361 units in May 2017, as
The second largest two-wheeler player in India, Honda compared to 13,312 units a year ago. Domestic sales of Tata
Motorcycle & Scooter India (HMSI), reported 510,381 units LCVs at 13,601 units were, however, up 5.6% y-o-y during
in domestic sales in May 2017, up by an impressive 22.7% the month.
y-o-y and almost double of the overall industry growth. As Ashok Leyland was also in negative terrain, witnessing a 12.7%
a result, HMSI inched closer to Hero MotoCorp’s monthly drop in domestic CV sales that aggregated 7,833 units in May
sale numbers. May 2017 marked the second month for 2017 vis-à-vis 8,970 units in May last year. Ashok Leyland’s
Honda in terms of achieving over 500,000 units in domestic M&HCV sales in domestic market remained under stress,
sales. declining by 17.8% to 6,143 units (May 2016: 7,469 units). Its
Elaborating on the market, Yadvinder Singh Guleria, Senior LCVs, which were down in April, turned positive, clocking
Vice President - Sales and Mktg, HMSI, said, “Honda continues 21.9% growth in domestic sales at 2,932 units in May
to outpace the two-wheeler industry growth growing nearly 2017(May 2016: 2,406 units).
three times that of the industry in April-May 2017. Increased Ditto for VE Commercial Vehicles that saw domestic sales of
acceptance of Honda’s newly launched motorcycles has Eicher branded trucks and buses slump by 16.0% to 3,953 units
resulted in Honda maintaining its No. 2 position in the in May 2017 from 4,705 in May 2016.
motorcycle segment for second month in a row. Overall, the Mahindra & Mahindra’s total CV sales in domestic market
two-wheeler industry has once again bounced back to double were up 24.0% at 16,261 units in May 2017 (May 2016:
digit growth after six months indicating early signs of recovery. 13,109 units). However, its M&HCV sales at 585 units
However, with upcoming GST implementation, industry remained negative, falling by12.9% to 585 units (May 2016:
sentiment is cautiously optimistic.” 672 units).
TVS Motor Company sold 240,527 two-wheelers in the Indian While forecast of a normal monsoon portends well for the
market in May 2017, clocking a 16.3% uptick vis-à-vis 206,886 auto market, with GST kicking in from 1st July 2017, there is
units in May last year. TVS two-wheeler exports grew by 11.0% fear of the unknown gripping the market currently. However,
y-o-y to 34,899 units during the month. as the dust settles down and uncertainty ebbs away, the
Pune-based Bajaj Auto sold 156,523 two-wheelers in domestic buoyancy is likely to return

9 June 2017


Surveys & Studies

Toyota Tops in J D Power Dealer Satisfaction Study for
7th Consecutive Year

Royal Enfield and Mahindra Rank Highest in 2-Wheeler and Commercial Vehicle Segments, respectively

More than half of all dealers across the three largest vehicle a lesser concern for dealers in India’s six largest cities where
segments in India - passenger vehicles, two-wheelers and one-fifth (21%) are disappointed with the extent of financial
commercial vehicles - express confidence for a profitable support provided, compared with 28% in the rest of the
financial year as customer buying sentiment continues to country.
improve, according to the J D Power 2017 India Dealer Commercial Vehicles
Satisfaction with Automotive Manufacturers Index (DSWAMI) Commercial vehicles are measured in the study for the first
Study released on May 25. time. Across the nine factors that compose the index,
Passenger Vehicles satisfaction with product ranks highest among dealers at 806.
More than half (58%) of all passenger vehicle dealerships in Nine out of 10 dealers indicate that the manufacturer has the
India expect to generate a profit in fiscal year 2017, up from range of vehicles to compete effectively in the market.
49% last year. Only 15% of dealers anticipate a loss, the lowest Marketing and sales activities, a key factor in the study, has
percentage in the study’s history. In addition to extending the lowest overall score in the study with one-fourth of
financial support to their dealers to ensure their viability, commercial vehicle dealers indicating they are disappointed
automakers are making concerted efforts to improve their with the variety of sales promotions (26%) and reasonable
systems, resulting in fewer delays and discrepancies. In 2017, dealer advertising allowance (27%).
22% of dealers indicate they have not
experienced a delay in the delivery of
vehicles, up from 16% in 2016.

“It is encouraging to see that
automakers are dedicated to enhancing
their systems so that information can
be relayed without error or delay,” said
Shantanu Nandi Majumdar, director at
J D Power. “With the overall Indian
economy and the automotive industry
on the road to recovery, manufacturers
that are committed to extending this
support are more likely to develop
stronger ties with their franchise.”

Two-Wheelers

Being measured for the first time in the
study, dealer satisfaction with two-
wheeler manufacturers averages 780
(on a 1,000-point scale), with 54% of
all two-wheeler dealerships expecting
their financial performance this year to
be better than the previous year, and
half expecting to be profitable.

However, nearly one-fourth (24%) are
disappointed with management’s
concern regarding dealer viability and
78% believe manufacturers need to
improve relations with dealers. This is

11 June 2017


PASSENGER VEHICLE

COMMERCIAL VEHICLE
TWO-WHEELER

June 2017 12


“As 2017-18 gears up for new model launches, facelifts and commercial vehicle (72%) and passenger vehicle (77%)
new variants across the three vehicle segments, savvy and dealers say that their manufacturer repays them by
effective marketing strategies will be the key to higher sales providing means to expand their business. Among two-
and enhanced brand image,” Majumdar said. “With more and wheeler dealerships, this proportion is notably lower at
more touchpoints in the purchase journey becoming digital, 59%.
the next few years are likely to see a sharp rise in digital Study Rankings
marketing spend by manufacturers.” In the passenger vehicle segment, Toyota (938) ranks highest
Following are additional findings of the 2017 study: in dealer satisfaction for the seventh consecutive year,
• Dealer satisfaction affects loyalty: Across the three performing particularly well across all factors. Maruti Suzuki
ranks second with a score of 920, followed by Renault (914).
vehicle segments - passenger vehicle, two-wheeler and Royal Enfield, with a score 868, ranks highest in dealer
commercial vehicles - more than 90% of the dealers in satisfaction among manufacturers of two-wheelers, followed
the top quartile of satisfaction indicate that they are likely by TVS at 834. Honda ranks third with 808.
to be working with the same vehicle manufacturer for at In the commercial vehicle category, Mahindra ranks highest
least another two years. In contrast, among dealers in in dealer satisfaction with a score of 890. Ashok Leyland ranks
the bottom quartile of satisfaction, less than 70% of second with 801, followed by Tata (777).
dealers expect to be working with the same automaker About the Study
in two years’ time. Now in its seventh year, the India DSWAMI Study measures
• Performance rewards/incentives influence satisfaction: dealer satisfaction with vehicle manufacturers or importers
Dealers who are incentivized with the opportunity to in India and identifies dealer attitudes regarding the
expand their current business score higher than those automotive retail business. Dealerships of two-wheeler and
who are given cash or awards/trophies. Three-fourths of commercial vehicle manufacturers in India are covered for the
first time in the 2017 study. Overall dealer satisfaction is
determined by examining nine factors (in order of importance):
sales team; marketing and sales activities; support from the
manufacturer; product; vehicle ordering and delivery; training;
warranty claims; after-sales team; and parts.
The 2017 study is based on responses from 2,358 dealer
principals or dealership general managers located in more than
200 cities throughout India. The study was conducted in
association with the Federation of Automobile Dealers
Associations (FADA) and was fielded from January through
March 2017

MARIKAR GROUP OF CONCERNS

DSK Benelli Motowheels Pvt Ltd - Benelli Motorcycles; Eicher Motors Ltd - Royal Enfield Motorcycles; Honda Motorcycle & Scooter
India Pvt Ltd - Honda Motorcycle & Scooters; Mahindra First Choice Wheels Ltd - Pre-Owned Cars; Nissan Motor India Pvt Ltd - Nissan
Cars and Datsun Cars; Skoda Auto India Pvt Ltd - Skoda Cars; Canon India Pvt Ltd - Canon Products; Gabriel India Ltd; NXT Automart
(India) Ltd - Drivol, Duracell, FIAMM, Bluechem; PETRONAS Lubricants (India) Pvt Ltd; R&R Textile - Ramraj, Ramyyam; TIDC India Ltd;

and Whirlpool of India Ltd - Home Appliances.
Branches: Alappuzha, Aluva, Attingal, Chavakkad, Cochin, Irinjalakuda, Kalamassery, Kollam, Kozhikode, Kulasekharam, Marthandam,

Nagercoil, Nedumangad, Pathanamthitta, Thrissur, Trivandrum and Varkala.
Phone: 0471 - 2477420, 2471814, 2465882 | Hotlines: 9961 88 9000 | Fax: 0471 2462630 | E-mail: info@marikar.in

13 June 2017


Opinion

GST Impact on Automobile Sector

ICRA

GST impact is largely neutral for the corporate sector Likely Impact

With the announcement of GST rates for most goods and • Proposed tax rate for small car will either be price neutral
services post GST Council’s meeting on 18th May, India has or marginally lower considering GST will subsume
reached another step closer to nationwide implementation infrastructure-cess.
of GST. Most of the GST rates announced so far have a neutral
impact on the indirect tax burden for the industry. • Bigger sedans (engine size > 1,500cc and length >4,000
The implementation of GST would have three major mm) and SUVs (engine size > 1,500cc and ground
implications for the corporate sector - a) expand availability clearance > 170mm) will see lower taxation and eventually
on input tax credit, b) higher degree of tax compliance with reduction in vehicle prices given the fact that they are
business moving away from unorganized sector to organized currently taxed above the proposed 43% tax rate.
sector, greater transparency on tax administration and c)
reduced bottlenecks and improved efficiencies in supply chain • Introduction of 15% cess on Hybrid vehicles appears to be
and logistics. Closer to the implementation date however we contrary to Government’s plansto promote greener vehicles.
would expect some disruptions and the distribution chain
(wholesale and retail) gets rid of channel inventory to avoid • In addition, vehicles with passenger carrying capacity
any potential inconvenience post transition. The working between 10-13 would also attract 15% cess; this may
capital cycle of the industry is also expected to expand mandate a review.
marginally, post GST implementation.
• Tax rate for other segments such 2Ws, 3Ws and CVs are
Key Announcements under GST for Automobile Sector broadly in line with the current taxation norms.

• Base rate for automobile sector set at 28% with an additional • Likewise for tractors, the tax rates of 12% broadly compares
cess of 15% of Bigger Cars, SUVs and Hybrid Vehicles. with existing taxation 12-13% currently applicable in the
form of VAT (i.e. 5%) and Excise duty on components (~8%).
• Small Cars to attract an additional cess of 1% and 3% on
petrol and diesel variants, respectively. Bigger Cars and SUVs to benefit under GST regime;
Taxation on other segments largely neutral
• Two-Wheelers, Three-Wheelers, Commercial Vehicles will
be taxed at a base rate of 28%. • GST Council announced the GST across various categories
of goods including automobiles. The rates, however, will
• Motorcycles with engine size > 350cc to attract an be subject to further vetting, during which the rates may
additional cess of 3%; This segment constitutes just 0.4% undergo some changes. In line with expectations, the base
of Indian 2W market during FY2017. GST rates for the automobile segment have been set at
28%, which is broadly in line with overall indirect tax rates
• Tractors fall under the 12% slab with provision to take at present. However, in addition to the base rate, the
input tax credit on raw materials. Government has also proposed to levy a cess of 1% and
3% on small cars with petrol & diesel engines, respectively.

June 2017 14


Opinion

• Considering GST will subsume infrastructure-cess – a) Service Tax paid on inputs such as Lease Rentals, IT
currently levied on domestic Passenger Vehicle industry, Services, Freight Charges (on finished products) and b)
proposed tax rate for small cars will either be price neutral Lower tax credit on outsourcing activities.
or reduce marginally. Moreover, bigger sedans (engine • The other major benefit of GST is expected to be easing
size > 1,500cc and length >4,000 mm) and SUVs (engine out of various bottlenecks and complexities involved in
size > 1,500cc and ground clearance > 170mm) will see transportation of goods using road logistics from one state
lower taxation and eventually reduction in vehicle prices, to another. Since CST will be subsumed in GST, companies
despite 15% cess above the base GST rate of 28%. will no longer be required to have depots/warehouses at
multiple locations and also do away with C&F agents. In
• Contrary to Government’s thrust on promoting greener the automobile industry, while OEMs dispatch vehicles
vehicles, the hybrid vehicles will also attract a cess of 15% directly from their factories to dealers; in their spare parts
over and above the base GST rate of 28%. This will result business, the sales are routed through depots and C&F
in hybrid vehiclesbecoming more expensive going forward. agents. With the implementation of GST, companies will
be able to consolidate their warehousing infrastructure
• Under GST, the effective taxation is likely to be almost and benefit from lower costs incurred in supply chain.
neutral for Commercial Vehicles, Three-Wheelers and
Two-Wheelers (up to 350 cc). However, within the CV Passenger Vehicles: Taxation on Bigger Cars and SUVs
space, the mini-bus segment (with carrying capacity of to reduce; Hybrid vehicles to cost more
10-13 passengers) has also been clubbed with bigger
vehicles and would attract an additional cess of 15%. ICRA • The Passenger Vehicle segment will see reduction in
believe this anomaly would most likely be reviewed by overall taxation under GST will subsume infrastructure-
the Government. cess currently levied on the segment. The extent of
reduction in overall taxes will vary across segments and
Input Tax Credit and Supply Chain efficiencies added Bigger Cars and SUVs will see the most benefit.
benefits of GST
• However, contrary to Government’s thrust on promoting
• Apart from simplification of taxation structure and a shift greener vehicles, the Hybrid vehicles will also attract a
towards uniform regime across the country, the cess of 15% over and above the base GST rate of 28%.
automobile sector will also see additional benefits by This will result in Hybrid vehicles becoming more
virtue of input tax credit on various elements of the cost expensive going forward. However, as clarified by
structure. Some of the common example would include

15 June 2017


Opinion

Government officials, the small hybrid vehicles will not base rate of 28% compared to an existing tax rate of
attract additional cess of 15%. Comparatively, electrically ~30%. However, within the CV space, the mini-bus
operated vehicle will be levied GST @ 12%, whereas segment (with carrying capacity of 10-13 passengers)
Hybrid will attract duty of 43%. has also been clubbed with bigger vehicles and would
attract an additional cess of 15%. We believe this
Two-Wheelers: Largely neutral except for Motorcycles anomaly would most likely be reviewed by the
above 350cc segment Government.

