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Old 15th June 2007, 11:03   #16
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Lets calculate what the financial implications would be, toward starting a dealership. These are only guesstimates and I would appreciate any corrections on the following numbers:

1. Land / Real Estate: This number would have the biggest variance with different rates within cities and between cities. However, many dealerships prefer to lease rather than purchase the property outright. Lease rates that I have heard of vary between 5 lacs - 15 lacs for the dealership property in Mumbai. I think a decent size for a dealership can be anywhere upward of 3,000 sq. ft. This does NOT include the service facilities.

2. Interiors and infrastructure: This would include design, renovation, computers, client management softwares, printers, inverter systems, beverage machines, brochures etc. I have heard sources quote this figure anywhere between 75 lakhs to 1.5 crores.

3. Other expenses: Recruiting / training staff members, launch advertising, website development, insurance (for dealership, employees and inventory) etc. Easily 25 lakhs.

4. Inventory: Depends on how many cars the manufacturer requires you to have on-hand at all times. Am not sure how manufacturer credit works but this point alone could account for 1.5 crore +.

5. Service facilities: About 3 crore to set up? Some manufacturers (Toyota included) follow the 3S rule where each dealership has the sales, service and spares under one roof. On a related note, I must add that the most impressive service setups I have seen are from Mercedes Benz and BMW. They are fanatical about meeting international standards with rules for even which tubelights you use!! Amazing stuff.

The most important incredients over and above finance would be time availability, management skills and a dedication to customer service. Manufacturers are very particular of how you manage their customers.

Last edited by GTO : 15th June 2007 at 11:06.
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Old 15th June 2007, 11:43   #17
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have u looked at this:

http://www.hondacarindia.com/Contact...oposalForm.doc
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Old 16th June 2007, 00:54   #18
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GTO is almost correct except inventry cost because no car maker gives you credit dealers have to borrow money from the bank which is called inventory funding at the rate of 12.5% pa and it has to be payback in 45 days otherwise there is penal interest of 20% its only motorcycle dealers who make very big profits because there is no discounts and inventory funding is shared by the manufacture and for your information honda gives lowest margin thats why dealers dont give big discounts as compare to maruti or hyundai trust me
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Old 16th June 2007, 17:10   #19
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Quote:
no car maker gives you credit dealers have to borrow money from the bank which is called inventory funding at the rate of 12.5% pa
They dont? That means if you have 50 Hondas lying in your dockyard...they are costing you 5 lakhs a month in interest alone!!

No wonder dealers want to move inventory so fast. Or keep only certain colours in stock while the rest are "ordered".
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Old 16th June 2007, 17:26   #20
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paying 15 to 20 lacs intrest is normal for a dealer selling 300+ cars per month my friend says it is the worst business opening a car dealership i have even seen there balance sheet and if anybody wants to open a dealership can mail me i can even get you meet my friend who owns a big dealership in delhi
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Old 18th June 2007, 14:24   #21
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Quote:
paying 15 to 20 lacs intrest is normal for a dealer selling 300+ cars per month my friend says it is the worst business opening a car dealership
Whats the turnover and net margin then? If they are paying 20 lacs a month in interest alone, I can only imagine what the earnings would be. What cars are these? If they are Hondas, I would presume atleast a gross of 60,000 per car (averaged between NHC, Civic, Accord and CRV). Thats 1.8 crores a month!
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Old 19th June 2007, 00:40   #22
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turnover of a car dealership is very high but margins what they get in a car is not that high what you have mentioned they some times cover interest cost or sell it in loss they only earn thru workshop that only if you have large customer base with lots of paid service and accidental repairs i think only person who have experience of running dealership can only earn it require lots n lots of personal involment and after that also you earn so less that it is not viable and company will always say we give full margin know its you who sell it in discounts or they say that put your own money so you dont have to pay interest
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Old 19th June 2007, 00:52   #23
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what i have mentioned is true for three company where dealer still some times earn that honda, hyundai and maruti and dont ask about other companies like ford, GM and HM they are even worse look how many dealers they have and how many dealers have closed but i have heard that mahindra is the most profitable dealership and i will again say motorcycle dealers earn lots of profits
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Old 19th June 2007, 11:56   #24
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If My hunch is correct, I believe they earn more in spares and service than in Sales.
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Old 19th June 2007, 15:05   #25
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Yup, I have heard the same about some brands like Ford, GM and even Tata. Their dealerships are not that profitable.

Again from hearsay, Honda, Toyota, MBenz and Maruti offer the most profitable opportunities.
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Old 24th June 2007, 20:29   #26
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Real estate boom means its more profitable to lease out the required land for a dealership in prime locations to somebody else.I am seeing a trend where dealers are moving towards the highways nowadays.

Heres something in case you missed it:

Quote:
Cost of running a showroom has shot up sharply due to higher salary, product promotion costs and high investment. Revenues from servicing is also under stress as road-side garages provide services at much cheaper rates, in some cases about 30% lower.

“We are not immediately planning to exit the business but the reality is that surviving in this trade has become very painful due to negligible margins. We may earn more by just leasing our land to somebody else than selling the cars but we are not exiting because having dealership of a big car company is a matter of prestige,” said a Maruti dealer.

“If we lease out our land to real estate developer or to the players in the organised retail sector, we would earn twice that of what we are earning right now. There is not even 2% margin in the business as most of the time we have to share discount offered by the company.
Source:
Auto dealers see more moolah in space rentals-Automobiles-Auto-News By Industry-News-The Economic Times
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Old 25th June 2007, 15:51   #27
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Interesting article. Notice that the quoted examples were from Bajaj, HH and Maruti dealerships. The relatively higher-end marques (Honda, Toyota etc.) are damn profitable!
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Old 27th September 2007, 12:07   #28
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Just an update for whoever it helps:

1. Approximate cost to set up a Honda dealership in Mumbai : 11 - 15 crores.

2. They prefer single owners. If partnership concern, then the relationship must be vertical (Father + son) etc. But no partnerships between siblings allowed.

3. Financing can be entirely from the proprietor or a 50 : 50 between self-finance and bank loans. This ratio is not open to negotiations.
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Old 27th September 2007, 12:09   #29
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Quote:
Originally Posted by devarshi84 View Post
If My hunch is correct, I believe they earn more in spares and service than in Sales.
Bang on. And accessories.
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Old 27th September 2007, 12:21   #30
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not much in accessories SAM

cos very less number of people buy accessories from dealers cos they are far costly
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