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Old 1st June 2013, 21:24   #16
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Default Re: 20% of Indian car dealerships to incur a loss in 2013

Any idea what would be the dealer margins on car are?
When I booked my Figo last November I got discounts and freebies worth 40K+. Makes me wonder if they are selling out at a loss if inventory is piling up?

Last edited by anurag.somani : 1st June 2013 at 21:24. Reason: Typo correction
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Old 1st June 2013, 22:08   #17
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Default Re: 20% of Indian car dealerships to incur a loss in 2013

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Originally Posted by GTO View Post
Dealers are going to have to look at other avenues for profits. I'm surprised so many of them haven't established strong used car departments. The profit margins on used cars are F-A-T.
GTO Sir
Though the margins are high in used car business, the overheads are also irrationally huge.
Take a simple case of a used Maruti 800 you have just traded for buying your beloved car. The dealer must have a yard for keeping number of exchanged vehicles, deep pockets to fund the purchase of those used vehicles, a cleaner and a mechanic to keep the machines running fine and look great. Though most of it is readily available, another aspect comes in the form of Legal transfer of asset.
There are too many hassles which render the whole endeavor back to square one with squeezed profits.
Add to that the unpredictable nature of buys in used car makes the regular business model seem relatively great.
No wonder just the deep pocketed group companies have jumped in this business with just the major objective of pushing their OWN cars in market.
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Old 2nd June 2013, 12:49   #18
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Default Re: 20% of Indian car dealerships to incur a loss in 2013

The other FAT source of revenue the dealers are missing on is Services.

Every year i get calls from my dealer about Insurance renewal and every year their rates are quiet high as compared to anywhere else. This shows they are running the business with too much fat, making customers go elsewhere.

On car servicing and repairs, i have found the dealers are at a minimum are twice as expensive as compared to my local garage for the same/similar quantum of work. Now i do not have concrete data to prove the "Twice" figure but even if it is not exact my experience says its close.

So much so i have stopped going to MSIL for any kind of repairs. Last i went for some repairs and the quote i got from them was about 30K. With that kind money i not only I got the said repair done, could also complete the suspension work and the normal service.
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Old 3rd June 2013, 21:44   #19
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Arrow Re: 20% of Indian car dealerships to incur a loss in 2013

Quote:
Originally Posted by anurag.somani View Post
Any idea what would be the dealer margins on car are?
When I booked my Figo last November I got discounts and freebies worth 40K+. Makes me wonder if they are selling out at a loss if inventory is piling up?
Dealer margin on a new vehicle is usually ~3-4% of the price. But there are other avenues for revenue for a dealer like insurance commission, finance payout on loan value, accessories and so on. There are many posts in this forum adding to this long list.
As far as special offers/freebies are concerned many a times they run with manufacturer's support like any other industry. So dealer doesn't sell at loss in normal circumstances.
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Old 3rd June 2013, 23:13   #20
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Default Re: 20% of Indian car dealerships to incur a loss in 2013

A few months ago I was speaking to a guys from a leading auto brand who is responsible for appointing dealers. I was curious about the ROI the dealers could expect. He pretty much told me that the ROI was negligible if not negative and that most people who invest in dealerships don't expect a a return and that they do it for other benefits. He did not get into the details, but eluded to the opportunity for parking black money game. So this news does not surprise me. Many things in India are not really what they seem..
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Old 4th June 2013, 00:05   #21
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Default Re: 20% of Indian car dealerships to incur a loss in 2013

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Originally Posted by vigneshnr View Post
Dealer margin on a new vehicle is usually ~3-4% of the price.
Actually, dealer margins on volume products esp. indian manufacturers start from paltry 1.5-1.75%. On top of it, dealers have an average 30 day stock cycle which when factored on interest costs, there is very little left.

But, there are incentives and especially in these bad times, dealers are literally surviving on incentives from manufacturers. Then you have commissions on finance and insurance which add another 1-1.5% in vehicle margin.