• For the two wheeler segment, the GST rates are likely to Tractors: Likely to be neutral under GST
be neutral as the segment will attract a tax rate base rate
of 28% compared to an existing tax rate of ~30%. However, • The tractor industry in India is exempt from paying Excise
motorcycles above 350cc segment will attract an Duty (on finished vehicles), however, it attracts VAT of 5
additional cess of 3%, leading to an overall tax rate of to 5.5% and is also not eligible to take credit on input tax
31%. In ICRA’s view, the impact will be limited as this paid by vendors on manufacturing of components. As a
segment accounts for miniscule share of (0.4%) of overall result, the overall indirect tax on tractor industry works
industry sales. out to be 12-13%.

Commercial Vehicles: Likely to be neutral under GST • Under GST, the tractor segment will be taxed at 12% with
provision to take input tax credit. Accordingly, the impact
• Likewise for the CV segment as well, the GST rates are of GST is likely to be neutral for the tractor industry
likely to be neutral as the segment will attract a tax rate

June 2017 16


Insight

The Future Depends on Improving Returns on Capital

Strategy&, PwC

Trouble ahead which it has emerged (though that is remarkable) as the
breadth of the innovation. Ubiquitous electronics, a variety
The global auto industry is more challenged than many people of digital services, and novel powertrains and connectivity
realize. On the surface, performance is strong. Worldwide sales systems are hastening the need for expensive new parts,
reached a record 88 million autos in 2016, up 4.8 per cent components, and functions. For OEMs, the price tag is high
from a year earlier, and profit margins for suppliers and auto — as much as 20 per cent greater than the cost of the previous
makers are at a 10-year high. Nonetheless, viewed through generation of automobiles.
the lens of two critical performance indicators, the industry is Consider the car’s interior, until recently a relatively stable
in serious trouble. component in terms of engineering & value to the automobile.
First, total shareholder return (TSR): Over the last five years, Now, interior surfaces are potential real estate for ambitious
the annual rates of return that the S&P 500 and Dow Jones enhancements of safety or entertainment. New technologies
Industrial Average achieved for investors (including dividends) such as 3D laminated glass, haptic sensors, and augmented
were 14.8 per cent and 10.1 per cent, respectively. In that reality heads-up displays — which offer drivers alerts, safety
period, average auto maker TSR was only 5.5 per cent. Second, aids, and warnings on invisible screens embedded in the
return on invested capital: In 2016, the top 10 OEMs returned windshield — have entered the vocabulary of traditional
an anemic 4 per cent, about half of the industry’s cost of suppliers. Large navigation and entertainment display screens
capital. The leading 100 suppliers have done a little better, in the dashboard offer Web-based information and media as
just beating their costs of capital to enjoy a small positive well as data arrays picked up from networked roads and other
return, after many years of negative net returns. cars. The autonomous car will further up the ante, and soon.
These numbers almost outweigh the positive sales and The front seat may be reoriented to face the back seat, so
earnings results. They paint a picture of a sector that is a less passengers can converse as they would in their living rooms,
attractive or less lucrative place to invest than other industries. while the car cruises to a destination. Or seats could face a
This assessment suggests that there will be relatively few windshield that’s become a large movie screen. Little wonder,
winners in the auto industry during the next five years and then, that vehicle electronics could account for up to 20 per
beyond. Those that do stand out will be the companies that cent of a car’s value in the next two years, up from only about
harness their limited capital resources in creative ways, to 13 per cent in 2015.
navigate a still-unfolding and unfamiliar landscape.
To be sure, rates of return on capital have been a problem Why costs may rise?
endemic to the auto industry for years, which is one reason
for the many bankruptcies — or near liquidations — among Innovative software developments may make tomorrow’s
OEMs and suppliers, particularly in the past decade or so. vehicles exceptionally expensive: OEMs and suppliers must
However, the situation is becoming more dire: The cost of earmark resources for acquiring new technology and recruiting
capital is unlikely to come down from its already low inflation- experienced technical talent. Many of the new features going
adjusted levels, and new capital outlays are rising for advances into cars require the expertise of software engineers, who by
in, among other areas, connected car and autonomous driving & large prefer the ostensibly more dynamic work environments
technology. of Silicon Valley startups to those of the automotive industry.
Indeed, what is particularly notable about the current wave As a result, some of the recent mergers and acquisitions in
of innovation in automobiles is not so much the speed with the automobile sector were undertaken to augment in-house
technical knowledge and capabilities. For instance, German

17 June 2017


Insight

supplier ZF Group, which paid US$12.4 billion in 2015 to the previous year’s record deal value, according to PwC’s
acquire TRW in order to expand into the electronic safety and Global Automotive M&A Deals Insights Year-end 2016 report.
connectivity market, took a 40 percent stake in vehicle radar However, consolidation is not the only solution — and in fact
supplier Ibeo Automotive Systems in 2016. not even an attractive solution for companies struggling to
Taken as a whole, innovation-related challenges are reshaping fund new innovations. Auto makers in particular will need to
traditional auto industry structures and relationships — in examine other strategic channels for relief. We believe that
particular, by threatening the existing distribution of profits OEMs should consider three actions:
and the boundaries between OEMs and Tier-I or Tier-II Share platforms and manufacturing
suppliers, as well as between automotive and tech companies. When the goal is to improve efficiency in capital outlays, a
Some suppliers will fold, as their business goes away good place to start is with platform (or chassis) and powertrain
completely, and others will struggle because changes in investments. Now that each auto maker is designing and
technology content will bring OEMs or non-automotive building its own engines, transmissions, and related
suppliers into their markets as new competitors. Decisions equipment, the amount of duplication within the industry is
about investments and industry alliances that are being made extraordinary. This is especially wasteful because consumers
now will determine the dominant positions of tomorrow. rarely buy cars for the platform — instead, they focus on such
The rising cost of safety and environmental regulations is also attributes as styling, quality, and reliability. Many OEMs, of
a concern for the industry. In the US, potential regulatory course, already “repurpose” platforms across brands and
relaxation under the new administration has stirred at least models. However, platform sharing among OEMs is rare. One
some hope that higher costs associated with tightened of the few examples is Nissan’s deal with Daimler to jointly
emissions standards might arrive more slowly or even be develop the MFA platform, which is used on Nissan’s Infiniti
avoided. However, there is a question whether a change in QX30 model and Mercedes’ CLA and GLA models. In the US,
federal U.S. regulations would make a significant difference GM and Ford are jointly designing a new 10-speed
because individual US states — and the whole of Europe — transmission. In both cases, the companies expect cost savings,
can continue to push for stricter standards. In addition, the particularly in R&D and materials procurement.
regulatory requirements in other parts of the world are quickly If auto makers expanded their cooperative efforts, the industry
catching up to those in the more regulated countries. For would essentially be smart-sizing, the way the airplane
instance, China now has emissions standards for large cities manufacturing sector has over its long history. In the very
similar to Europe’s, with only a brief (one- or two-year) grace beginning of aeronautics, the Wright Brothers and companies
period for smaller cities. Moreover, the real environmental that grew in their wake made their own engines. Before long,
challenges that underlie these trends are not going away and a group of separate businesses emerged to produce engines,
will ultimately have to be confronted. each of them competing to improve and advance the
equipment. As aircraft engine technology advanced rapidly,
A new road map jet engines became the dominant design — and having a spate
of companies making the same part proved costly. The industry
Considering these disparate pressures on costs, there is no responded by consolidating, resulting in a few independent
easy formula that OEMs or suppliers can use to improve their aircraft engine manufacturers and efficient supply market.
return on capital. The solution will likely come from a The similarity to having many OEMs and suppliers producing
combination of actions. Part of the answer lies in virtually the same automobile transmissions is clear. An
consolidation, which reduces industry capital requirements approach like the aircraft industry’s may lead to potentially
by eliminating competition and combining two manufacturing more valuable auto partnerships than platform sharing:
and design footprints into one. To a degree, these goals explain namely, jointly manufacturing vehicles. This, too, is already
2016’s robust supplier M&A volume, continuing the trend of happening in isolated cases. The difficulty of eking out profits
from small cars long ago prompted Toyota and Groupe PSA to
share production at a plant in Kolin, in the Czech Republic.
Similarly, we have seen rebadging across brands in markets
where sales volume is low. For instance, Renault, Nissan, and
GM have been cooperating in manufacturing some light
commercial vehicles, virtually identical products sold under
three different brands.

June 2017 18


Insight

By removing excess capacity and concentrating supply, these simple experience — and can’t seem to find one. That is why
collaborative solutions offer some of the same benefits as in the US, the auto sales program of warehouse club Costco,
industry consolidation — in particular, improvements in capital which represents consumers in negotiations with car dealers,
efficiency and capital returns. has become popular. Costco assisted on almost half a million
Offload more development work to technology suppliers car purchases in 2015, comparable to the volume at some of
Many automotive companies are highly involved in developing the country’s top dealership groups.
the new technologies their customers want — whether it is Broadly speaking, OEMs have more leeway than suppliers to
the human–machine interface for infotainment, autonomous implement aspects of this road map — largely because they
features, or the components for electrification. OEMs need are at the top of the food chain and in a better position to
to identify which aspects of a vehicle’s digital features they influence ground rules than those below them. Given these
can hand off to tech industry partners that have more expertise constraints, suppliers should focus on two areas. First, they
in designing and producing digital components and software. should position themselves in a profitable part of the vehicle
In these relationships with Silicon Valley, OEMs can retain a ecosystem. Whether the end product is differentiated or a
proprietary hold on interfaces as well as on connectivity and commodity, suppliers need to be sure they have the best
infotainment systems that distinguish them from competitors. organizational and operational capabilities for their niche in
Some early initiatives (such as BMW i Ventures, a venture the current and future industry structure. Second, they need
capital fund based in Silicon Valley, and Toyota Connected, a to optimize their business model. For suppliers of
partnership with Microsoft) offer glimpses of how the auto– commodities, this involves a relentless focus on minimizing
tech ecosystem might work. costs. For other suppliers that are able to differentiate their
Redesign distribution models products or operations — through technology innovation,
Upward of 15 per cent of a car’s cost typically goes to patents, an advantageous manufacturing footprint, or superior
distribution. There is of course some variation by country and logistics and supply chains — the challenge is to build upon
segment; for instance, fleet sales are less expensive than retail. these assets by creatively upgrading them, while enjoying the
However, the percentage is generally higher than it needs to benefits of the price premium. In short, suppliers must
be. Although OEMs are locked into dealer relationships in the recognize the world they inhabit and make sure that they can
US and Europe by complex and often antediluvian rules, they effectively navigate it.
should begin to explore and lobby for approaches that will The sheer number of OEMs (and suppliers) in many segments
reduce their costs by using more efficient channels to reach has in the past prompted hasty partnerships and investments.
car buyers. These changes in the distribution system should Poor decisions have been made in an effort to avoid falling
ultimately aim to cut costs by minimizing the number and behind competitors rather than to maintain a logical, suitable
expense of retail outlets and using technology for better path for growth. In many cases, an OEM would hear about a
inventory control. hot market and establish a plant or distribution arm there,
Savings could come from selling via Web channels. In the US, only to find out that its models and brands were not a good
OEMs are barred from bypassing dealerships, a prohibition fit for that region. Auto makers often expend too much energy
that electric carmaker Tesla is campaigning to eliminate. Rather — and money — on vehicle design and components of vehicles
than opposing Tesla, as some automakers have, US OEMs that have little impact on customers’ decisions. (That’s why
should view this potential change as an opportunity to when an auto maker exits a disappointing market, as GM is
innovate. OEMs are finding that as customers use the Internet hoping to do through the proposed sale of its European
to research car purchases, they do less shopping in person. operations to PSA, industry returns on capital tick up.)
Car buyers are now visiting between one and one-and-a-half
dealers before buying a car, compared with visiting four or Focus on returns
five a generation ago. Using analytics to assess this data for
demographic and location trends, automakers hope to gain For companies in any industry, deciding what to invest in is
savings from inventory and dealer facilities management. They complicated. In the auto sector, where we are already
can target customer preferences more effectively and place witnessing revolutionary product changes and where more
the appropriate mix of retail formats in the right areas. are certain to come, it is especially difficult. So viewing the
Improving the dealer model would be a plus for OEMs and a sector through the lens of return on capital is absolutely
relief for customers, who by and large want a haggle-free, critical. The current low rates of return are unsustainable in
this environment, and improving returns will ensure that the
industry can continue to attract the capital it requires to create
the types of vehicles customers want most

