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Old 3rd January 2012, 16:09   #16
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Default Re: How do Dealers survive?

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Originally Posted by arjab View Post
Very interesting topic.

Selling a car in today's competitive market actually do not leave the dealer with much money in their hands. Typically for a mass market OEM dealership, the margins are to the tune of 3% of the model/variant price. But in reality, this is very tough to retain because the OEM makes sure that the dealer has to share an "x" amount of their dealer margin as per that month's sales scheme - which leaves precious little cash in hand for the dealership.
true
as i said there are various revenue streams which include everything but not the LOGISTICS/HANDLING charges.i truly beg to differ on this aspect.these charges are properly accounted.people dont realise the cost of transporting a car from the plant to the showroom!toll,fuel,drivers,octroi,rto agents commission[compulsory according to rto],number plates,trailer hire etc.it is the same as maybe a processing charge by a bank on credit/debit cards or shipping costs when ordering something from e retailers!

Last edited by GTO : 13th January 2012 at 15:58. Reason: Please quote ONLY the relevant bits of a post. Quoting an entire long message inconveniences our mobile users
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Old 3rd January 2012, 16:35   #17
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Default Re: How do Dealers survive?

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true
as i said there are various revenue streams which include everything but not the LOGISTICS/HANDLING charges.i truly beg to differ on this aspect.these charges are properly accounted.people dont realise the cost of transporting a car from the plant to the showroom!toll,fuel,drivers,octroi,rto agents commission[compulsory according to rto],number plates,trailer hire etc.it is the same as maybe a processing charge by a bank on credit/debit cards or shipping costs when ordering something from e retailers!
I agree with the points mentioned by you. The process of registration does involve a lot of expense but the biggest reason why these charges are questioned is because there is no transparency in the process. Most of the dealers do not share any details/breakup of these charges.

In addition to this, a lot of the dealers (NOT ALL) try and convince you to take the insurance from them and this too seems to form a small contributing factor towards their income.
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Old 3rd January 2012, 17:42   #18
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Default Re: How do Dealers survive?

Now lets look at this months number for fiat , Renault and Mitsubishi:
Fiat
1. Punto : 269
2. Linea : 263

Mitsubishi
1. Lancer/Cedia : 30
2. Outlander : 13
3. Pajero: 82

Renault
1. Fluence : 149
2. Koleos : 41

Are these numbers enough to sustain the dealerships ( including the After sales contribution)? Secondly and more importantly are they lucrative enough to attract more dealerships which is the basic necessity to enable the company to grow, reach out to more number of people and specially expand outside the Metro cities?
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Old 3rd January 2012, 18:18   #19
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Default Re: How do Dealers survive?

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Originally Posted by ajmat View Post
Mitsubishi - I still do not understand why a new dealer in a central location with no service facility (run by someone else) came up!!! Good cars but not matched to our market needs. Most Lancers are so old they are out of the service network. The dealers must be waiting for the HM split. The Pajero Sport could be a turnaround through
You must be talking about the new HM/Mitsubishi showroom on Residency Road next to Sweet Chariot, right where Cash Pharmacy used to be, am I right?

Is the Mitsubishi Pajero Sport on sale or in the pipeline? Why can't Mitsubishi give us the new Lancer?
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Old 3rd January 2012, 21:08   #20
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Default Re: How do Dealers survive?

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Originally Posted by suhaas307 View Post
You must be talking about the new HM/Mitsubishi showroom on Residency Road next to Sweet Chariot, right where Cash Pharmacy used to be, am I right?

Is the Mitsubishi Pajero Sport on sale or in the pipeline? Why can't Mitsubishi give us the new Lancer?
Correct, the Pajero Sport is due around March. Due to Thai floods, supplies could not make it to the Auto Expo, not even one!
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Old 3rd January 2012, 21:38   #21
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Default Re: How do Dealers survive?

Any business has a risk perspective to it and automobiles are no exception. People who invest in new dealerships have to take a gamble and jump in. Sometimes the car(s) are a success and sometimes they are not. Admittedly, no dealer makes money on actual sale of the car.

In fact even Maruti's are sold at a loss per car when the interests, rents and salesmens salaries are taken into account. All dealerships make money only on the After Sales Service. In fact, to ensure this most manufacturers allow their dealers not to sell the spares across the counter giving the dealer exclusivity on profit on spares + labour charges. Maruti is the only exception here and they do so only because the dealers have volumes otherwise.

Several dealerships (Hyundai etc) have closed down on account of lack of viability.

