After sending legal notice to UM Lohia Two Wheelers Pvt Ltd (UM Lohia), the Federation of Automobile Dealers Associations (FADA) has requested intervention by the prime minister's office (PMO) to stop exit of the joint venture company from India. UM Lohia is a joint venture (JV) between the Lohia group and UM Motorcycles, an American company, which had surreptitiously folded up its operations and closed its warehouse for spare parts within three years after setting up the JV.
In a statement, FADA says "Auto manufacturer’s shutting shops and exiting India overnight now brings a strong urge to introduce franchisee protection act to safeguard interests of customers, dealers and employees since India aspires to make the country a manufacturing hub with an aim of Make in India."
FADA, which has taken up the cause of the dealers of ‘UM Motorcycles’, whose motorcycles were manufactured and sold in India by had also requested several ministries like the ministry of heavy industries, road transport & highways, commerce & industries and corporate affairs to intervene in the matter.
In October this year, FADA had sent a legal notice to UM Lohia for defrauding dealers. "...to protect the interests of the customers and the dealers, FADA, through its counsel Khaitan & Co, has issued a legal notice to UM Lohia and its management, calling upon them to redress all grievances of dealers relating to the losses suffered by dealers due to actions of UM Lohia and to take steps to ensure the maintenance and servicing of motorcycles already sold in accordance with the warranty terms and law," the national body of automobile retail industry had said at that time. (Read: FADA Sends Legal Notice to UM Lohia and Promoters for Defrauding Dealers)
However, FADA says it did not receive any response from UM Lohia as well as promoters and management of the company.
In a statement, the dealers association says, "Looking at the plight of the customers who are not getting proper service and spares because of carelessness of the owners and dealers who are aggrieved by the dishonesty and fraud on part of the management and promoters of UM Lohia, including founders Ayush Kumar Lohia and Jose Miguel Villegas, FADA has taken up this issue and is requesting intervention of the PMO and allied ministries."
"Due to the plagued relationship between the owners, it has caused huge losses to dealers and has exposed them to unwarranted litigation from customers for whom, dealers are the face of the company. Apart from the business losses which the dealers are facing with, it has also resulted in creating a bad name in their society and has therefore added to their plight and mental harassment," FADA added.
In 2016, the Lohia group has set up the JV with UM Motorcycles to manufacture and sell in India ‘American’ style motorcycles under the brand of ‘UM Motorcycles’.
According to FADA, the woes of dealers began the moment the JV entered the market with its motorcycles. "It soon came to light that the so called ‘American’ motorcycles were actually being assembled from Chinese parts at UM Lohia’s manufacturing plant at Kashipur in Uttar Pradesh. Consumer interest immediately dipped as no one wanted to purchase cheap Chinese replicas of ‘American’ motorcycles. The brand lost its value, and with it the investments of dealers, who were now holding a product few desired."
According to FADA, at a time when the entire automobile industry in India was moving towards BS-IV emission standards, UM Lohia chose to enter the market by introducing BS-III motorcycles in the second half of 2016, even though the ban on sale of BS-III vehicles was to take effect in a few months from April 2017. As soon as the ban on BS-III vehicles came into effect, the dealers of UM Lohia were left with a huge inventory of BS-III motorcycles which was not only undesired by customers but now also legally unsellable.
UM Lohia, however, refused to compensate dealers for this unsellable stock and also refused to return the advance payments given by many dealers.
"It is only after much cajoling that UM Lohia even acknowledged the problem. Even then, instead of buying back the BS-III motorcycles from the dealers and returning their advances, UM Lohia came up with the scheme to sell BS-IV motorcycles to dealers in lieu of their stock of BS-III motorcycles and advances. However, the BS-IV motorcycles supplied by UM Lohia were entirely unfit to ply on roads with several basic components such as EFI module controller and gear breaking down within few days of use of the motorcycles by the customers," FADA says.
To make matters worse, FADA says, UM Lohia has now surreptitiously folded up its operations and closed its warehouse for spare parts. This makes it impossible for dealers to service the warranty claims on defective UM motorcycles. As a result, many dealers have been exposed to litigation from customers of UM motorcycles.