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Old 14th June 2018, 16:47   #31
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Default Re: Financials (income, expenses & margins) of car dealerships in India

One thing that puzzles me is the unsympathetic attitude of manufacturers towards Multi-Brand Dealerships - Seems to work in the US. The VAG group could reap economies of scale at the back-end due to parts commonality. The Renault Rebel alliance could also do the same.

Maintain some sort of separation for the brand. Maybe Maruti-Next have nailed it in a way.
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Old 14th June 2018, 18:36   #32
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Default Re: Financials (income, expenses & margins) of car dealerships in India

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Originally Posted by blackwasp View Post
I will share some more insights into the overall dealership revenue, but only as an overview.
Any idea how dealer sales incentives work? Competent Maruti pocketed a cool Rs. 35 cr while Toyota paid Shinrai Rs. 53 Lakhs. I remember you mentioning that car salesmen too get sales incentives.

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One thing that puzzles me is the unsympathetic attitude of manufacturers towards Multi-Brand Dealerships
Maybe Indian CXOs paid too much attention to chapters on Brand Positioning and Brand Identity when they did their MBA in Marketing? That's why all that nitpicking about font size/font type/font color on brand signboards

If manufacturers allow multi-brand retailing and over time, they generate most of the sales, then retailers will have bargaining power over manufacturers. Example: A multi-brand retailing chain might aggressively push Toyota Yaris instead of Honda City, if Honda refuses to increase their margins.

Also, I'm pretty sure existing single brand dealerships will not be very happy if multi-brand dealerships are allowed.

Last edited by smartcat : 14th June 2018 at 18:53.
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Old 14th June 2018, 21:08   #33
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Default Re: Financials (income, expenses & margins) of car dealerships in India

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Any idea how dealer sales incentives work? Competent Maruti pocketed a cool Rs. 35 cr while Toyota paid Shinrai Rs. 53 Lakhs. I remember you mentioning that car salesmen too get sales incentives.
I am not sure how incentives are categorised in accounting, or if they have a separate bearing other than motivating a dealer to sell more cars, allied parameters, accessories etc.

Generally the company will give yearly targets to dealers. I think this is FY year basis though I could be wrong. Targets mean you should have wholesale numbers of xx cars in a year. Wholesale = cars a dealer picks up from Maruti. Now, for a dealer if he is not picking up cars in a good number per month, there is a scramble at the last month to pick up as many cars as possible to meet the targets. This number usually is around 100-150 cars more than that month's sale. These are approx. numbers for a dealership selling 300 cars per month on an average.

Incentives could also be in the form of certain number of bookings of a new car, doing better numbers than other in the region, having the highest % of exchange penetration, insurance %, extended warranty and so on.

The company also takes peak performers to nice vacations abroad. It could be sales guys, accessories, dealer CEOs and top management and owners (separate individually IIRC). This year some went to Thailand. The higher the level in the food chain, the better is the vacation.

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If manufacturers allow multi-brand retailing and over time, they generate most of the sales, then retailers will have bargaining power over manufacturers. Example: A multi-brand retailing chain might aggressively push Toyota Yaris instead of Honda City, if Honda refuses to increase their margins.
This happened in the Tata-Fiat debacle.

Last edited by blackwasp : 14th June 2018 at 21:09.
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Old 14th June 2018, 22:39   #34
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Default Re: Financials (income, expenses & margins) of car dealerships in India

What many may not realize is most of the already established industrialists within the automotive field OR from outside it, are the ones owning car dealerships today.. for example :

TAFE Access - Amalgamations Group, tractor and battery makers.

TVS Sundaram - TVS Group, industrialists, 2 wheeler manufacturers and married to the Amalgamations Group.

Advaith Group/Akshaya Motors - One and the same, banker owned.

Navnit Motors - A massive cross-structured group spanning finance, insurance, infrastructure,sports etc. The biggest luxury car seller in the country.

Landmark Dealerships - dealers of Fiat, Renault, VW, Nissan, Leyland, Mercedes, Fiat, Datsun, Leyland, Jeep etc along with related businesses in insurance and wealth management.

Trident - Deals in Hyundai, Honda, Renault, Isuzu etc.

Berkeley Motors - Deals in Mercedes-Benz, Hyundai and TATA Motors, banking-associated family.

As it stands and as it always will be, car-dealerships run on rotation and that rotation comes from sales. Sales give the sales-executives their bonuses and commission, it helps pay the rent, it increases revenue by baiting the buyers into service, etc etc. To withstand tough times, and I assume that the period immediately following demonetization where all transactions involving vehicles were monitored, would be easy only for people of a certain net-worth else it would be nothing short of a nightmare for ordinary people.

I'm a process-management guy, right from my first job involving ERP but the computer side of things bored me to death so I decided to indulge in the glamour (or not) of real-life PPP, though the nasty software is catching up with everything.. not a finance guy either, numbers put me to sleep faster than anything else.. but even to me the automotive dealership business would be a nightmare in terms of coordinating teams, HR people, marketing people, interacting with the manufacturers, handling delivery issues, service issues, getting flogged like hell on social media etc, no wonder there is never directly a face when it comes to elevating issues.

Not pointing to ANY dealer in particular but from my experience car buying has to be one of the most ridiculous buying experiences in my life, because :

- No fixed pricing.. a few thousands here and there depending on factors like corporate discount, exchange bonus, association with the dealership etc.

- Spiked insurance rates, and they are spiked how, up to nearly 5 digits per car versus getting a rate yourself from the insurance company directly.

- Service is one treacherous area, be prepared to handle a few dozen problems a day from an owner point of view.

- The most money is made from service via unnecessary additions to service bills (yes, I'm looking at you - decarbonizing, body treatment, teflon coating, engine bay dressing and early clutch/brake/air filter replacements).

I know once the corporate machine gets rolling then the operations will get easier but it never is that easy.. I find most of them are at meetings, target planning, discussions, negotiations every waking moment. I wouldn't be part of this line even if it paid me heavily. Most of the margins and profits, according to what I know, and what is rightly shown in this thread, are from shafting. Then there is more - handling insurance, repairs, inspecting as to what qualifies for warranty and what doesn't, reaching out to OEM's for suggestions, feedback, quality assessments.. my god.

I love business in general but not this one. My views as a customer, walking into a car dealership is as simple as this :

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Old 15th June 2018, 03:23   #35
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Default Re: Financials (income, expenses & margins) of car dealerships in India

Awesome thread! Never knew the intricacies involved in operating a car dealership. Always wondered about this information though. Thanks for posting the research!
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Old 17th June 2018, 13:27   #36
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Default Re: Financials (income, expenses & margins) of car dealerships in India

Gentlemen, the home page of this thread has been updated - you can find the financials of an Audi dealership (Jahnvi Audi).
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