One thing is for sure - a person investing in a new dealership will need deep pockets in order to survive.
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Old 3rd January 2012, 22:36   #22
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Default Re: How do Dealers survive?

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Admittedly, no dealer makes money on actual sale of the car.

In fact even Maruti's are sold at a loss per car when the interests, rents and salesmens salaries are taken into account. All dealerships make money only on the After Sales Service.
Seriously? Is it just a guess you made or a factual statement? In the case of latter its looking more like the Aviation industry to me then where the joke is that the only way to make a million is to start with a billion.

Quote:
Several dealerships (Hyundai etc) have closed down on account of lack of viability.
But then Hyundai has both the Volumes and atrociously priced spare parts. They should be amongst the most happiest bunch of dealers right?
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Old 3rd January 2012, 22:51   #23
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Default Re: How do Dealers survive?

The car business is extremely competitive. The prices that OEM supply to the manufacturers are far lower than what you would get when you buy the same outside. To add to it, take a look at the inventory of a Hyundai or Maruti dealership. Each of then would be forced to hold at least 30 cars and these sometimes are sold after a very long time. I know of new Fiats that are in the inventory of the dealers for more than 11 months ! However, some exceptions like Swift Diesel, Dzire Diesel, New Verna Diesel and other diesels ease matters a bit for the dealer. But almost every dealer (if not all) lose money on new car sales.

There was a Hyundai dealer in Chennai that closed about 3 years ago.

However, I am only talking of the sale of a new car which would be at a loss. During the after sales service and sale of spares / accessories the dealer would be able to make a profit, provided he has sufficient volumes.
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Old 3rd January 2012, 23:25   #24
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The head at a prominent Hyundai dealership once told us the dealerships make most of their profits from service and accident repairs. The sale of the car itself doesn't contribute much to profits of the large volume budget brands like Hyundai and Maruti.
But in the case of the so-called "premium" brands the dealers have good margins per car sale, and also the handling charge, commission from insurance, etc contribute. Also earnings from spares and services is much higher to make up for the low numbers.
In any case, setting up a new dealership requires considerable capital.
The Fiat Cafes being launched, I believe, are company owned?
And these are just swish showrooms, with after sales remaining with TASS, right?
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Old 12th January 2012, 16:42   #25
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Default Re: How do Dealers of low-volume brands survive?

Brands like Mitsubishi are fast losing dealerships. IIRC, in Mumbai, they have all of 1 dealership. Fiat dealers, when independent, all shut down or moved to brands that make better business sense. That's why Fiat was forced to tie-up with Tata...no one was willing to invest in their dealership.

A couple of points which might offer more insight:

- When your brand is fresh and still not gaining traction, the manufacturer offers monetary support. This can be finance at 0% (or really low rates), absorbing marketing costs etc. I know of one or two dealers who also had some part of their working capital paid by the manufacturer.

- A certain number of dealership owners view the outlet as a source of converting black money to white. They couldn't care less if their outlet is not making any money, or even losing 10% each month.

A car dealership is an extremely capital intensive, "headache" business for newcomers.
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Old 12th January 2012, 20:38   #26
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Default Re: How do Dealers of low-volume brands survive?

Dealers make most of the money from

. Sale of Insurance at full rate. Most of us know that any independent insurance agent will give the same insurance (from the same firm) at a discount of 10-20%.

. Commission on hire purchase. The loan disbursed from dealer's counter is very popular, as the dealer ensures hassle free paperwork.

. Service. The free service coupons are paid for by the manufacturer. The rate must be lucrative, as my MUL dealer was willing to give me a free fourth service if I got the first three free service done there.

. Accident repair is pretty lucrative, as you have no say in the rates charged. Believe me they are quite high compared to independent garage, but as most of us want to get it done from the dealer, we pay up (or rather the insurance company pays most of the bill, and we are extremely happy with our contribution!)

. Incentives for achieving targets are quite high, but cannot be relied on by the dealer as a regular income stream.
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Old 12th January 2012, 21:37   #27
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Default Re: How do Dealers of low-volume brands survive?

Adding to the above list -
  • Selling basic ICE components at an exhorbitant rate
  • Selling a basic Waxing as Teflon coating / Paint protection and charging a bomb.
  • Under Chassis coating / rain-rust protection coating, charging more than what even the authorized dealer charges.(3M Under chassis coating)
  • Quoting more for official accesories (There are some posts in XUV threads related)
  • Exhorbitant Non-Mechanical service (PUC at 50 outside, 150/- My.A.S.S)

Last edited by scopriobharath : 12th January 2012 at 21:39.
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