19 June 2017


Technology

Building the Digital Car Company of the Future

Boston Consulting Group

Digitalization and a host of societal and technological trends companies in the tech world focus on discerning the
are transforming the automotive industry. Advances in future demands of customers and then use an agile
autonomous driving, the Internet of Things, and big data approach to design, test, and refine products in multiple
analytics are redefining how drivers interact with vehicles and iterations. Reusable software platform designs give them
creating opportunities for innovative products, services, and an advantage over competitors that continually redesign
business models. Urbanization, ubiquitous connectivity, and to solve isolated problems.
the embrace of mobile devices and social media, meanwhile,
are giving rise to a mass customer base that is increasingly • Software- and Ecosystem-Based Innovation. The tech
open to replacing car ownership with shared, on-demand world focuses on differentiation through software
mobility services, ushering in a new era of digital service innovation and speed to market rather than hardware.
solutions. Standalone design, in which all aspects of product design
are vertically integrated and tightly controlled by the OEM,
is no longer feasible. Therefore, companies must leverage
This convergence of forces is causing a paradigm shift in how a broad and diverse ecosystem of partners to secure
automotive original equipment manufacturers do business
and organize their companies. In the past, OEMs saw innovative technologies and new ideas for products,
business models, and sales channels. Ecosystem
themselves primarily as providers of hardware. Now, they are development and the ability to integrate best-in-class
beginning to evolve into providers of connected mobility
solutions. Until very recently, OEMs interacted with customers components from internal and external sources, often
market-specific or even open-source solutions, become
mainly through intermediaries, such as dealerships. Now, they critical differentiators.
are recognizing the value and the necessity of engaging directly
with customers throughout a vehicle’s life cycle and beyond. • Customer Centricity and Individualization. Tech
companies engage buyers through a variety of channels
What Automakers Can Learn from the Tech Industry and seek to cultivate a seamless customer experience

To seize the growing opportunities in new digitally enabled across all customer touch points. They take advantage of
businesses, automotive OEMs are looking to adopt the flexible,
agile, and collaborative approaches that have succeeded in frequent customer feedback for continuous improvement.
Customer centricity becomes the guiding principle in the
the faster-moving tech industry—and that have been adopted design of products, which are built to exceed users’ needs
by such attackers as Tesla. These strategies include:
rather than satisfy complex technical aspirations.

• Continuous Life Cycle Management. Traditionally, the For most automotive OEMs, adapting to these new rules of
automotive world has operated in strict, multiyear the game will require a transformation of the organization.
development cycles that clearly sequence product However, the traditional automotive manufacturing business
development and launch. Products are hard to upgrade will not disappear. The challenge will be to integrate the
because their functionality stems mainly from hardware traditional business with the digital business so that they
components and embedded software. Of course, the complement and work alongside one another.
digital tech world and new auto players such as Tesla also
sequence product development and launch. But products To be sustainable and to ensure that all parts of the company
are released at an earlier stage and are then continually operate in sync, this digital transformation requires a holistic
upgraded. Additional software and functions follow the approach. It should begin at the strategic level and extend
main launch. The goal is to build a large, installed base of through product offerings, the value chain, organizational
customers who are likely to keep buying products or structure, and mindset.

services. OEMs are now moving away from this “one off” Four Archetypes of the Digital Organization
style of product development and embracing “living”
products. With that change, however, comes the need to Virtually every major automotive OEM has begun to offer
develop stronger life cycle management capabilities and connected mobility services in some form and to adapt its
sustain the required teams. organization to the digital era. But some are further along
than others. While there is no one-size-fits-all template for
• Agile Development. Instead of taking an engineering- what the digital automaker of the future should look like, clear
driven, sequential waterfall approach to development, patterns are emerging.

June 2017 20


Technology

We see five topic areas at the intersection of the traditional generally not yet complex enough to require major cross-
automotive and the digitally enabled business that OEMs must functional alignment.
be able to address: mobility, connectivity, autonomy, digital • The Transformer. As OEMs delve into more-sophisticated
retail and services, and Industry 4.0. 20 automotive OEMs in applications of digital technologies—or as initiatives
North America, Europe, and Asia-Pacific, we also have developed at the opportunist stage come to fruition—
identified four basic organizational archetypes, or stages, that they recognize the need for greater cross-functional
major automakers adopt, generally in sequence, on their coordination. At the transformer stage, OEMs typically
digital journeys: the opportunist, the transformer, the create a digital-transformation office, often comprising
pacemaker, and the digitalist. (Exhibit 1.) fewer than 50 full-time employees, that coordinates
resources and orchestrates digital initiatives across the
An individual OEM’s position on this evolutionary path can organization. OEMs at this stage also often appoint a chief
be plotted along two axes. The first is its level of sophistication digital officer (CDO) to complement the role of the chief
in digital activities—from small pilots to mature businesses— information officer, who is responsible for such traditional
in the five topic areas. The second is the degree to which digital IT tasks as planning, building, and running IT systems; data
activities are synchronized across the organization. This can administration; and security management. The CDO can
range from limited coordination to an organization in which handle new responsibilities related to digitalization, such
digital is fully synchronized and ingrained, as it is in the tech as digital business building, infrastructure management
industry. (Exhibit 2.) for new digital offerings, and ecosystem development.
• The Opportunist. This is the starting point for most The company’s circumstances determine whether the
CDO requires a dedicated staff.
organizations. At this stage, individual functions pursue • The Pacemaker. As digital offerings grow more complex,
digital opportunities as they arise and synchronize them merely synchronizing digital activities is not enough.
across the organization in only a limited way. This results Pacemakers go a step further and establish one or more
in faster time to market, but often at the expense of centers of excellence—or “digital powerhouses”—that
quality, consistency across products, and an optimized take responsibility for delivering digital products and
user experience. R&D may begin work on connected-car services in a coordinated way. These powerhouses are
solutions, for example, while marketing and sales enters standalone, cross-functional units with up to 400 full-time
digital retail channels and operations tackles Industry 4.0 colocated employees; some have their own profit-and-
topics. At this early stage of digitalization, solutions are loss responsibilities and legal status. Digital powerhouses
typically encompass mobility, connectivity, autonomy, and
digital services, while Industry 4.0 and digital retail remain
in their respective functions.
• The Digitalist. At this last phase of digital evolution, the
automaker operates more like a tech company. The digital
mindset is ingrained in the organization. As capabilities
developed in the digital powerhouse mature, they are
integrated into the respective business and production
functions, becoming the “new normal.” Digital topics that
are still nascent continue to be developed in the digital
powerhouse.
As their digital businesses become larger and more complex—
and the need for cross-functional collaboration rises—
automotive OEMs tend to move from opportunists to
digitalists. They need not follow the stages in sequence to
succeed in digital, however. The starting point will depend on
the activity or technology the OEM is pursuing. And the speed
required to reach the desired stage will depend on a company’s
circumstances, capacity, and skills. The key is to ensure that
the OEM’s organization fits its digital strategy.

21 June 2017


Technology

In many cases, OEMs can successfully launch connected-car between the company’s current capabilities and where it
solutions, enter the digital retail space, and implement basic needs to be, as well as the roadblocks in the way.
Industry 4.0 technologies while they are still at the opportunist The importance of seven success factors for digitalization
stage. The development of self-driving cars, however, requires depends on where OEMs are in their evolution. (Exhibit 3.)
a greater degree of coordination across components and • Digital “Upskilling.” Whether an OEM is an opportunist,
subsystems. It also requires a step change in software and
digital capabilities, which must remain closely integrated with a transformer, a pacemaker, or a digitalist, it needs skilled
the traditional product development cycle. Therefore, OEMs people, who have enough clout to bring new digital units
typically need to have reached at least the transformer stage. to life. This requires team building, training, and often hiring.
Mobility services pose a fundamental challenge to the • Digital Ecosystem Building. The OEM should leverage the
traditional OEM business model. Because they are in the experience and resources of a network of close partners
nascent stage, they require both focus and agility. that complement its own capabilities and capacity in order
Consequently, many OEMs that are introducing mobility to increase the quality of its solutions and decrease
services at scale are following the pacemaker model. development time. Even OEMs at the opportunist stage
Of all the automotive OEMs around the world, only one, Tesla, should start building an ecosystem.
is in our view at the digitalist stage. The digital organization of • Digital Vision. The organization’s leadership team must
another leading US carmaker is rapidly moving toward that be fully committed to and aligned with a clearly defined
stage: General Motors is reintegrating many of the services vision for a digital organization. This vision is important
developed by its former digital powerhouse, OnStar—such as at the transformer, pacemaker, and digitalist stages
navigation, remote diagnostics, and subscription-based because it lays out how the automaker wants to position
communications—into its core product development function. itself in the digital game over the long term.
Leading German manufacturers of premium automobiles have • Technology and Business Integration. Developing
established digital powerhouses. French and other US OEMs technically feasible, comprehensive digital solutions that
are in the process of doing so, but their organizations are less meet customers’ demands requires an approach that
digitally mature. Most Japanese automakers are at the involves technology, IT, and business functions. This
transformer stage but are in the process of reorganization. holistic approach is important for transformers,
Most other Asian automotive OEMs so far are at the pacemakers, and digitalists because it enables them to
opportunist stage because they lack the internal capabilities further align all parts of their organizations with an
and fast decision-making processes to succeed in digital increasingly complex digital business.
mobility solutions. • Cross-Functional Teaming. Internal silos impede digital
speed. OEMs need to create teams that work across
A Roadmap for Building a Digital Car Company functions and have end-to-end responsibilities, decision-
making authority, and clear alignment mechanisms. For
The first step in reorganization is to develop a clear picture of pacemakers and digitalists in particular, this ensures that
what the car company of the future will look like and the their work is in line with the goals set by the C-suite.
factors that will be critical to success. What kinds of • Seamless Customer Experience. Dedication to the
technologies must be mastered, and which capabilities will customer must be the common denominator across
be required? A rigorous health check can gauge the current functions in order to provide a superior, consistent, and
level of readiness for competing in each of the major topic
areas: mobility, connectivity, autonomy, digital retail and seamless digital experience. That
services, and Industry 4.0. An OEM can then identify gaps kind of experience helps
pacemakers and digitalists
differentiate their offerings from
competitors’ and achieve
superior satisfaction ratings. The
more varied and numerous the
customer touch points, the more
challenging it is to achieve
seamlessness.

June 2017 22


Technology

• Digital-Native Mindset. An effective communication and • What path should we take through the four
change management program is essential to the adoption organizational stages, and how should we identify
of new technologies and methodologies, and helps anchor points? OEMs need to identify the required
companies think of themselves as digital organizations. intermediate steps and stages of technology and of digital
At the digitalist stage, this mindset makes digital the new maturity. They need to differentiate between nascent and
normal and avoids fragmenting the organization. mature activities when determining organizational focus.

Only if the whole organization supports digitalization, and • How can we ingrain digital throughout the organization
achieves the seven key success factors, can an automotive OEM as we evolve into a mobility solutions provider?
work in a fully digitalized way, as a technology company does. Achieving this requires a fundamental shift so that the
OEM thinks of itself as a mobility solutions provider; it
Key Questions to Ask Before Beginning the Journey also requires a new way of working. An automotive OEM
needs new methodologies, technologies, and cultural
As OEMs embark on the path to becoming a digital traits to be able to play by tech industry rules.
organization, executives need to ask themselves three
questions: The most successful automakers have already begun to refine
• What is the current stage of maturity of our digital their digital organizations to reflect the breadth and maturity
of their digital businesses. OEMs in the vanguard are learning
organization, and what is our target? Answering this from companies in the technology and digital consumer
question first requires insight into the organization’s product industries how to raise their game and build
digital maturity. What are its digital capabilities, organizations that can deliver on the possibilities for new
technologies, and organizational setup, and what are the mobility solutions for customers. Automotive OEMs that
roadblocks to achieving the key success factors? Next, an embark on this journey now will be in a much stronger
OEM needs a clear target picture of technology, digital position to realize the enormous growth opportunities of
topics, and digital maturity to make sure the final digital the digital age
organization is in line with the company’s strategic goals.

