Hyundai dealers tap govt over contract suspension

Written by Roudra Bhattacharya | New Delhi | Updated: Aug 28 2013, 14:40pm hrs
With Hyundai Motor India (HMIL) terminating the contracts of some of its dealers for alleged non-performance, the Hyundai (India) Dealers Forum has approached the ministry of heavy industries for support. While the ministry had, in a letter to BS Seo, MD & CEO, HMIL, sought a tripartite meeting, it could not take place as senior company officials were in Russia for an annual dealer conference. The ministry has, however, asked HMIL, the country's second-largest car maker, not to suspend dealerships, pending the discussions.

(The) ministry of heavy industries and public enterprises has been approached by a large number of Hyundai dealers of the western region expressing their grievances arising out of the dealership termination notices, and other matters between the company and dealers. The minister (Praful Patel) has expressed concern in the matter as it is likely to affect the livelihood and well-being of a large number of people, the letter sent to HMIL, which was reviewed by FE, said. HMIL did not respond to a detailed questionnaire sent via email. However, sources said that the company terminated some dealerships as it found them selling competitors products.

The Hyundai Dealers Forum has alleged indiscriminate practices by the company that have led to the closure of a few dealerships, with a possibility of more such instances. Hyundai has about 350 dealers in the country. Dealers, across the country, wrote four letters between March and June this year to both HMIL and its South Korean parent, Hyundai Motor Corp, the last of which had been signed by 42 dealers from western India.

HMIL officials had also met representatives of a dealer forum in Mumbai in June this year to seek a resolution, but a compromise could not be arrived at. In the letters, Hyundai dealers said they were under pressure to buy fresh stock even as sales were slowing down at their end. This was leading to heavy business losses due to high inventory, real estate costs and rising interest rates for short-term financing.

The completion of work in accordance with the directives by past officials was told to be useless by the officials of new management. Sudden flash of debits in the account statement given to dealers and never explained in advance by RO (regional office) and necessary clarifications and justification remain unanswered, one of the letters seen by FE said. The letter added that there has been a sudden reduction of labour bills at 30% or more, but not progressive reduction/cut without time gap or advance advisory intimation for such action by service department of HMIL in the respective region. Another letter mentions issues like dealer viability, market discounts, wholesale order and service policy.

Puneet Gupta, principal analyst at IHS Automotive India, said, In good times, dealers can take a dent in their profits and deal with issues, but in challenging times it is really a win-win situation if companies support their channel partners with attractive offers and financing support.