Shoppers are the largest losers with Ford India’s ‘restructuring’ exit; then it’s dealerships, their employees.
By Vinkesh Gulati
On September 9, 2021, Ford India introduced it’s ‘restructuring’ its home operations. This implies discontinuation of all fashions it used to promote, closing manufacturing vegetation in Gujarat and Tamil Nadu, and for all sensible functions a transparent exit from the Indian vehicle market. There have been sufficient debates on what this implies for the trade, and the hardships it can create for dealerships when it comes to lack of jobs, livelihood and financial safety. However it’s equally vital to debate the repercussions on one of the crucial vital stakeholders on this chain, the Indian shopper.
This announcement got here a day earlier than Ganesh Chaturthi (which marks the start of the festive season, a interval thought of auspicious for purchasing vehicles, gold, property and so on). However for Ford sellers and consumers, this Ganesh Chaturthi was something however auspicious. Sellers had been left to take care of offended and confused clients who had been cancelling bookings, asking for refunds and refusing to take supply. Most car purchases occur by way of financing, and shoppers take a look at worth, model, gasoline effectivity, after-sales help and resale worth earlier than shopping for a automobile. From the misery that adopted Ford’s announcement, it’s clear that almost all shoppers wouldn’t have determined to purchase a Ford automobile in the event that they knew the corporate was shutting store, however at the moment are caught with a product whose future is unsure, and which has been purchased at a significant monetary price.
The considerations of Ford shoppers stem from the previous expertise of comparable exits by different automakers from India. Regardless of assurances by Common Motors, submit their exit in 2017, the supply of GM spare elements and its service centre community have dried utterly. Shoppers pay street tax on automobiles for 15 years, so it’s honest to count on service help and availability of spare elements for a minimum of that period. The shortage of after-sales help has a destructive impact on a shopper’s car-owning expertise and should encourage the faux auto elements trade, having direct penalties for street security. Such exits even have a knock-on financial impact because the resale worth of vehicles plummet sharply after a producer’s exit.
Ford’s exit also can result in a scenario the place a shopper could not have a transparent authorized recourse in case there are points associated to product legal responsibility or guarantee. Sadly, in such circumstances, shoppers typically are likely to take authorized motion in opposition to sellers, the one face of the model left on the road. In a single case, a supplier of United Bikes needed to take care of a shopper grievance that arose out of producing defects, which ought to clearly be beneath the producer’s ambit. In Ford’s case too, the producer’s exit could result in onerous authorized burden on the supplier, whereas additionally leaving the buyer with no sure resolution.
Actually, Ford’s exit leaves everybody in a foul place—round 170 sellers with 391 shops are gazing a loss upwards of Rs 2,000 crore in sunk funding prices. Round 40,000 workers working at these dealerships are going through lack of livelihood and over 10 lakh Ford clients in India have a product whose future efficiency and worth is unsure. Ford was establishing new dealerships in India until a minimum of a number of months earlier than this announcement, and sellers who had been stored at the hours of darkness had been taking bookings until a day earlier than the exit was introduced. Whereas corporations ought to be capable to exit the market primarily based on financial concerns, additionally it is vital that each one affected stakeholders have their pursuits safeguarded.
We don’t at present have provisions that shield the pursuits of sellers and shoppers in the identical method. The enactment of an vehicle supplier’s safety Act will be useful on this regard. It will probably guarantee there’s clear and outlined duty within the case of product legal responsibility and guarantee infringement, making a pathway for the buyer when it comes to authorized recourse. Most shoppers won’t ever instantly work together with OEMs, and their possession expertise will largely rely on their interplay with sellers. Therefore, an Act that ensures the obligations of OEMs in the direction of sellers will present a level of assurance to the buyer as effectively. The creation of a transparent, structured, delineated framework might help alleviate the anxiousness and uncertainty associated to an exit, whereas making certain that the exit results in minimal disruption available in the market.
The creator is President, Federation of Car Sellers Associations of India. Views are private.