Most international brands (VW, Ford, Chevy) are more generous with average 3% dealer margin as already stated by vignesh.
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Old 5th June 2013, 12:17   #22
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Default Re: 20% of Indian car dealerships to incur a loss in 2013

Just to add to this , its good that they get a dose of reality. In addition to some of the unethical practices these guys indulge in , there is also a lot of scope for improvement in general when it comes to Customer relationship management and experience. People in general would be happy to have a long terms , repeat purchase driven relationship with a dealer if they have been happy , but i think mostly this is not the case , from arrogance to lack of knowledge to lack of support and sudden dis-interest post a purchase - these are things which add up in a consumer mind as well.

Its much easier , and much cheaper to retain a customer than to get a new one - basic ground rule of marketing , and they need to drive repeat purchases up to ensure a certain financial stronghold. And it will pay across all fronts , revenues from a car do not end at the purchase of the car itself - we are talking about insurance, accessories , spare parts , essential and non essential services , exchange etc etc.


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Over the years, The average dealers and the Average manufacturer have been a greedy lot.
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Old 8th June 2013, 10:51   #23
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Default Re: 20% of Indian car dealerships to incur a loss in 2013

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Sundaram Motors (part of TVS group) are dealers for four manufacturers - Mercedes, VW, Honda and Chevrolet.
.
they are dealers for Renault for all of Kerala too.
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Old 9th June 2013, 21:38   #24
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Default Re: 20% of Indian car dealerships to incur a loss in 2013

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Originally Posted by anurag.somani View Post
Any idea what would be the dealer margins on car are?
According to a dealer I met socially this weekend, dealer margins on new Mahindra Vehicles are only 1%
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Old 10th June 2013, 06:59   #25
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I read on the news ticker on CNBC that Tata dealers are carrying 6 weekss of inventory. Maruti dealers have about 4 weeks of petrol and 2 weeks of diesel inventory

Last edited by ajmat : 10th June 2013 at 14:38.
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Old 10th June 2013, 14:06   #26
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Default Re: 20% of Indian car dealerships to incur a loss in 2013

Quote:
Originally Posted by vigneshnr View Post
Dealer margin on a new vehicle is usually ~3-4% of the price...
Quote:
Originally Posted by akhilesh51 View Post
Actually, dealer margins on volume products esp. indian manufacturers start from paltry 1.5-1.75%...
Is this from a verifiable source or as per information you have gathered through numerous interactions? I find these numbers very hard to believe.

When I bought the Bolero in 2009, I got a dealer discount of 54,000 on the ex-showroom price. This was almost 9-10% of the vehicle's ex-showroom price. Considering I arranged the finance and insurance myself, the dealer did not make any more money from me. If the margins are 3 / 4 / 5 % then a dealer would be incurring huge losses on every sale.

For a product that costs in lakhs, margins cannot be such a paltry figure. You also need to factor in tremendous dealer overheads - salaries, rent, inventory, interest payments to banks, etc.
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Old 10th June 2013, 14:20   #27
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Default Re: 20% of Indian car dealerships to incur a loss in 2013

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Originally Posted by lucifer1881 View Post
Is this from a verifiable source or as per information you have gathered through numerous interactions? I find these numbers very hard to believe.

When I bought the Bolero in 2009, I got a dealer discount of 54,000 on the ex-showroom price. This was almost 9-10% of the vehicle's ex-showroom price. Considering I arranged the finance and insurance myself, the dealer did not make any more money from me. If the margins are 3 / 4 / 5 % then a dealer would be incurring huge losses on every sale.

For a product that costs in lakhs, margins cannot be such a paltry figure. You also need to factor in tremendous dealer overheads - salaries, rent, inventory, interest payments to banks, etc.
This information is fully verified as I am personally associated with automobile trade.

The point you have raised regarding consumer schemes, is valid but different issue altogether. Dealers have little to share in consumer scheme and now a days all volume manufacturers pass on consumer scheme from their end itself. These scheme are then passed to customer through dealer. Hence, it is not from dealer margin, or at least not the whole of it.

Take it this way, any advertised consumer scheme (print / visual media) is from the manufacturer with some sharing from the dealer. Anything you have got above such scheme is usually totally dealers.
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