FADA introduces auto dealers’ protection act, seeks government assistance

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The Federation of Automobile Dealers’ Association or FADA on Wednesday has released a new policy brief. It comes as an introduction to the automobile dealers’ protection act in India. FADA as the automobile dealer’s apex governing body has requested central government assistance on this.

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The move comes as US auto major Ford has decided to stop manufacturing operations in India after General Motors, MAN Trucks, UM Motorcycles and Harley-Davidson too took similar steps. FADA is seeking the central government’s intervention to create a level playing field for the Indian automobile dealers.

As the automobile dealer’s body has said, the prevailing practices by the automobile OEMs in recent times are making the dealership operations problematic. “The prevailing OEM practices are extremely problematic and against the principles of equity, justice and good conscience. FADA is requesting the intervention of the Union Government to level the playing field between the financially strong OEMs and the smaller automobile dealers,” FADA has further said in its note.

The organisation also said that Indian automobile dealer agreements tend to have vague and broad grounds of termination that provide greater flexibility to OEMs in comparison to auto dealers. It further claimed that the OEMs’ decision to abruptly exit operations in the country impacts its dealer partners in a multidimensional way. Such moves cause employment losses and affect the consumers with confusion about after-sales services.

Many countries around the world recognize the inherent power imbalance between automobile manufacturers and dealers. There are legislations to create a level playing field for the OEMs and the dealers. However, in India, there is no such legislation and FADA has been advocating for such rules for quite some time.

Currently, OEMs and their dealer partners sign a business agreement at the beginning of their partnership, which is valid under the Indian Contract Act. However, the law doesn’t give any clarity about the solutions for automobile dealers in case the OEM withdraws their operational activity from the country.

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