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Old 6th July 2011, 13:58   #61
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Default How much does it cost to set up a car dealership in India?

hello all
just out of curiosity, i had applied for dealership for a car delaership with one of the newly launched manufacturer who has a range of cars from small cars to suv, with japanese roots.
to my surprise, they have expressed interest to take it ahead.
after reading so many posts on the issues with the dealers, poor after services, bad management, i have got a bit scared. is car dealership a decent business model? what is your take on this? what is that you expect with a dealer? any suggestions to make a dealership viable business?
thanks in advance
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Old 6th July 2011, 14:35   #62
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Default Re: car dealership- is it business worth getting into?

Well, as with any other business startup a car dealership will require a lot of investment from you in terms of time and effort. In terms of viability it really depends on the franchise that you will work for and most of your initial business will be based on:
- the goodwill that the brand has in India
- the efficiency of their product lineup
- service shortcomings from your competitors

After you tide over these issues, you will need to have a strong setup in place to provide at the minimum:
- an efficient and honest buying experience
- honest & polite customer service, not only for those who buy from you but for all those who visit your showroom

The challenge would lie in maintaining high standards and encouraging your staff to acheive/ exceed them on a daily basis
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Old 6th July 2011, 14:47   #63
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Default Re: car dealership- is it business worth getting into?

Depends which location / city in which you are intending to set up your business and of course its market size and the price band in which the OEM's products fall.

Sales:
Cut-throat competition. For almost all OEM's, dealer has to forego a significant part of their dealer commission to contribute to the monthly sales scheme. Thus you make very little money for every car you "sell"

SERVICE:
Margins are much better. And if you offer good quality service and "word - of - mouth - reputation" is good about your workshop, then you will rake in the profits. In service, the trick is to have a very good bodyshop as 60% of your margins will flow from there.

ACCESSORIES/Insurance/Extended Warranty :
All offer some margins , nothing to go ga-ga over , but you will retain something.

Apart from this there are many aspects, sales schemes, offtake-retail, incentives run by OEM's through which you can earn or lose money! Incidentally i've handled sales, channel management and dealer development for an OEM in India for many years. you can PM me for any help you require.

All the best and drive safe !
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Old 6th July 2011, 14:50   #64
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Default Re: car dealership- is it business worth getting into?

The most important factor will be the quality of your service staff. The success of your venture depends on this one factor more than anything else.
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Old 6th July 2011, 15:36   #65
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Default Re: car dealership- is it business worth getting into?

The main question to ask yourself is: do you have the land required for a showroom + service centre. Because that is the largest investment. If the answer is yes, you are more than halfway home. If the answer is no, then investing in land at current prices will make this business venture non viable (unless you have idle cash)
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Old 18th August 2011, 13:46   #66
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Default Car distribution

Hello all!

I am a management student. I would like to get some information on the distribution models of Indian car manufacturers. I could not find any thread regarding this topic using the search function. To be more specific I would like to know details about
1) How does the car reach the customer from the manufacturer's factory? the whole channel
2) Approximate profit margins the dealers earn by selling the cars
3) Some schemes like discounts and loyalty programs given to customers
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Old 18th August 2011, 21:06   #67
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Default Re: Car distribution

Hey..for this we have a guy in this forum - Mustang.101 He will be able to give you some info about that. Before that, I would request you to complete the min number of posts to activate your PM facility.

Edit:: Sent a PM to Mustang.101 on your behalf. Help should come soon.

Last edited by swiftnfurious : 18th August 2011 at 21:09.
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Old 18th August 2011, 22:18   #68
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Default Re: Car distribution

Quote:
Originally Posted by ronello View Post
Hello all!

1) How does the car reach the customer from the manufacturer's factory? the whole channel
More than the car reaching the dealership, how the bits and pieces arrive at the factory is much more interesting. Toyota has the best logistics. You could try reading "the toyota way".

Generally cars are transported in trucks. Each company has their own specifications. Whereas Hindustan Motors (The good ol' Ambassador) transports the cars by driving them to the destination.

2) Approximate profit margins the dealers earn by selling the cars
Lower segment cars have the least margins ~4%. C segment usually is around 5-7%. Premium sedans range between 7-10%. A dealer can earn by selling the accessories/warranty/insurance/registration additionally.

3) Some schemes like discounts and loyalty programs given to customers
Most give cash discounts when the stock is high. Free insurance, free accessories are some of the schemes that are offered. Some manufacturers give gold coins etc during festivals in India. Further they have discount schemes for Corporates and army / government officials.

Hope this helps!
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Old 8th October 2012, 12:27   #69
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Default Re: How much does it cost to set up a car dealership in India?

Out of Curiosity and a little interest in setting a shop, wanted to know how much would it cost to start a FIAT dealership. As many of us know, FIAT is expanding it's independent dealerships in India and with Jeep launch too announced for India, do you think it would be a profitable business working with FIAT?

Your inputs on the cost involved for a dealership in Hyderabad will be helpful.
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Old 8th October 2012, 15:36   #70
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Default Re: How much does it cost to set up a car dealership in India?

