UM Motorcycles In Legal Trouble

The Federation of Automobile Dealers Association (FADA) has issued a legal notice to UM Lohia management on behalf of UM Motorcycles’ dealers

• UM Motorcycles have shut shop in India leaving its dealers high and dry.
• With UM out, its 80 dealerships are facing closure and could lead to over 2,500 job cuts. 
• FADA will be acting on behalf of the 80 dealers and besides legal action, might also involve government authorities to resolve this issue.

The Federation of Automobile Dealers Association (FADA) has slapped a legal notice on UM Motorcycles. FADA is a national body, which was formed to represent automobile dealers in India. In this case, FADA has taken up the grievances of 80 UM Motorcycle dealers who were left high and dry after UM abruptly shut shop in India. 

UM Motorcycles dealers have faced issues since UM commenced India operations when it launched BS3 two-wheelers just a few months shy of the BS4 deadlines. This left the dealers with a large inventory of unsellable BS3 motorcycles post the April 2017 BS4 deadline. UM then replaced the dealer’s BS3 stock with BS4 units, which started facing breakdowns within a few days of delivery. 

UM has suddenly shut shop leaving dealers with no spares and no way to service the already sold motorcycles. Till date, UM has sold more than 10,000 motorcycles in India. The sudden exit could lead to the 80 dealers being forced to shut shop leading to over 2,500 job losses. 

According to FADA, UM has shown no interest in resolving dealer and customer grievances leaving the dealers to face the wrath of customers. The management’s apathy has forced FADA to issue a legal notice to UM Motorcycles and its India partner, the Lohia Group. 

UM Motorcycles’ sudden exit comes as a surprise as it had said that it stopped production in October to update its products to meet BS6 norms and fit them with ABS. It also revealed plans to launch two new adventure motorcycles like the DSR 200 Adventure this Diwali.

We believe UM Motorcycles should have formally announced its exit from India and offered service backup for the sold motorcycles, which were still under warranty. Ultimately, in such cases, it is the customers who suffer as they are left with a motorcycle that cannot be serviced or even sold at an acceptable price. 

Here is the press release from FADA:

FADA issues Legal Notice to UM Lohia & its Management through its counsel Khaitan & Co.

23rd October’19, New Delhi: The Federation of Automobile Dealers Association (FADA) has taken up the cause of the dealers of ‘UM Motorcycles’, which motorcycles are manufactured and sold in India by UM Lohia Two Wheelers Pvt. Ltd (UM Lohia).

UM Lohia is a joint venture between the Lohia Group and UM Motorcycles, an American motorcycle company. The joint venture was set up in 2016 to manufacture and sell in India ‘American’ style motorcycles under the brand of ‘UM Motorcycles’.

The dealers are aggrieved by the dishonesty and fraud on part of the management and promoters of UM Lohia, including founders Mr. Ayush Kumar Lohia and Mr. Jose Miguel Villegas, which has plagued the relationship between them since beginning and has caused huge losses to dealers as well as exposed them to unwarranted litigation from customers of UM Motorcycles.

The dealers’ woes began as soon as UM Lohia 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 in Kashipur, 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.

Further, at the 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 2nd 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.

To make 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 the defective UM motorcycles. As a result, many dealers have been exposed to litigation from customers of UM motorcycles.

In all this, UM Lohia, its promoters and its management, have shown no inclination or interest in resolving the dealers’ grievances, despite several attempts made by the dealers, first themselves, and then, through FADA.  

The promoters of UM Lohia have now started new ventures – the Lohia group is now investing in the e-vehicles segment and once again finding dealers for this new venture.

Accordingly, 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.

If UM Lohia & its management does not respond to our legal notice, FADA will have no other option but to take appropriate legal measures against the Company, its Management and all others concerned with this matter. Simultaneously, FADA will also update and involve Government Authorities in this matter.