Parliamentary Standing Committee Recommends New Franchise Protection Act For Auto Dealers

The Federation of Automobile Dealers Associations (FADA) has announced that the Parliamentary Standing Committee (PSC) headed by K Keshava Rao has recommended that the Government of India should formulate a new Franchise Protection Act for Auto Dealers. This recommendation was part of suggestions made by the Standing Committee in its Report Number 303 titled 'Downturn in Automobile Sector-Its Impact and Measures for Revival'. The recommendation has been made to protect the interest of Auto Dealers after auto manufacturers decide to exit the market.

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General Motors had announced its exit from the Indian market in 2017.

There has been a series of market pull outs in the last three years by major auto makers like General Motors, MAN Trucks (a Volkswagen Group brand) and Harley Davidson among others and investments of their dealers are at stake after these manufacturers have announced exit. Commenting on the recommendation Vinkesh Gulati, President- FADA said, "India does not have a Franchisee Law at present due to which the OEM - Dealer agreements are highly skewed towards manufacturers. This leads to a tussle in managing dealership operations in various ways, very short terms agreements and non-existence of a clearly defined exit policy. Many developed Countries like Mexico, Brazil, Spain, Albania, Russia, China, Indonesia, Malaysia, Japan, Australia, Italy, Sweden, and Belgium now have such rules to protect the franchisee's which started with USA introducing the same in 1980s.

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Harley Davidson is the latest automaker to announce its exit from the Indian market.

Franchise laws will aim to level the playing field between large automakers and local dealers. Currently, almost all auto dealerships are privately owned proprietorship or family owned businesses. It will also be beneficial to customers in long run by providing reliable services to the consuming public and also provide stable employment to those working at the dealership.