23 June 2017


Competition Law Updates

Competition Commission Yazaki’s relevant turnover was more than what was claimed
of India penalises Hyundai by the company, thus, attracting a maximum possible fine
Motor India with fine of of A$17.5 million (€12 million).
Rs. 87 crore Australian Federal judge, on being convinced with the lower
The CCI has found Hyundai quantum of turnover, reduced the penalty to A$9.5 million
Motor India to have (€6 million) from A$17.5 million (€12 million).
indulged in anti- Incidentally, the Supreme Court of India, in a recent
competitive conduct like judgment of Excel Crop v. CCI has held that the relevant
resale price maintenance turnover has to be considered while determining penalty.
by putting in place Panasonic and Ficosa fined for failure to notify
arrangements that resulted In June 2015, Japanese electronic corporation, Panasonic
in monitoring of the Europe that manufactures and sells car navigation systems
G R Bhatia, Partner & Head, maximum permissible and entertainment displays for vehicles, acquired a 49%
Competition Law Practice Group, discount. This was done share in Spanish auto parts manufacturer Ficosa
Luthra & Luthra Law Office through discount control International and its subsidiaries including Ficosa Mexico
and penalty mechanism, that produce and sell car parts like brake systems, drive
whereby dealers were permitted to provide only a cables and fluid systems, giving Panasonic more than 35%
maximum permissible discount and asked not go beyond of Ficosa Mexico’s assets.
the recommended range, along with mandating its dealers Under the Mexican competition law, deals must be notified
to use “recommended lubricants/oils” and penalising them to the Commission when they lead to the acquisition of
for non-complaince. more than 35% of a company’s assets in Mexico, if the
CCI has penalised Hyundai Motor India with a fine of target (i.e. the entity being acquired) has annual sales or
Rs. 87 crore amounting to 0.3% of the Hyundai’s assets that are 18 million times the minimum wage in
average relevant turnover in the last 3 financial years Mexico City.
from 2013-14. Finding that the companies breached the prior-notification
European Commission closes investigation against obligation, thereby failing to notify the Commission of a
Exhaust system makers deal that exceeded the merger thresholds, Mexico’s
The Director General, European Commission, had competition enforcer has fined both the companies,
suspected that large number of companies were forming directing them to pay 56.2 million pesos (€2.7 million).
a cartel and engaging in abusive practices, thereby, violating Supreme Court stays COMPAT order that imposed penalty
anti-trust laws. The European enforcer had also raided on 3 car companies
several exhaust system makers across Europe. However, it The Competition Appellate Tribunal (COMPAT) vide its
decided to drop investigations on failing to find sufficiently order dated 09.12.2016 directed three car companies –
strong evidence. Ford, Toyota and Nissan, to remove all restrictions imposed
Australian Court fines auto parts maker Yazaki on lower through agreements, open additional distribution channels
turnover to the open up market for spare parts on a country-wide
Australian Competition and Consumer Commission (ACCC) basis, remove all restrictions on supply of spare parts by
had penalised Yazaki and its wholly owned subsidiary – original equipment suppliers to authorized dealers etc.
‘Australian Arrow’ in 2012, finding Arrow to have indulged The three car companies filed appeals along with stay
in bid rigging with other car parts manufacturers for the application against the Compat’s order before the Hon’ble
tender floated by Toyota. Supreme Court. The Hon’ble Supreme Court, while
Under the Australian competition law, fines are capped at admitting the appeals and issuing notice on 7th April, 2017,
10% of the relevant turnover or A$10 million (€7 million), granted stay on the operation of the Compat order of
whichever is greater. Yazaki argued that its relevant 09.12.2016. The matter has been adjourned and is likely
turnover was A$65 million (€44 million), implying that it to be listed post vacation
couldn’t be fined more than A$10 million. ACCC held that

June 2017 24


FADA Newsline

FADA Delegation Meets Union Minister of Road Transport & Highways

A four-member team of FADA, comprising John K Paul, certified for pollution, safety and roadworthiness by any of
President; Ashish Kale, Vice President; Vinkesh Gulati, Hony the national testing agencies specified in Rule 126 of Central
Secretary; and Nikunj Sanghi, Past President, met Nitin Motor Vehicle Rules.
Gadkari, Hon’ble Union Minister of Road Transport &
Highways at New Delhi. FADA’s submissions discussed at the meeting with the
Hon’ble Union Minister included: According industry status
to the auto retail & service in view of its importance and
enormous contribution to the national and state economies
in terms of employment and revenue generation; Provision
and development of auto clusters along national and state
highways; Scrapping of old vehicles and incentives therefor
in the interest of modernisation of vehicle parc and clean
environment & road safety; Inclusion of FADA’s
representatives in various committees of the Ministry of Road

At the outset, FADA team thanked the Union Minister and
his Ministry for issuing clarification that there is no need of
approval of new model by the State Transport Departments,
if prototype of the model has already been tested and

Transport & Highways; Bringing in uniformity in Life-Time
Road Tax across States; and Strengthening training
infrastructure for skill requirements of automobile
dealerships.

Responding positively to FADA’s suggestions, the Union
Minister assured the FADA delegation that the suggestions
would be favourably considered


New on Wheels

Volkswagen Introduces Tiguan in Premium Car Segment

Volkswagen announced on June 13, the launch of the premium Safety is priority
carline, based on the modern MQB platform, the Volkswagen Tiguan integrates innovative safety technologies and
Tiguan, with a starting price of 27.68 lakh, Ex-Showroom, assistance systems as standard. The carline is equipped with
Mumbai. 6 airbags for occupant’s protection and an ACTIVE HOOD for
Speaking at the launch, Thierry Lespiaucq, MD, Volkswagen pedestrian safety. For added pedestrian protection, Tiguan is
Group Sales India said, “Tiguan has proven its mettle as a built with special deformation elements in the front bumper,
robust and capable carline world over and we are delighted a maximum possible distance between bonnet and engine,
to introduce our global best-seller in the Indian market. Be it and deformable wings, ensuring other road users and
daily commute or a meticulous off-road adventure, Tiguan is pedestrians are exposed to as little danger as possible.
a perfect companion, packed with the right amount of power, Fuel Efficient Engine
design and exceptional driving capabilities. The tough and Tiguan is equipped with the powerful and efficient 2.0L TDI
impressive Tiguan offers an impeccable combination of safety, engine mated to a 7-speed automatic DSG transmission that
style, luxury and class leading performance. With the Tiguan, offers superior fuel-efficiency of 17.06 kmpl (ARAI tested) and
we are proud to introduce our 4MOTION intelligent all-wheel a fuel tank that offers a capacity of 71 litres. The engine delivers
drive system based on the modern MQB platform, a first for peak power of 143 PS/105 kW.
Volkswagen in India.” Refined comfort with every touch
Tiguan will be available across all Volkswagen dealerships, in Tiguan combines excellent space and flexibility with superb
two trims Comfortline and Highline, with an array of colours comfort under all road conditions. The dashboard is the
viz. Tungsten Silver, Oryx White, Deep Black, Indium Grey and epitome of aesthetic and functional design, with driver assist
Atlantic Blue. technologies that make every drive, pleasurable. The 3-zone
Powered with superior capabilities auto-climate control system, including Air Care Climatronic
Featuring the 4MOTION intelligent all-wheel drive system with an allergen filter, delivers precise multi-zone temperature
with variable torque transfer to the rear wheels, the Tiguan control at all seats. A spacious interior along with a significant
guarantees superior acceleration capability and tremendous gain in boot space that offers 615 litres with all seats up and
driving fun in every situation and on every type of driving 1,655 litres with rear-seat folded.
surface. The carline impresses with its strong characteristics Tiguan incorporates several class leading premium lifestyle
and elegant design that radiates power and authority. Built features like Pedestrian Safety (Active Hood), 6 Airbags, Hill
on Volkswagen’s modular transverse matrix (MQB) platform Start Assist, Auto Hold, Self-sealing tyres, ‘Vienna’ leather
that makes the vehicles lighter, more efficient, spacious, safe seats, Cruise Control, AppConnect, Rain and Light sensor, LED
and comfortable with a more dynamic drive system and Headlamps with DRLs, LED tail-lamps, Easy open boot,
appearance, the Tiguan as a result draws an unmistakeable Electrically foldable ORVM, LED illuminated Panoramic
stance with distinctive proportions and a very dynamic Sunroof and Keyless Entry & Go, among others.
design.

June 2017 30


New on Wheels

Mercedes-Benz AMG G 63 'Edition 463' and AMG GLS 63 Drive into India

Mercedes-Benz further strengthened its performance SUV Exteriors:
segment, with the launch of two powerful SUVs - Mercedes- • Stainless-steel underride guard
AMG G 63 ‘Edition 463’ and Mercedes-AMG GLS 63 on June • AMG Sport strips on flanks
14. The launch of these SUVs now expands Mercedes-Benz’s • Inserts in exterior protective strips in dark aluminium look
dominant SUV portfolio to eight, consolidating its top position • 53.3 cm (21-inch) 5-twin-spoke light-alloy wheels.
in the luxury segment, spearheaded by the AMG sub-brand.
Mercedes-AMG GLS 63
Launching Mercedes-AMG G63 limited ‘Edition 463’ and
AMG GLS 63, Roland Folger, MD & CEO, Mercedes-Benz India This model has a 5.5-litre V8 BITURBO engine, which develops
said: “Our AMG portfolio has witnessed overwhelming a peak output of 430 kW and maximum torque of 760 Nm.
success and we are thrilled to introduce two new The unique AMG RIDE CONTROL sports suspension with
performance SUVs– Mercedes-AMG G 63 ‘Edition 463’ and ACTIVE CURVE SYSTEM roll stabilisation provides high-level
Mercedes-AMG GLS 63 to our luxury SUV range in India.” driving dynamics and the comfort.

Mercedes-AMG G 63 Interior Features
• AMG Performance steering wheel in black nappa leather
The new Mercedes-AMG G 63 is equipped with a supercharged • Temperature-controlled cup holder
5.5-litre V8-engine developing 420 kW @ 5500 rpm and a • Multicontour front seats including massage function,
maximum torque of 760 Nm @ 5000 rpm Mercedes-AMG G
63 accelerates from 0 to 100 km/hr in 5.4 seconds, with a top luxury head restraints and seat cushion depth adjustment
speed of 210 km/hr. The combination of three 100% • THERMOTRONIC automatic climate control
differential locks, an off-road reduction gear and the Electronic • Harmon Kardon Logic 7 surround sound system
Traction System 4ETS is unique in this segment. Mercedes- • Memory package | Heated rear seats |Heated front seats
AMG G 63 has a load capacity of up to 2,250 litres and a • EASY-ENTRY system power release (2nd and 3rd rows
massive towing capacity up to 3,500 kg.
electrically foldable seats).
Interiors:
• Single-tone dashboard in black designo leather Exteriors:
• 2-tone seats designo black leather or designo light brown • Collapsible spare wheel and chrome fins
• Red paint brake callipers and Panoramic sliding sunroof
leather with side bolsters in black carbon leather • Mirror package including brand logo projection
• 2-tone centre console | Colour-coordinated topstitching • Anti-theft protection package
• LED Intelligent Light System with integrated LED DRLs
on dashboard, front and rear door handles, armrest, • Adaptive High Beam Assist Plus
handbrake, seat covers and head restraints front and rear. • EASY-PACK tailgate with electrically operated opening and
• AMG carbon-fibre trim and Designo Exclusive package
• Door centre panels in designo leather (in designo colour) closing functions
with diamond quilting.

31 June 2017


Upgrades & Variants

Renault Launches New Duster Petrol with CVT

Renault India launched the new DUSTER petrol range with The new Duster Petrol Range: Offering Unmatched
CVT (Continuously Variable Timing) transmission on May 2. Performance, Driveability and Efficiency
The new DUSTER petrol range is available in two trim levels – Enabling the comfort of a sedan and the performance of an
RXE and RXL, offered at an introductory starting price of Rs. SUV, new DUSTER petrol range along with the CVT offering is
8.49 lakh and new DUSTER CVT is available in the RXS trim, powered by an efficient 1.5L H4K (Multi Point Injection) engine,
offered at an introductory price of Rs. 10.32 lakh (Ex- delivering a combination of high performance and an excellent
Showroom, Delhi). DUSTER CVT comes with easy selection fuel efficiency. With superior comfort, high driving position
drive modes – P (Park), R (Reverse), N (Neutral), D (Drive) and and 205mm of ground clearance, the new DUSTER petrol range
a 6 speed manual mode option. is capable of cruising through the toughest of terrains. The
Commenting on the launch, Sumit Sawhney, Country CEO and special ECO Mode, available on the RXL MT and RXS CVT
MD, Renault India Operations said, “DUSTER plays a pivotal variants helps balance power with fuel economy for better
role in our product portfolio and with the introduction of the performance, enabling less fuel consumption.
new petrol range with CVT, Renault has the widest offering in The CVT is currently offered with 2WD and a 6-speed manual
the segment, enabling us to best cater to evolving customer mode is also offered in the vehicle. The Renault DUSTER CVT
needs. We are confident that the new DUSTER petrol range petrol, powered by the new 16-valve 4-cylinder 1.5-litre engine
with the CVT will resonate well with discerning Indian customers.” produces 106 PS at 5,600 rpm and 142 Nm of torque at 4,000
rpm. The DUSTER Tronic CVT delivers an ARAI certified fuel
• DUSTER petrol range starts at an introductory price of efficiency of 14.99 kmpl.
INR. 8.49 Lakh with the CVT variant offered at an In manual transmission, the new Renault DUSTER with the
introductory price of INR. 10.32 lakh petrol powertrain, mated to a 5-speed manual transmission
powered by the 1.5-litre four-cylinder engine unit delivers an
• Powered by a new 1.5L H4K petrol powertrain, offering ARAI certified fuel-efficiency of 14.19 kmpl.
the best combination of power, convenience and fuel- The new Duster CVT X-TRONIC Gearbox
efficiency The new DUSTER CVT comes equipped with the efficient X-
Tronic CVT automatic gearbox. It is also more fun to drive with
• New DUSTER CVT is equipped with the efficient X-Tronic no shift shock during acceleration. The new DUSTER CVT X-
CVT automatic gearbox and new styling, safety and Tronic gearbox is characterized by easy selection of drive
comfort features with hill start assist and creep function modes – P (park), R (reverse), N (Neutral), D (Drive) and a 6-
speed manual mode option. It offers the best combination of
• Easy selection of drive modes in CVT – P (Park), R power output and fuel efficiency from the engine. It is quick
(Reverse), N (Neutral), D (Drive) and a 6 speed manual to accelerate and delivers smooth transitions at different
mode option speeds due to infinite gear ratios (in automatic mode)

• DUSTER now has the widest range which includes a
diesel manual, diesel AMT, diesel AWD and the all new
petrol manual and petrol CVT

June 2017 32


News from Regions

Interactive Session on GST with Government of Delhi

The Automobile Traders Association Delhi (ATAD), a Founder the GST, the widespread use of IT in tax administration will
Member of FADA, organised an Interactive Session on GST with make things easier for the dealers.
the Government of Delhi on 14th June 2017 at Hotel Le Issues taken up at the Interactive Session included: GST on
Meridien, New Delhi.

