FADA to sue UM Lohia for closing operations
■ Legal notice says firm caused `150 cr loss to its 80 dealers
The Federation of Automobile Dealers Association or FADA on Wednesday issued a legal notice to premium Delhi-based bike maker UM Lohia Two Wheelers (UM Lohia), alleging fraud that caused a loss of Rs 150 crore to 80 dealers across the country in setting up the infrastructure.
There is also a direct job loss of 2,500 people at these dealerships, with many shutting down operation and burdened with five to 10 bikes unsold at each dealership.
“We will be responding to the legal notice legally and it takes time,” Ayush Kumar Lohia, founding partner of UM Lohia told Financial Chronicle, adding that he had committed no fraud.
“We had some difficulties with our American partner who did all the research and development and produced bikes for the Indian market which were not BS IV emission norms compliant,” he said, stating that he was left alone to face the heat from the dealers.
UM Lohia, a joint venture (JV) between the Delhibased Lohia Group and USbased UM Motorcycles, which started retail sales in 2016, stopped operations in India abruptly last October, leaving around 80 dealers in the lurch. UM Lohia was started by Ayush Kumar Lohia and Jose Miguel Villegas of the US in an equal joint venture with an investment of Rs 100 crore.
It claimed to manufacture and sell “American style, American Made” motorcycles under the brand UM Motorcycles and attracted dealers by showcasing its models at an automobile exhibition.
US-based UM Motorcycles, promoted by the Villegas
Family, produces several models of motocycles and cruisers, including the Renegade range of motorcycles.
Soon after the India JV’s dealerships were signed, it emerged that the motorcycles were made using Chinese components assembled at a manufacturing plant in Kashipur, Uttar Pradesh, allege dealers. This resulted in the brand losing its value and customers avoiding purchase.
The company also launched vehicles compliant with BS-III emission norms in the second half of 2016, even as the regulation mandating BS-IV was already scheduled to come into force from April 2017.
The dealers were not able to sell once the deadline was crossed and the company allegedly refused to take back the vehicles.
Amid mounting pressure, the company later agreed to come out with BS-IV compliant vehicles, and collected further deposits from some dealers.
However, the vehicles produced later were substandard, with basic components like gear breaking down within a few days of use. “To make the matters worse, UM Lohia has now surreptitiously folded up its operations and shut down its warehouse for spare parts, making 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,” FADA said.
“These dealers have invested around Rs 150 crore in establishing requisite infrastructure alone,” Saharsh Damani, CEO at FADA said, adding that it has served legal notice to the US and Indian directors of the entity.