Unceremonious exits are of automakers' own making

While the recent exit of international automakers from India has brought up several economic issues, there is ample evidence to suggest that their own missteps might have caused these exits.

Companies can no longer launch a product which has succeeded elsewhere and expect it to work in India. Take for example the case of Ford and Hyundai. Both companies entered the Indian market at the same time.

Hyundai launched products after taking customers' requirements into consideration, while Ford continued to sell products designed for other markets. Today, Hyundai has the second largest market share in the country and Ford has disappeared.

Though these exits have been caused by the automaker’s own actions, dealers, employees and customers were negatively impacted. The exit of automakers since 2017 has caused 64,000 employees to lose jobs across dealerships.

Dealerships are relatively small family-run enterprises that are built with the investment of life savings. Even though they are critical links in the market, they are rarely consulted or even informed about any exit plans.

Automaker-dealer agreements lack provisions for post-exit obligations of the OEMs and Indian law is not stringent. Dealers are left with angry and confused customers, unsold stock and no clarity on the future of their large-scale investments. In fact, dealer investment worth Rs 2,500 crore has gone down the drain due to the exits of five OEM exits since 2017.

On the consumer's end, it is clear that many would have decided against buying these vehicles if they knew of the company's exit plans. General Motors (GM), which suffered a similar fate, is a case in point. After GM’s exit in 2017, spotting a GM car on the road has become next to impossible. This is because the service network has all but vanished and spare parts are rarely available.

Exits are a natural part of any business ecosystem and enabling them does make economic sense. However, these cannot be unceremonious exits and need to be accompanied by clarity on obligations towards all stakeholders.

Automakers continue to put stakeholders at risk as they have no requirement to do otherwise. This is not the case in other countries. In fact, the same automakers have agreements in other countries which clearly detail exit obligations. The government must pitch in to play their part as there is a clear need for a law that protects auto dealerships.

(The author is the president of the Federation of Automobile Dealers Associations)