The Interactive Session was presided over by Manish Sisodia, sale of Pre-Owned/Used Vehicles; Disallowance of Input Tax
Dy Chief Minister of Delhi. Other senior officials of Delhi Credit on Mismatching; Inter-State Transfer of Goods within
Government, who addressed and interacted with the members the same Organisation; Dual Control of Central and State
of automobile dealer fraternity in Delhi, were: H Rajesh Prasad, Governments, leading to complexities of compliance; Likely
Commissioner, VAT; Kapil Singh, Special Commissioner, KCS- classification disputes in case of composite service comprising
VAT; and Ms Sonika Singh, Special Commissioner, VAT. labour and parts; Treatment of Incentives under GST regime;
Raj Chopra, President, ATAD, welcoming the guests, referred Free service against Free Service Coupons; and Disincentivising
to the growing complexities in tax regime, with incidence of the promotion of hybrid vehicles by bringing them at par with
tax on each and every transaction. other vehicles.
Commissioner, VAT, allaying the fears of President, ATAD, said Dy Chief Minister of Delhi assured the participants that the
that there might be apprehensions initially in implementing Delhi Government would do its best to remove the anomalies
and problems arising out of GST

33 June 2017


Know our Member

MCS Auto Pvt Ltd, Kanpur

MCS Auto Pvt Ltd, a new member of FADA and based in The operations of MCS Auto are carried out by a strong,
devoted and competent team of 70 employees.
Kanpur, is the dealership engaged in sales, service and
spares of the entire range of two-wheelers manufactured

by Honda Motorcycle and Scooter India.

One of the premier and reputed two-wheeler dealerships

in Kanpur, MCS Auto has been in the automotive business
since 2001. The company was incorporated on 17th April

2001.

MCS Auto sells around 10,000 Honda two-wheelers and
services, on an average, 30,000 two-wheelers per annum.

The dealership’s turnover, comprising sale, service and
spares, is to the tune of Rs. 50 crore.

The dealership is

managed by Amit Kohli,

Executive Director of

the company. His

dynamism and

Located at Chunniganj in Kanpur, MCS Auto boasts of a customer & employee-
tastefully built showroom, offering perfect ambience for
the discerning customers. centric philosophy have

The dealership provides on-the-spot exchange and trade- been the key to the
ins, as also the instant finance facilities. MCS Auto also deals
in certified used/pre-owned Honda two-wheelers. The tremendous success
dealership also offers cashless facility – all under one roof,
for the convenience of its esteemed customers. and growth of MCS

MCS Auto’s state-of-the-art workshop is equipped with Auto over the years. He
modern machines, tools and gadgets, maintaining high
standards of service & repair. is not resting on his

Customer satisfaction is the cornerstone of the dealership laurels and is constantly
operations. The management and the employees make sure
that customers’ experience at all stages, be it pre-sale, sale striving to improve and Amit Kohli
or post-sale, is delightful. do better. Being active

in social & business circles, Amit Kohli has other business

interests as well. In addition to auto retail trade & servicing,

Amit is also engaged in real estate, construction and

corporate leasing activities.

FADA wishes MCS Honda, Amit Kohli and his entire team
further success in their quest for development and

excellence

35 June 2017


News Basket

Maruti Suzuki to Set Up Auto Skill
Enhancement Centres at 15 ITIs

Maruti Suzuki India Ltd (MSIL) announced on May 25 that it Speaking at the inauguration, Ayukawa said: “Maruti Suzuki
would set up Automobile Skill Enhancement Centres (ASECs) is committed to supporting the government’s #SkillIndia
across 15 Government-run ITIs, across 11 states, in the next initiative. India’s automobile industry is growing steadily, and
three months. technology is being upgraded at a rapid pace. There is need
The first of these ASECs was inaugurated by Kenichi Ayukawa, for skilled people to service and maintain these automobiles.
MD & CEO of Maruti Suzuki at ITI Nizamuddin in New Delhi. At the same time, India has a large pool of young people, who
Each ASEC will be equipped with a state-of-the-art workshop have to be trained for the job market. It is estimated that the
to provide practical training in automobile service and repair automobile industry will be ready to employ 125,000 skilled
to students. The workshops will be equipped with modern- technicians at workshops in the next five years. By partnering
day service tools and equipment, and latest Maruti Suzuki with ITIs our mission is to train 30,000 youth and help them
vehicles. Along with this, the company will appoint full-time become employable in workshops, thus leading a better life.”
trainers. It will arrange training for the existing ITI teachers on The latest set of 15 ASECs are being established at select
latest technology and equipment. Maruti Suzuki will also partner ITIs in Delhi, Varanasi, Amritsar, Patiala, Gorakhpur,
organise industrial outreach programmes to upgrade skills of Jaipur, Udaipur, Ambala, Solan, Coimbatore, Shillong, Pune,
students and make them job-ready. Meerut, Hyderabad, and Indore.
In all,MSIL will spend Rs. 60 million in these 15 ASECs, as part
of its skill development initiative under Corporate Social
Responsibility (CSR). Around 600 students are expected to
benefit from these ASECs, annually.

Mahindra First Choice Wheels Inaugurates India's Largest Multi-
Brand Pre-Owned Vehicle Showroom in New Delhi

Mahindra First Choice Wheels Ltd (MFCWL) inaugurated the Mahindra Group said, "Over the last decade, MFCWL has
country's largest pre-owned vehicle showroom in Wazirpur established itself as a leader in the multi-brand used car
Industrial Area, Ring Road, New Delhi on June. space. Our market research indicates that the brand
Spread over an area of approx. 7,000 sq ft, the massive 3- translates to other consumer vehicle segments such as
storey, multi brand pre-owned vehicle display showroom will electric vehicles and two wheelers as well, where consumers
retail passenger cars, commercial vehicles and premium 2- are looking for a strong trusted brand to stand behind their
wheelers from the same facility - an industry first. All products transactions."
retailed from the showroom will offer Mahindra First Choice "Our Indraprastha Group has been in the automotive retail
Wheels Certification and Warranty. business for over a decade and we have been an MFCWL
Inaugurating the new outlet, Rajeev Dubey, Group President franchisee for the last two years. I have experienced significant
- HR & Corporate Services and CEO, After-Market Sector, benefit from the MFCWL brand as well as exceptional support
from an experienced team on the ground who are committed
to our profitability and success. MFCWL is unique in its hybrid
model wherein it provides us an online presence but also
allows us to enable transactions with a showroom experience.
I believe a premium showroom such as this one has the
potential to be a landmark multi-brand outlet in the NCR
region," said Sanjay Virmani, Dealer Principal, Indraprastha
Automobiles. "With this initial success, we are planning to
expand our footprint with MFCWL in the coming months," he
added.


News Basket

Mercedes-Benz Inaugurates
Refurbished '3S' Dealership in Mumbai

Mercedes-Benz further strengthened its footprint in the
financial capital, by inaugurating its revamped world-class
3S dealership - Shaman Wheels - in the heart of the city at
Kalina, Santa Cruz, Mumbai.

Spread over an area of 44,000 sq ft and built with an
investment of Rs. 6 crore, the luxurious 3S dealership was
inaugurated by Roland Folger, MD & CEO, Mercedes-Benz
India and Amar Sheth, Dealer Principal, Shaman Wheels.

Speaking at the inauguration, Roland Folger, commented, have shown keen interest for a Mercedes-Benz. With this
“Mumbai remains an important market for Mercedes-Benz new facility we are confident of creating an unforgettable
contributing nearly 20% to our overall sales annually. With luxury experience for our ever growing customer base in
this entirely refurbished 3S luxury car dealership, we aim Mumbai.”
to cater to the incessantly burgeoning luxury car market in Shaman Wheels’ new 3S facility in Mumbai emphasizes on
the city. This is Mercedes-Benz’s eleventh outlet in Mumbai modern interior architecture that reflects modern luxury and
and we are glad to present yet another luxury destination creates a new benchmark in retail luxury quotient. The shell
for our patrons in this key market. We are confident that of the new dealership is designed as a monolith with the
our ever-growing customer base will now enjoy a hassle ceiling as sculpted surface. The lighting inside the dealership
free ownership experience synonymous with the Three accentuates the fascinating range of Mercedes-Benz that
Pointed Star, in close proximity; be it in South Mumbai or creates an aura around the vehicles. The façade is made
the central and western suburbs.” larger with the help of an opaque lacquered glass which not
Folger further elaborated, “With our philosophy of only adds sophistication to the external appearance of the
providing the ‘Best Customer Experience’ for 2017, we are showroom, but also gives access to diffused natural light.
confident that together with our long-standing partner Shaman Wheels’ dedicated new car delivery area has been
Shaman Wheels, we will continue creating unsurpassable created with semi-transparent thread curtains and a fabric
luxury car ownership experience for our discerning patrons. light to impart a superlative premium experience adding
Mercedes-Benz has always believed in the growth story of to the exclusive experience for the patrons while taking a
India and the company has been adding value to the new car delivery. In addition, the service reception has been
narrative of strengthening the brand presence across the designed as a large open lounge with café tables and a
country. Its strategic initiatives like this in network Barista to make it more plush and interactive.
expansion, which enhances our growth story even deeper Shaman Wheels is the first dealership of Mercedes-Benz in
in the market and wins customer trust.” Mumbai to boast of the exclusive ‘S Lounge’ created for
Amar Sheth, commented, “Shaman Wheels has been the customers of the high-end Mercedes-Maybach and the
associated with Mercedes-Benz for the last 8 years and we S-Class luxury sedans. Adorned with wooden floor, highly
are extremely pleased to continue this strong relationship. exclusive carpets, imported furniture, the ‘S Lounge’ boasts
We now have a state-of-the-art 3S outlet, which is the of a complete luxury atmosphere and exudes modern luxury
largest in Mumbai and incorporates the latest elements of to the core. With segmented wall panels having integrated
modern interior architecture that reflects modern luxury. elements, latest accessories display and audiovisual display
The strategic location of Shaman Wheels will not only cater built into the wall panels unit, the ‘S Lounge’ is the most
to the premium clientele in the Central Mumbai, but also distinctive arena of the new dealership. The S Lounge is
provide easy accessibility for the customers from south also lit by mood lighting that provides an unparalleled
Mumbai and the western suburbs. The convenient location personalized experience for patrons, akin to the ambient
backed by top-notch infrastructure will make the lighting experienced in the S-Class luxury sedan. The high-
experience of buying a Mercedes-Benz from this facility a end Mercedes-Maybach and the flagship S-Class luxury
memorable one for the Mumbaikars. The luxury car sedans will be exclusively displayed at the S Lounge.
segment growth in Mumbai is on an upswing, and patrons

37 June 2017


News Basket

Ducati India Expands Network
with a New Dealership in Kochi

Ducati’s newest addition to the growing network in India is a Bangalore. With over 20 models on sale, the range in Kochi
world class dealership and service facility in Kochi, Kerala, will extend across Cruisers, Naked motorcycles, Super Bikes,
which started its operations on May 22. Sports Touring, Adventure Enduro and the complete Scrambler
Established by EVM Motors at Maradu in Kochi and spread range. The dealership will also stock the Ducati and Scrambler
over an area of 12,000 sq feet, the 3S dealership boasts of an apparel collections and motorcycle accessories.
elegant showroom and a state-of-the-art servie facility. The Sabu Johny, Managing Partner, EVM Motors, said “Ducati is one
dealership is equipped with ultra-modern equipment and a of the most coveted premium motorcycle brands and we are
team of highly qualified and trained service personnel to extremely excited to partner with Ducati in India. I’m looking
ensure excellent levels of service. forward to starting the Desmo Owners Club in Kochi and riding
Ravi Avalur, Managing Director of Ducati India said, “We are together with the motorcyclist community. Customers in Kochi
very excited to bring the unique experience of Authentic Italian can expect the same unprecedented levels of service and
Performance to Kochi. Kerala already has a large number of ownership experience that Ducati delivers around the world.”
Ducatisti and we look forward to seeing the community grow.
We’ve seen very promising results in South India over the last
two years and the opening of the Kochi dealership is
strategically aligned to our goals in the region.”
Kochi is Ducati’s sixth store in India, with dealerships already
operational in Delhi-NCR, Mumbai, Pune, Ahmedabad and

Toyota Wins 'Best Kaizen Award' at Confederation of Indian Industry (CII)

Toyota Kirloskar Motor (TKM) was honoured with “Best Kaizen emphasis on proactive and preventative maintenance in
Award” by Confederation of Indian Industry (CII) at the 30th production line, markedly increasing plant output, whilst
Kaizen Conference & Competition held at the India Habitat increasing employee morale and job satisfaction. The Toyota
Centre, New Delhi on 16th May 2017. Toyota was awarded team stood first successfully clearing this Kaizen competition
under the “Breakthrough” category, for initiating innovative held at zonal level (North Region level), thus, qualifying for
practices to reduce energy consumption at the paint booth in the “Best of Best” Kaizen Champions Competition at the
the company’s manufacturing facility at Bidadi in Karnataka. national level, scheduled to be held during September 2017.
The award winning technique involved the use of a
psychrometric controller method, ideated and executed On receiving the award, Raju B Ketkale, Senior VP, TKM said,
internally, to regulate temperature and humidity, which “We are honoured to receive the award as an acknowledgment
eventually led to reduced energy consumption. to our dedication for continuous improvement in efficiency
More than 65 companies participated in the category, which and production quality. The commitment to go above and
recognizes improvement in equipment effectiveness with an beyond building just word-class cars and following a more
sustainable production process with minimal environmental
impact is deep rooted in the Toyota culture.”

