How a single Delhi dealer pushed Audi sales into red

In January last year, Audi's India head Rahil Ansari exuded confidence that the luxury car maker would post double-digit growth in sales, given that the pains of demonetization and cess hike under GST were behind it.

However, it turned out to be too optimistic forecast.

A father-son duo, Rash Pal Singh Todd and Mandhir Singh Todd, owners of Audi's retail stores in Delhi's NCR region, gave a jolt to Ansari's aspirations as the company delivered just 6,463 units -- a de-growth of 18%. The car with four rings, as it is called, had clocked 7,876 unit deliveries in 2017, a growth of 2% over the previous year.

The company blamed the loss in volume on the closure of its single largest dealer, which impacted the sales in its largest market for luxury cars in India – National Capital Region (NCR). At the same time, the company also battled the supply constraints of selected models owing to European market shift to WLTP cycles and resultant phase in-phase out of the models, which also impacted the deliveries, the company executives said.

WLTP, or Worldwide Harmonised Light Vehicle Test Procedure, provides for more realistic testing conditions and an accurate basis for calculating fuel consumption and CO2 emissions.

A statement issued by Audi said, "In North India (Delhi NCR), where Audi records its maximum deliveries, it experienced an extraordinary effect owing to the closure of its single largest dealer location, which impacted sales in the largest market for luxury cars in India."

Todds, who are British nationals of Indian origin, were arrested from Delhi airport by Delhi police when they were attempting to flee to the UK after defrauding a consortium of banks to the tune of over Rs 270 crore, besides denting the image of Audi's parent Volkswagen group, which is barely out of diesel-gate scandal. Todds also owned a Porsche showroom.

The fraud came to light after HDFC Bank, which is one of the lenders to the Todds's companies, received communication from the accused that since they were running losses, they will not be able to repay their loans. The bank had offered credit facilities to the Todds based on the documents submitted by them, showing sound financial health.

According to the investigators, the arrangement between the banks and the accused company was such that the former extended trade advances based upon the details of the cars such as chassis, model numbers and engine numbers provided by the vehicle manufacturers. Based on the details, a corresponding amount for the purchase of the cars was remitted by the banks in the account of Volkswagen Finance Private Ltd, a captive finance company of the vehicle manufacturer. As per the terms of the agreement, within 90 days of the sale of a car, the amount was to be remitted back to the banks. As per the books of accounts, there was supposed to be a stock of 200 cars, but the audit by the banks later revealed the presence of only 29 cars.

"In view thereof, it is apparent that the rest of the cars have been clandestinely sold by the accused without informing the bank," the HDFC Bank executive informed the investigators. After the scam was unearthed, the deliveries were stopped impacting sales. The accused also allegedly cheated the banks on the purchase of demo cars.

Audi will introduce its flagship models A8 and R8 in the Indian market in 2019.

UNEXPECTED BUMP

• The company delivered 6,463 units in 2018 against 7,876 units in 2017-- a de-growth of 18%
   
• The company blamed the loss in volume on the closure of its single largest dealer