The interest rate murders you. Know few who have set up shops. Nowadays, a proper 2 wheeler showroom with ASC costs ~3cr.

Recently MUL opened a new dealership at our place & despite spending close to 8Cr. the sales area is small (heard some money exchanged hands to get the already possessed land certified for showroom use) and there are just 4 ramps. Not done at all.

The only saving grace is via service & majority by body work (dents/paints).

If you can show crores as cash, then its good.
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Old 3rd December 2012, 18:49   #71
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Default Re: How much does it cost to set up a car dealership in India?

We are looking to get a dealership of a major car company with only petrol models, in what can only be classified as D or E city. Land and showroom space is not a problem, is it viable in today's economic climate to venture into this space. My cousin who is going to get the whole plan going is very enthusiastic but I am not convinced. My questions are

He is putting the total cost of the *** and the show room at around 3 crores, does this sound OK or is it going to be more

How much will the returns be if he say sells around 50 Brios a year.
Is servicing really that much more rewarding than Sales.

Please any help in this regard will be appreciated including suggestions on should such a plan be even carried out in the first place. He is hard working and resourceful but then there are certain things in life which can just not be controlled.
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Old 3rd December 2012, 19:52   #72
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Default

Quote:
Originally Posted by eq24
We are looking to get a dealership of a major car company with only petrol models, in what can only be classified as D or E city. Land and showroom space is not a problem, is it viable in today's economic climate to venture into this space. My cousin who is going to get the whole plan going is very enthusiastic but I am not convinced. My questions are

He is putting the total cost of the *** and the show room at around 3 crores, does this sound OK or is it going to be more

How much will the returns be if he say sells around 50 Brios a year.
Is servicing really that much more rewarding than Sales.

Please any help in this regard will be appreciated including suggestions on should such a plan be even carried out in the first place. He is hard working and resourceful but then there are certain things in life which can just not be controlled.
The dealer/ retailer margin on car sales can be between 12 and 20% as far as I know. Yes, servicing is far more lucrative and the accessories business is extremely lucrative indeed. Servicing generally brings in the moolah on account of spares and labour charges. Accessories, if the business is handled well, can bring in a comfortable 20% contribution to top line sales. You can explore the pre- paid paradigm too, to get your cash flows better organized.

You will need to do an ROI model to figure out if it is worth it, but my guess is that in in Tier 3 city, it will take an easy four to five years to recover the initial costs and general overheads and then start turning a profit.

But don't base your assumption that he will only sell Brios. There is bound to be a mix of sales with some bigger, more expensive cars kicking in as well.
And you can always ask the car manufacturer to give you a reasonably large-ish territory around, which you can service by holding regular camps etc.

You can PM me if you want to talk about this or exchange emails.
Cheers.
Shankar

Last edited by shankar.balan : 3rd December 2012 at 19:56.
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Old 20th December 2012, 13:43   #73
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Default Re: How much does it cost to set up a car dealership in India?

Quote:
Originally Posted by shankar.balan View Post
You can PM me if you want to talk about this or exchange emails.
Cheers.
Shankar
Thanks for the help Shankar, I will as more details are needed. The company in question is asking for a very high inventory management, this is the breaking point as of now. They want us to maintain more than 50 units at any given time. We have told them that they will be lucky if we can sell that many in 3 or 4 months. So we are still waiting on them to budge. I find it so hard to believe that with their sales at an all time low and then someone coming up and helping them out to get an area in which they have no presence and still they are enforcing.

Fiat has also approached us but their products at the moment will be very difficult to convince people.

I want to look at the Renault Nissan Alliance, how are they, are the margins good. We can sell their cars but I find their response time very very slow. I have written them 3 emails till now but no response what so ever. Does anyone have a direct number for Renault.

Cheers
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Old 23rd December 2012, 21:55   #74
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Default Re: How much does it cost to set up a car dealership in India?

I am very much interested in opening a car dealership in a tier 3/4 city.How much minimum cash one needs upfront as seed money for the venture.
Secondly ,can it be possible to cater to nearby tier 2 city if its in range of 30 kms and connected by four laned NH-2.
Thirdly,I own 15000 square feet of land located on NH,will it be a good launch pad for my envisaged venture.
I have fiat dealership in my mind .
Please enlighten me
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Old 29th October 2013, 18:34   #75
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Default Re: How much does it cost to set up a car dealership in India?

Quote:
Originally Posted by aman345 View Post
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
I have doubts on this, Manufacturers do give credit, atleast I am aware of Tatas. If you are aware of the latest shutdown of large dealership (in Delhi), it was because of credit default of more than 50 Crores by them. They have been picking up cars from Tatas and have not paid since commonwealth games in Delhi.

I heard this from one of the SAs when I got my car serviced in March 2013.

-----------

Note from Mod: Also check out this related thread:

LINK (Average Sales / Dealership : Indian Car Manufacturers)

Last edited by Rehaan : 7th November 2013 at 15:07. Reason: Just cross-linking to another thread.
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