CII Kaizen Conference & Competition is a renowned platform

that honours best practices and continuous improvement of
processes in the fields of manufacturing, engineering,
supporting business processes, and management across
industry verticals, aiming to share best practices of different
corporates and to enhance individual’s capability. Every year,
a total of 4 winners are selected from under four categories

(Restorative, Renovative, Innovative and Breakthrough) to
carry the best kaizen award in the form of a trophy

39 June 2017


Fuel Watch

Shale Producers Won OPEC's Oil Price War

Steve Austin for OIL-PRICE.NET

Some wars are fought on the sidelines. They too are full of understood - and controlled - risk vs profit dynamics. Whereas
ideas, intrigue and bravado. Some backfire thoroughly. The state-owned Saudi Aramco is obligated to fund the lavish
Saudis took a brunt of it in their war with shale. lifestyle and social welfare of an entire society - which is only
In the US, after the peak oil production of early seventies, the possible with high markup - US Shale companies are thankfully
oil industry went into a limbo. It even looked like the US would free of that burden and manage to grow while remaining
be an importer of oil forever. Yet, things did change. What barely profitable. This is a tremendous competitive advantage
revived the energy scene was the arrival of shale gas on the that US shale enjoys over Gulf producers, a "vaccine" against
horizon. It was boom time. After 2008, the oil industry grew future OPEC price wars.
at a phenomenal rate. Then came the anti-climax. Saudi Arabia No doubt then that Shale changed the energy landscape of
wary of shale oil exerting influence on the global market the US, ushering in the much needed energy security in the
devised a cunning strategy to end the dominance. The process. The shale revolution, made possible by advancement
Kingdom just flooded the market with more crude leading to in technology and production, is a fascinating story. Can the
increased exports. More supply of any commodity brings down story go awry again under President Trump? Let's find out.
the prices, after all. Oil wasn't a glorious exception, either. Phase 1 From 2008-2014
Oil prices plunged. In 2014, oil prices fell to as low as $27 per High oil and gas prices were the root cause of shale revolution,
barrel and the foundations of shale industry did shake. The it has to be stated. With high prices shale production picked
breakeven point for shale producers was just above $70 a up with gusto. The growth was due to two factors: debt and
barrel because of expensive drilling. The rig count too fell from new technology.
1, 600 to 400 in quick time. Oil companies filed for bankruptcy In fact, the shale boom in the US happened because of debt.
and Saudi Arabia had pulled off a crouched coup - almost. Banks were more than willing to issue debt to oil companies
The shale industry had, indeed, run into a brick wall built by (and even independent drillers) to finance shale wells. The
Saudi Arabia. main reason was that the 'reserves' of oil companies were
However, the shale industry withstood the tremors and how. promising. Low oil prices would have meant unviable reserves
Cost cutting, innovation, increased recoveries and prudent and reduced lending.
management showed the resilience of shale industry. The Money was on offer and shale producers went into debt to
break-even cost fell to as low as $45 a barrel. In synch with finance "a rolling mill" of fracked wells in North Dakota. It was
market realities, Shale oil returned with a vengeance. And, the 'free' lending from banks that helped the drillers acquire
Saudi efforts to strip away and undermine the emergence of more acreage. Because of accessible debt, many oil companies
US in the oil field reached a massive road block. didn't have to sell useful assets to finance new wells.
Why not? Comparison between shale and conventional oil Further, new technology made fracked wells economical and
sources heaves out a clear winner in shale. Oil exploration is reliable. Advances in horizontal drilling and hydraulic fracturing
as expensive and time consuming as can be. After billions of techniques meant that it was possible to tap into previously
dollars and years, at the end of explorations, some wells throw unviable oil in shale rock. Soon, commercial oil and gas
up just a few thousand gallons of oil, or even nothing at all. available in the US outgrew even the most promising outlook.
On the other hand, shale chugs out oil to bring an assured If in 2009 the oil production averaged 5.4 million barrels a
return to the investor. day, by 2014 the crude oil production went up to 8.7 million
And this is the key economic differentiator that makes Shale a barrels per day, which was the largest one year volume
clear winner over conventional oil exploration: having been increase in over a century.
hurt by Saudi Arabia's "pump-and-dump" strategy, the majors Of course, it took guts but shale wells had an almost
have cut down on multi-billion dollar offshore exploration guaranteed chance to extract oil. With a breakeven cost of
projects seeking conventional reservoirs and have instead $70/barrel and WTI at more than $100/barrel, banks were
diverted funding into short-term "stop-and-go" shale drilling, lining up to finance drillers while packaging these obligations
which consistently extracts oil in short order. In other words as "high-yield corporate bonds". With a near-zero fed rates,
by attempting to kill shale, OPEC caused more investments to these high-yield bonds were happily picked by investors
go to Shale, which now has a lower barrier of entry and well

June 2017 40


Fuel Watch

creating a gold-rush fracking. In a matter of months, North allowing drilling rigs to drill a series of consecutive horizontal
Dakota became one of the richest states in the nation. To put wells at a rapid pace. The drilling rig only needs to move less
this in perspectives the US, at this point of time, surpassed than 30 feet to start a new well, which results in huge savings
Saudi Arabia as the world's number one crude producer. in time and completion costs.
Best of it all, employment in the oil and gas industry showed And, US oil production peaked in April 2015 with 9.63 million
definite rise with the shale boom. In the period between 2010 barrels a day. Yet the story was far from rosy. Over the next
and 2012, the oil and gas industry added 169,000 jobs, few months, production dropped by about a million barrels.
showing an exponential growth rate ten times that of overall Third phase: 2016-now
nationwide employment. The Saudi factor's greatest victory came in the February of
Till the end of 2014, the surplus oil from the US didn't alter 2016, when oil prices crashed to $27 a barrel, the lowest since
global oil prices because of the geopolitical situations in Libya 2003. Consequently, 2016 also saw record number of
and Iran. So much so, the shale industry continued to enjoy bankruptcies for North American energy companies. Yet, didn't
oil price in the range of $105-110 a barrel. the oil companies reduce costs to turn profitable? Adding to
The second phase started in 2014 the woes, Iran's production increased to about three millions
With better techniques, oil production in the US continued to a barrel in early 2016. Along with increase in Iraqi output,
rise. With it, the dynamics in the market shifted too. exports from Saudi Arabia spiked too.
As we stated in the introduction, Saudi Arabia felt threatened. So, how did the shale industry respond? They boosted
The kingdom was anxious to maintain its market share and production. By the second half of 2016 things began to look
did something it never did before: instead of cutting up. The crude oil production in the US averaged 8.9 million
production to lift up prices, it increased production to crash barrels per day in 2016, according to EIA. What about the
prices and force shale producers out of the market. And the rigs? From a peak rig count in 2014 and the subsequent
orchestrated coercion worked, kind of: Since shale production decline, it was only after June 2016 that the rig count in the
involves higher costs than conventional wells, Saudi gamble US showed slight improvement. By December 2016, the
paid off. With oil prices collapsing to below $40 and breakeven average US rig count was 634 about five hundred more than
costs at $70, the US oil industry was brought to a grinding the previous month.
halt. It was a double edged sharp sword, as the oil companies Well, the efficiency increased so much that oil companies could
had to keep drilling in spite of low oil prices as shale wells are make profit at $45 a barrel, whereas previously the marker
known to decline easily. But for how long? With prices was at $90 a barrel. Shale oil recovered faster than anyone
crashing, the oil companies couldn't keep up. Rig counts fell could have anticipated. Yes, Saudi Arabia had underestimated
and the petroleum companies were forced to lay-off. the US.
Saudis rejoiced with their brutal 'kill' So, OPEC went under serious dilemma with regard to further
As it turned out, this was a short-sighted move on the part of production cuts, as any further production cut will be market
Saudis, as US shale producers went back to the drawing board share lost by Saudis to the US. OPEC extended the production
and found innovative ways to improve the (still fairly new) cuts but it was already too late. Shale had scored a decisive
process of fracking. Within a year, the following improvements victory.
were made. In marked contrast, at present, shale producers can
Local suppliers were strengthened to reduce money lost in dynamically ramp up production, if there is shortage in the
transportation. Efficiency increased with the recovery of more market. Could anyone, leave aside Saudi Arabia, have expected
oil from each well instead of going for a new one. In other such a turnaround? Such positivity in the US energy field is
words, refracking older wells became cheaper. It turned to be also thanks to Saudi Arabia's schemes.
a better option to extract more from wells already paid for. Further, this situation where US producers are able to increase
Average speed of well completion increased from 35 days to oil production makes the supply 'elastic'. Basically, it means
21 days, resulting reductions in costs approaching 50%. that oil producers are on track to produce more on the face
Better drills and sensors, along with new fracking fluids came of immediate volatile demand. Remember, it was 'inelastic'
along. Another innovative technology was the multi-pad supply that caused oil to shoot up to $140 a barrel in 2009,
drilling, which paid off rich. Multi-pad drilling is a technology when rise in demand caused shortage? Of course, the present
'elastic' supply is a big cause of worry for OPEC.

41 June 2017


Fuel Watch

Even if, in the future, OPEC increases output, oil prices will fall architect of these deals was none other than Olivier
below $30, which will impact the fiscal management of OPEC Dassault, heir to the Dassault Group, maker of the Mirage
countries, especially Saudi Arabia more. A move none of the and Rafale multirole fighter aircrafts. Olivier Dassault is also
OPEC countries can afford. chairman of the Saudi-French Friendship Group of the
Shale dominates French Parliament, an extremely controversial government
Oil production in the US is all set to record a historic high of entity, which for many years has centralized and promoted
10 million barrels per day before December 31, according to Saudi culture in France - importing radical Imams and fast-
latest reports. As a matter of interest, it's shale drilling that tracking their residency permits - in exchange for military
has compensated for the declines from conventional oil fields. contracts. Coincidently, Olivier's father Serge Dassault -
Thus, it would be shale that will help the US match the record currently CEO of Dassault Group - routinely sells massive
of 10 million barrels a day seen previously in 1970. At present, quantities of military and civilian aircrafts to Saudi Arabia.
production is at about 95,000 barrels per day. Clear?
On the export side, the oil industry exported about 1.3 million Over the years, this cozy friendship has proven too expensive
barrels of crude per day last month. On the back of it, the for France. Indeed, it has turned France into the number one
decision of OPEC and Russia to cut output by 1.8 million barrels western exporter of ISIS fighters. Saudi-funded and
a day for another nine months hasn't had an expected impact controlled mosques are strategically being planted in all of
on the market. France's major metropolitan areas in spite of Saudis
The refineries in the US too processed a record 17.51 million propagating a very hardcore Wahhabist branch of Islam.
barrels in May beating 17.29 million barrels set in April. In the Suicide attacks and terrorist plots have become a common
first quarter, US exported about 900,000 barrels of crude per occurrence.
day, which is a significant number. Exports are now reaching Yet, coincidently with Trumps' deal, the Saudis also inked
markets in Europe and Asia too. another $100bn deal with Blackstone Group LP, a sizeable
The big question is: will the strides continue with Trump at investment in US infrastructure projects. That is a direct
the helm? access to the nerve centres of the US. It also comes at a time
Looking forward where Trump is planning to privatize power transmission
The analysis of Trump and Saudi Arabia in recent times throws lines in 20 western states currently operated by the Federal
up quite a few implicit pointers. 'Tremendous investments in government.
the United States', said Trump after meeting the Saudi king. So, we are giving the Saudi Kingdom control over one of the
Which begs the question - While on the state visit, what most important strategic assets and chore engine of American
concessions did Trump have to make with Saudis behind closed innovation: electrical power in the western states, the same -
doors for that $100bn weapons deal? Reading between the currently inexpensive - power that makes Google, Facebook,
lines, looks as though the oil industry in the US has many Data Centers and the Silicon Valley competitive. Was this
reasons to watch their toes. Indeed, they'll have to keep an "condition" attached to the $100bn defense deal? No one
eye out for a downfall of this "Saudi deal" disguised as new could tell as it's the nature of closed-door deals.
legislation that would penalize frackers. Since 2014 low oil prices have depleted the Saudis wealth fund,
Time and again, we've seen that close-door deals with Saudis which stands at $400bn by our estimates, and $100bn is no
hidden from public scrutiny usually come with heavy chump change to the Saudis. Now that Saudi attempt to derail
consequences. Take France for example. France is the world's the US energy market has failed, this is a last-ditch attempt to
second biggest aerospace exporter next only to the US with diversify away from crude oil, whose price OPEC no longer
$77bn vs $131bn of USA. In June 2015, France inked some controls.
historic deals with the Saudis for $12bn worth of defense A productive workforce - which the Saudi's sorely lack - is the
equipment including H145 airbus helicopters. Months later, most important asset of any modern economy. Owning the
France signed another deal with the same kingdom for $11.4 western grid will let the Saudis once again levy a tax on today's
billion. France is also helping Saudi Arabia in its communication American productivity, as they did in the 70s, when
and observation satellite's programme. productivity was more tied to fossil fuels. Which is a mighty
Strip away the fa&?ccedil;ade and you'll find that the shame, to say the least.
Expect the power and internet bills to go up in the next few
months

June 2017 42


The Changing Automotive Landscape

Trends That Will Drive the Automotive Industry in 2017 and Beyond

Stefan Issing, Global Industry Director-Automotive, IFS

The automotive industry is set for major disruption in 2017. 4.8 million provincial charging stations by 2020, to meet a
Alternative fuels, new lightweight materials and innovative forecast demand of 5 million EVs. A robust strategy for charging
technology are transforming the manufacturing process as well stations is essential for EV uptake.
as the cars we drive. 3. New Materials Race Heats up
Look out for these major developments in the coming year: Formula One is a hothouse for the development of ultra-high-
1. Connected Cars Move Ahead speed, ultra-light-weight, tough, crash-resistant materials. In
The Uber generation is here. Brand loyalty is becoming a thing 2017, materials and technologies developed in Formula One
of the past as millennial and those even younger explore long- will keep transitioning into mainstream serial manufacture.
term leases and car sharing. For these new consumers, digital Cost is a key issue for OEM producers, but many are already
capabilities will be a key differentiator. Which services, achieving increased quality, while reducing costs. 2016 has
networks and data can they access? How enabled will their seen excellent advances in serial vehicles that are safer, lighter
vehicle be? A premium range of apps and digital functions and more powerful. In 2017, we’ll see even more. The use of
are now expected as standard, with the latest models still new and innovative materials shows the serious competitive
selling primarily on power and weight. edge large-scale manufacturers get when they learn closely
Many IT requirements will become mandatory by 2018, and from smaller, high-end, innovative manufacturers.
manufacturers will need to take this into account. In the US, it But new materials are only half the story. New vehicles mean
will become law to have a rear camera. Every year in the US, new processes. The growth of EVs and hybrids means many
approximately 200 people are killed and 14,000 injured in manufacturing processes are being turned on their head. In
back-over accidents. EVs and hybrids, the battery is one of the last parts to be
For most manufacturers, rear cameras are already a priority. installed—a complete reversal of traditional processes. For
By 2017, 80% of all manufactured cars will have one. Back-up suppliers and manufacturers, automation and new processes
cameras are included on around half of all new cars sold in will power their competitive edge. Manufacturing plants like
the US today. Wi-Fi hotspots in vehicles, too, are on the road Tesla’s, that have several automated stations rather than a
to becoming standard, with 20% of car manufacturers planning traditional sequential line, will become the norm. The Tesla
to provide WLAN hotspots in vehicles in 2017. plant employs 3,000 people and 180 highly versatile,
2. Electric Vehicles Power the Future specialized robots. Process efficiency drives everything.
The alternative fuel market will reach $614 billion by 2022. In 2017 we will see the backbone of auto manufacturing—
The Asia-Pacific region is continuing to corner this market, the production line—streamline, automate and diversify at
especially in China. In July 2016, the market share for electric even greater speed as manufacturers and suppliers race to
vehicles (EV) in China broke through the 1% barrier, up to 1.1% produce lighter more powerful vehicles faster. The effects will
of all new car sales. Although this may not sound like much, spread throughout the supply chain. Suppliers, too, will need
1.1% meant 34,000 new EVs on Chinese roads in July 2016, a to be more innovative, faster and more agile—often
188% increase over June. transforming their logistics and production processes, as
Central to China’s success has been its network of charging smaller, more technologically advanced suppliers start
stations. Between 2010 and 2015, the number of charging challenging older ones.
stations in China grew from 1,122 to 49,000. Factor in privately Lighter, faster, powerful and safer—manufacturers are constantly
owned charging stations and stations for buses and logistics changing our understanding of what a ‘car’ is, what we can
vehicles, the total number of stations reached 160,000. The do in it and how we power it. For manufactures and suppliers,
country aims to build 12,000 centralized charging stations and this means new directions, new processes, new capabilities
and new strategies—and the sooner the better

43 June 2017


Consumer Case Studies

National Consumer Disputes Redressal Commission, New Delhi

Dr B C Gupta, Presiding Member, Dr S M Kantikar, Member

Reliance General Insurance Co. Ltd – Petitioner

Versus

Jivabhai Maldebhai Godhaniya – Respondent

Revision Petition No. 1407 of 2014 Decided on 9.5.2017

(Against the Order dated 30/09/2013 in Appeal No. 1477/2010 of the State Commission Gujarat)

Consumer Protection Act, 1986 – Section 15, 17, 19 and 21 – Insurance – Damage to insured vehicle in accident – Claim
repudiated on ground that driver had no valid licence to drive vehicle at the time to accident – Vehicle in question was a
commercial vehicle but driver of vehicle at the time of accident was carrying a licence of driving a Light Motor Vehicle (LMV)
only and there was no endorsement on same for driving commercial vehicle – A transport vehicle may be Light Motor
Vehicle as well, but for the purpose of driving the same , a distinct licence is required to be obtained – There is evidently a
fundamental breach of terms and condition of policy for non-possession of proper licence – Insured is not liable to be
granted any compensation by Petitioner under terms and conditions of policy – Impugned order set aside and complaint
dismissed. (Paras 10, 12, 15 and 16)

Important Point

A Transport vehicle may be a Light Motor Vehicle as well, but for the purpose of driving the same, a distinct transport
vehicle driving licence is required to be obtained.

Order

1. Dr B C Gupta, Presiding Member - This revision petition claim for Rs. 5,25,302 was submitted before the Insurance
Company after giving due intimation to them about the
has been filed under section 21(b) of the Consumer accident. The Petitioner/OP Insurance Company
appointed a surveyor to assess the loss, but the insurance
Protection Act, 1986, against the impugned order dated claim was rejected on 04.02.2008 by the Petitioner, saying
30.09.2013, passed by the Gujarat State Consumer that the driver had no valid licence to drive the said vehicle
Disputes Redressal Commission, (hereinafter referred to at the time of the accident. Alleging deficiency in service
as “the State Commission”) in Appeal No. 1477/2010, on the part of the Petitioner for repudiation of the claim,
Reliance General Insurance Co. Ltd vs Jivabhai Maldebhai the Complainant filed the consumer complaint in
Godhaniya, vide which, while dismissing the appeal, the question, seeking directions to the Petitioner to provide
an amount of Rs. 5,25,302 to him along with interest @
order dated 05.10.2010 passed by the District Consumer 18% per annum and also to give compensation of Rs.
Disputes Redressal Forum, Jamnagar in Consumer 50,000 for mental agony etc.
Complaint No. 3/2009, filed by the present Respondent,
allowing the said complaint, was upheld.

2. Briefly stated, the facts of the case are that the 3. The complaint was resisted by the Petitioner Insurance
Complainant/Respondent Jivabhai Maldebhai Godhaniya Company by filing a written statement before the District
is the owner of a Light Commercial Vehicle No. GJ10X Forum, in which it was stated that the Complainant had a
6204, manufactured by the Mahindra & Mahindra. He Light Commercial Vehicle meant for carrying goods etc.
obtained a commercial vehicle package policy, bearing and hence, it was a transport vehicle. However, the driver
no. 1604372329101536, valid from 18.06.2007 to did not have a valid licence for driving this type of vehicle.
17.06.2008 from the Petitioner/Opposite Party (OP) The driver had licence for LMV vehicle i.e. Light Motor
Reliance General Insurance Co. Ltd. During the period of Vehicle, which was meant for driving a private vehicle only
insurance, the said vehicle met with an accident on and not a transport vehicle.
13.08.2007, when it was being driven by Hamirbhai
Lalabhai Modhvadiya. The vehicle is stated to have 4. The District Forum, after taking into account the
suffered heavy damage during the accident for which a averments of the parties, allowed the complaint on non-

June 2017 44


Consumer Case Studies

standard basis and stated that the Complainant should application for condonation of delay filed by the
be given 75% of the amount of Rs. 2,99,000 as assessed Petitioner, the said delay is ordered to be condoned.
by the surveyor. A sum of Rs. 5,000 as compensation was
also awarded by the District Forum vide their order dated 9. The main issue for consideration in the matter is whether
05.10.2010. Being aggrieved against this order of the the action of the Petitioner Insurance Company in
District Forum, the Petitioner Insurance Company repudiating the claim on the ground that the driver of
challenged the same by way of an appeal before the State the vehicle did not have a valid and effective licence at
Commission, but the said appeal having been dismissed, the time of the accident is in order in the eyes of law, or
vide impugned order, the Petitioner Insurance Company the orders passed by the consumer fora below in allowing
is before us by way of the present Revision Petition. the claim on non-standard basis are in accordance with
law.
5. During arguments before us, the learned counsel for the
Petitioner Insurance Company submitted that the vehicle 10. It is not denied by either of the parties that as per the
in question was a transport vehicle, for which a facts on record, the vehicle in question was a commercial
commercial vehicle package policy had been obtained vehicle, but the driver of the vehicle at the time of the
from the Petitioner Insurance Company, but the driver of accident was carrying a licence for driving a Light Motor
the vehicle Hamirbhai Lalabhai Modhvadiya did not have Vehicle (LMV) only and there was no endorsement on
a valid and effective driving licence to drive the vehicle at the same for driving the commercial vehicle. The matter
the time of accident and hence, there was a wilful breach has been discussed in a number of Judgments/Orders
of the terms and conditions of the policy. The learned passed by the Hon’ble Supreme Court of India and this
counsel argued that the claim was not payable even on a Commission from time to time. The issue of grant of
non-standard basis, in view of the judgements given by driving licence for a private and a commercial vehicle was
the Hon’ble Supreme Court and this Commission in a dealt with by this Commission in Revision Petition No.
number of cases from time to time. The learned counsel 579/2013, The Oriental Insurance Company & Ors vs
has drawn attention to the order passed by the Hon’ble Seema, in an order passed on 06.05.2014. After making
apex court in New India Assurance Co Ltd vs Prabhu Lal, a detailed analysis of the statutory provisions of the Motor
AIR 2008 Supreme Court 614 (1), saying that if the holder Vehicles Act, 1988 and the Central Motor Vehicles Rules,
of a LMV licence did not have endorsement from the 1989, this Commission concluded that the requirements
concerned authority to drive a transport vehicle, the of age, qualifications, medical examination, period of
Insurance Company was not liable to pay the claim in licence etc. for obtaining of licence for driving a transport
question. The learned counsel has also drawn attention vehicle were distinctly different from those for getting a
to an order of the Hon’ble Supreme Court in Oriental licence for non-transport vehicle. In the said order, the
Insurance Co Ltd vs Angad Kol & Ors, AIR 2009 Supreme differences/requirements for the grant of licence for
Court 2151, in which it is stated that a transport vehicle transport vehicle and other vehicles were summed up as
may be a Light Motor Vehicle, but for the purpose of follows:-

driving the same, a distinct licence is required to be Transport Vehicle
obtained. The learned counsel argued that as per the
law laid down by the Hon’ble Supreme Court, the claim 1. Age
in the present case was not admissible. The minimum age for the grant of a licence to drive
6. The learned counsel for the Respondent, on the other a transport vehicle is 20 years
hand, argued that the consumer fora below had rightly
2. Medical Certificate

allowed the claim on a non-standard basis and had rightly Always required for grant or renewal of licence.
relied upon the order passed by the Hon’ble Supreme
Court in Amalendu Sahoo vs Oriental Insurance Co Ltd, II (Section 8 of Motor Vehicles Act)
(2010) CPJ 9 (SC). 3. Educational Qualification

7. We have examined the entire material on record and given The minimum qualification required for obtaining
a thoughtful consideration to the arguments advanced licence is 8th standard.
before us. 4 Validity of licence

8. There is a delay of 25 days in filing the present revision The driving licence for driving a transport vehicle is
petition. In view of the position explained in the valid for three years only.

45 June 2017


Consumer Case Studies

5. No person can be granted a learner’s licence unless three years in case of an effective licence to drive a
he has held a driving licence to drive Light Motor ‘transport vehicle’ whereas in case of any other
Vehicle for at least one year. licence, it may remain effective for a period of 20
(Section 7(1) of Motor Vehicles Act) years.”
12. It has been clearly stated by the Hon’ble apex court that
Non-Transport Vehicle a transport vehicle may be a Light Motor Vehicle as well,
1. Age but for the purpose of driving the same, a distinct licence
is required to be obtained. It is clear from above that if
The minimum age for grant of licence for non- the holder of a LMV licence was authorised to drive a
transport vehicle is 18 years commercial vehicle as well, there was no necessity of
(Section 4 of Motor Vehicles Act) prescribing distinct conditions or requirements for the
2. Medical Certificate grant of licence for commercial vehicle.
Medical Certificate may not be required. 13. In the case, New India Assurance Co. Ltd vs Prabhu Lal
3. Educational Qualification (supra) as well, the Hon’ble Supreme Court had laid down
No qualification is prescribed. that if a Light Motor Vehicle falls under the category of
(Rule 8 of Central Motor Vehicles Rules) Transport Vehicle, the driving licence has to be endorsed
under Section 3 of the Act.
4. Validity of licence 14. The learned counsel for the Respondent has drawn
The licence is valid for 20 years or till the person attention to an order passed by the Hon’ble Supreme
attains the age of 50 years, whichever is earlier. Court in Lakshmi Chand vs Reliance General Insurance,
(Section 14(2) of Motor Vehicles Act) (2016) 3 SCC 100, saying that unless there was a
fundamental breach of the terms and conditions of the
5. A person cannot appear in the driving test unless he policy, the claim should not be repudiated in total. The
has held a learner’s licence for at least thirty days. Hon’ble Supreme Court referred to their earlier decision
(Rule 15 of Central Motor Vehicle Rules) in the case, B V Nagaraju vs Oriental Insurance Co. Ltd,
(1996) 4 SCC 647, in which case also, it was held that if
11. After concluding that the basic requirements of age, more number of persons than permitted were being
qualifications, medical examination, period of licence, etc. carried in a transport vehicle, it did not amount to a
were entirely different for grant of licence for transport fundamental breach of terms and conditions of the policy
vehicle from that for non-transport vehicle, it was stated and the total repudiation of the claim by the insurer was
that under Section 2(21) of the Motor Vehicles Act, 1988, not justified. It may be observed, however, that the facts
LMV means a transport vehicle as well but this did not of the present case are distinct from the facts in the cases
mean that the holder of a licence for driving a Light Motor Lakshmi Chand vs Reliance General Insurance (supra) and
Vehicle was authorised to drive a Light Commercial Vehicle B V Nagaraju vs Oriental Insurance Co. Ltd (supra). In
or a transport vehicle as well. It was brought out that a the latter two cases, the insured committed breach of
person holding a licence for LMV only, or the licence for a terms and conditions of the policy on account of
private vehicle was debarred from driving a transport overloading of passengers in the vehicle, but the present
vehicle, unless he has proper authority or endorsement case is concerned with non-possession of valid and
to this effect from a competent licensing authority. The effective licence on the part of the driver. The learned
Hon’ble Supreme Court in the orders passed in Oriental counsel for the Respondent has drawn attention to
Insurance Co. Ltd vs Angad Kol & Ors (supra) observed as another order passed by the Hon’ble Supreme Court in
under:- Mukund Devangan vs Oriental Insurance Co. Ltd & Ors,
(2016) 4 SCC 298 in which, after considering the various
“10. The distinction between a ‘Light Motor Vehicle’ and Judgments/Orders passed from time to time, the Hon’ble
a ‘transport vehicle, is, therefore, evident. A transport Court decided to refer the matter to a larger Bench in
vehicle may be a Light Motor Vehicle but for the order to resolve the conflict in the views expressed by
purpose of driving the same, a distinct licence is different Benches of the court. One of the issues identified
required to be obtained. The distinction between a for such reference has been stated to be the meaning to
‘transport vehicle’ and a ‘passenger vehicle’ can also be given to the definition of Light Motor Vehicle as defined
be noticed from Section 14 of the Act. Sub-section in Section 2(21) of the Motor Vehicles Act. A question
(2) of Section 14 provides for duration of a period of

June 2017 46


Consumer Case Studies

has also been framed whether the transport vehicles were commercial vehicle, the licensing authority has to ensure
excluded from the same. that he fulfils the requisite conditions of age, educational
15. Considering the overall facts and circumstances of the qualifications, medical certificate etc. Unless a person
present case, it is abundantly clear that the vehicle in satisfies the licensing authority on that score and obtains
question was a commercial vehicle, but the person who proper authorisation for driving a commercial vehicle, he
was driving the vehicle at the time of the accident, did cannot be stated to be in possession of a valid and
not have a valid and effective licence to drive the same. effective driving licence. In the instant case, therefore,
Considering the distinct requirements laid down in the there is evidently a fundamental breach of the terms and
Motor Vehicles Act, 1988 and the Central Motor Vehicles conditions of the policy for non-possession of a proper
Rules, 1989 about the grant of licence for commercial licence. It is held, therefore, that the insured is not liable
vehicles, it is clear that the holder of the LMV licence had to be granted any compensation by the Petitioner under
no authority to drive the commercial vehicle without the terms and conditions of the policy.
proper endorsement from the concerned transport 16. Based on the foregoing discussion, the present Revision
authority. The detailed analysis of the legal provisions, Petition is allowed and the orders passed by the consumer
made in para 10 above about the basic requirements for fora below are set aside, being perverse in the eyes of
the grant of licence for transport/non-transport vehicles, law. The consumer complaint in question stands
make it clear that for enabling a person to drive a dismissed with no order as to costs

Engagement of GST/Service Tax Consultant

A GST/service tax consultant – Ms Puloma Dalal, FCA based in Mumbai, has been engaged by FADA on retainership to
help members deal with the complexities of GST/service tax law and procedures. She will, on reference made by FADA,
guide and give legal opinion on various issues relating to GST/service tax as applicable to automobile dealers.

FADA will forward the queries raised by members to Ms Puloma Dalal for her opinion.

While Ms Puloma Dalal will, essentially, give legal position and clarification, supported by case law, on various GST/
service tax issues raised by FADA members, those wanting to engage her as counsel to fight their cases in litigation, will
have to pay separately as per terms that may be mutually agreed to.

Members seeking clarification or legal position relating to GST/service tax as relevant to automobile dealers, may send
their queries to FADA office at 804-805, Surya Kiran, 19, K G Marg, New Delhi (E-mail Id: fada@fada.in).

The service is offerred to FADA Members free of charge.

NADA 2017 Workshop Handouts with the Talk Video

A delegation of over 40 automobile dealers led by John K Paul, FADA President participated at NADA 2017 Convention in
New Orleans held from January 26 – January 29, 2017.

FADA has purchased 50 workshop compilations from NADA at special rate of USD 250 (Rs. 17,500) per user for the
benefit of automobile dealers especially those who could not participate.

A special feature of the compilation is that both the video & the hand-outs are synchronised. The proceedings are
avalable in limited numbers and will be made avaialble on First-Come-First-Serve basis.

Those interested in buying the compilation of Workshop proceedings may remit the payment of Rs. 17,500 by DD/
Cheque in favour of Federation of Automobile Dealers Associations payable at Delhi and send their payments to FADA
office at New Delhi.

47 June 2017


MAURYA MOTORS LIMITED

Tata Authorised Dealer for Passenger & Commercial Vehicles

Plot No. C-1, Industrial Area
Patliputra

Patna - 800 013

Phones: 92636 32685 / 92636 39260 / 92346 66948

E-mail: vinay.agarwal@mauryamotors.in

ranjan.kumar@mauryamotors.in

June 2017 48


PASSENGER VEHICLE SALES - MAY 2017

Domestic Sales May-17 May-16 Growth Y-o-Y (%) Exports May-17 May-16 Growth Y-o-Y (%)
0 1-
OEM 340 501 -32.14 OEM
133 Force Motors 16,761
Fiat India 6,742 143 -6.99 Ford India 8,297 11,499 45.76
Force Motors 361 General Motors
Ford India 5,780 16.64 Honda Cars 498 1,680 393.87
General Motors 24 Hyundai Motor 8,257
HM Finance Corp 11,278 2,615 -86.20 Mahindra
Honda Cars 42,007 Maruti Suzuki 308
Hyundai Motor 72 -66.67 Nissan Motor 6,175 597 -16.58
Isuzu Motors 185 Renault India 4,311
Mahindra 20,270 9,954 13.30 Tata Motors 1,118 11,805 -30.06
Maruti Suzuki 130,248 Toyota Kirloskar
Nissan Motor 41,351 1.59 Volkswagen 89
Renault India 3,707 Total 1,442
Skoda Auto 8,639 13 1,323.08 10,477 1,085 -71.61
Tata Motors 1,064 57,733
Toyota Kirloskar 12,499 19,635 3.23 9,828 -37.17
Volkswagen 10,914
Total 3,231 113,162 15.10 6,830 -36.88
251,642
3,506 5.73

8,343 3.55 167 569.46

904 17.70 218 -59.17

9,456 32.18 994 45.07

12,614 -13.48

3,591 -10.03 6,816 53.71

231,640 8.63 51,523 25.59

Domestic Sales + Exports

OEM May-17 May-16 Growth Y-o-Y (%)

Fiat India 340 501 -32.14 Segment wise (Domestic Sales + Exports)
Force Motors 133 147 -9.52
Ford India 23,503 17,279 36.02 Category May-17 May-16 Growth Y-o-Y (%)
General Motors 8,658 4,295
HM Finance Corp 101.58 Cars 212,398 198,972 6.75
Honda Cars 24 72 -66.67 UVs 81,785 70,127 16.62
Hyundai Motor 11,776 10,551 11.61 Vans 15,192 14,064
Isuzu Motors 50,264 53,156 -5.44 8.02
Mahindra 1,323.08
Maruti Suzuki 185 13 -0.69
Nissan Motor 20,578 20,720 10.92
Renault India 136,423 122,990 -22.43
Skoda Auto 8,018 10,336 14.65
Tata Motors 9,757 8,510 17.70
Toyota Kirloskar 1,064 30.12
Volkswagen 12,588 904 -9.20
12,356 9,674 31.72
13,708 13,608
10,407 9.26
Total 309,375 Total 309,375 283,163 9.26
283,163 Source: SIAM

49 June 2017


TWO-WHEELER SALES - MAY 2017

Domestic Sales Exports

OEM May-17 May-16 Growth Y-o-Y (%) OEM May-17 May-16 Growth Y-o-Y (%)
Bajaj Auto 156,523 120,592
H-D Motor 179,822 -12.96 Bajaj Auto 127,522 -5.43
Hero MotoCorp 326 477
HMSI 613,019 360 -9.44 H-D Motor 20,865 336 41.96
India Kawasaki 510,381 567,855 7.95 Hero MotoCorp 26,654
India Yamaha 415,860 22.73 HMSI 16,297 15,262 36.71
Mahindra 2W 108 11.34 India Yamaha
Piaggio 69,429 97 10.65 3,121 20,468 30.22
Royal Enfield 62,748 349
Suzuki 2,125 14,558 11.95
Triumph 4,246 2,049
TVS Motor 58,647 5,436 -60.91 Mahindra 2W 5,141 1,402 122.61
38,923 34,899
2,247 88.96 Piaggio 132 164.39
71 47,232 24.17 Royal Enfield
240,527 25,659 51.69 Suzuki 1,372 49.34
-46.21 TVS Motor
132 16.26 7,193 -28.53
206,886
31,434 11.02

Total 1,694,325 1,514,334 11.89 Total 230,444 219,679 4.90

Domestic Sales + Exports

OEM May-17 May-16 Growth Y-o-Y (%)

Bajaj Auto 277,115 307,344 -9.84

H-D Motor 803 696 15.37

Hero MotoCorp 633,884 583,117 8.71

HMSI 537,035 436,328 23.08

India Kawasaki 108 97 11.34

India Yamaha 85,726 77,306 10.89

Mahindra 2W 5,246 6,838 -23.28 Segment wise (Domestic Sales + Exports)

Piaggio 4,595 2,379 93.15 Category May-17 May-16 Growth Y-o-Y (%)
Scooters/
Royal Enfield 60,696 48,604 24.88 Scooterettes 583,442 478,547 21.92

Suzuki 44,064 32,852 34.13 Motorcycles/ 1,269,596 1,179,065 7.68
Step-Through
Triumph 71 132 -46.21

TVS Motor 275,426 238,320 15.57 Mopeds 71,731 76,401 -6.11

Total 1,924,769 1,734,013 11.00 Total 1,924,769 1,734,013 11.00
Source: SIAM

June 2017 50


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