Cost of opening a motorcycle dealership

[sumitsingh]

Hello Everyone,

I am looking to get some information on what is the cost of setting up a motorcycle dealership ( Two wheelers) in a different cities ( Tier I, II and III). On searching the forum, I was able to find some information in terms of costs incurred in setting up a honda dealership. This information has shaped some of the questions below.


a) What are the things that the big 2 wheeler manufacturers like Honda, Hero Honda and Bajaj look for while granting a dealership?

b) Approximately what is the space requirements for a full Sales, Services and Spares kind of dealership?

c) What kind of management is required for operating such a dealership?

d) Expenses in terms of staff, facilities, inventory, working capital can be expected?

e) What documentation is required before approaching the big manufacturers?

f) How does one go about getting the following information from the manufacturers in terms of setting up the dealership?

- Cost of the project
- financing available from the banks
- return on investments available in the two wheeler industry

g) From an industry standpoint, If I would like to evaluate the attractiveness of the industry from margins ( dealership), profitability, capital required, where can i get these.

I know these are a lot of questions but I am unable to find answers to these on the net and dont have contacts in the industry to be able to get these.

Thanks to everyone who responds.

Regards,
-Sumit

[Rehaan]

Hi Sumitsingh,

See these two threads if you haven't already seen em both...

1. How Much Does It Cost To Set Up A Car Dealership ?

2. Car dealership - How to Set Up ?

cya
R

[sumitsingh]

Rehaan,

Thanks for providing the links. These links did help me frame some of the questions in mind. I wasn't however able to find anything related to 2 wheelers except that they turn out to be a more profitable investment.

So any other pointers would be great.

-Thanks.

[sumitsingh]

Bumping the thread hoping the biking gurus will see it and provide comments. I did try to google this information but in all vain.

Thank you for your inputs in advance.

-Sumit

[kkr2k2]

Nice thread sumit, while the threads mentioned here are useful but arent specific. May be sumit you need to be more specific as well.

Me too planning for a dealership. In my case its a 3-wheeler. If everything goes accordingly, my showroom will start operations from this Month end.

At the same time I am also looking at two wheeler honda dealership, If this comes with-in my budget that will be a great thing. I am going to approach the honda guys the next week for details.

raj.

[sumitsingh]

Hey Raj,

I think my objective is the same as yours. :-). Apart from the interest factor in bikes, I wanted to understand the finances involved in setting up something like this and also understand what are the things that bike manufacturers look for in awarding these dealerships.

It would be great if you could share your experiences on the same. and best of luck for your discussion and all the best for your 3 wheeler dealership.

With Regards,
-Sumit

[sumitsingh]

Hey Raj,

I do understand its been a long time since the thread was opened. Did you finally manage to open your dealership? Would you be able to provide some more information in this regard.

Any other information from other people is most welcome as welcom.

Thank you very much.

With Regards,
Sumit

[kkr2k2]

I am extremely sorry sumit, I should have posted it long back.

I worked on the points mentioned by GTO as in this post:
https://www.team-bhp.com/forum/india...tml#post469151

Now that was for a 3-wheeler brand which was making its debut so the manufacturer gave full support with least formalities to be fulfilled.

But if you are going for a reputed motorcycle brand, you should first decide which area(s) you want to open it and you should be able to understand the potential of the market. This is very important and most of the reputed motorcycle brands asks you to mention this in the application form. The best source is the RTA (who else can give the best numbers). Some motorcycle companies expect you to buy motorcycles around 20% of the market size. i.e. if e.g. in Worli the total number of motorcycle sold per month is 1000 then you are expected to keep 200 motorcycles as the target in other words you are committing yourself to the company that you will contribute to 20% of the market share!!!

Now apart from the stocking of the motorcycles, you are also expected to have inventory of the spares and you might need to have lot more of it if the vehicles are already in the market as they will flocking be your workshop literally(I have seen this in the case of Honda two wheelers and Maruti cars workshops). And sometimes the companies expect you to buy all the spares upfront(no credit business!!). This way the I feel companies want to make sure that you are financially strong. Another reason which make me feel like that is, I know of certain manufacturing company discouraged a bank which was willing to give Bank Guaranty or Credit Note for a prospective dealer.

Also in case of the two-wheeler companies you should also find out whether they are looking for expansion especially in these times of recession most manufacturers refrain from expanding their dealership numbers in markets which already have their dealerships. So you might look out for districts or two tier cities where the company doesn't have any dealerships or has only one or two dealerships.

Raj.

[GTO]

Originally Posted by kkr2k2

Some motorcycle companies expect you to buy motorcycles around 20% of the market size. i.e. if e.g. in Worli the total number of motorcycle sold per month is 1000 then you are expected to keep 200 motorcycles as the target in other words you are committing yourself to the company that you will contribute to 20% of the market share!!!

We learn something new everyday! Thank you for sharing this info, Raj.

[naveenroy]

I'm reopening an old thread but thought it appropriate to ask this here.

How much of a profit does a motorcycle dealer make on each bike? I am not asking about profit after his overheads. I am looking for the price difference between the price the dealer gives him a bike and how much he sells it for.

Does anyone have any idea? Or an estimate? Guesstimate?

[null]

Originally Posted by naveenroy

I'm reopening an old thread but thought it appropriate to ask this here.

How much of a profit does a motorcycle dealer make on each bike? I am not asking about profit after his overheads. I am looking for the price difference between the price the dealer gives him a bike and how much he sells it for.

Does anyone have any idea? Or an estimate? Guesstimate?

I am not sure if this is absolutely correct, but from what I was told sometime back, it ranges from 5 to 15% depending on the segment (for one of the largest 2 wheelers dealership here). The lower priced ones (like 30-40k costing models) has a lower profit margin compared to higher priced models (logical). It seems, the dealers make more profit through vehicle service & repair/spares rather than just new sales.

Would be interesting to hear from others. There is a new KTM shop opening up on my way to work. Whenever I see that, I am tempted to take up such a dealership (chuck the current line of work & get into this) as a full time profession. Wonder how much it costs?

[naveenroy]

Originally Posted by null

I am not sure if this is absolutely correct, but from what I was told sometime back, it ranges from 5 to 15% depending on the segment (for one of the largest 2 wheelers dealership here). The lower priced ones (like 30-40k costing models) has a lower profit margin compared to higher priced models (logical). It seems, the dealers make more profit through vehicle service & repair/spares rather than just new sales.

Would be interesting to hear from others. There is a new KTM shop opening up on my way to work. Whenever I see that, I am tempted to take up such a dealership (chuck the current line of work & get into this) as a full time profession. Wonder how much it costs?

Thanks for the guesstimate. Yes, I've been asking around and seems like the dealerships make more money from spares and service. If it is 15% for a new CBR with ABS, maybe the profit comes to around 27k. Hmm. I am sure bikes like the Splendor will give a much lesser profit - maybe around 2500 bucks?

[ghodlur]

Originally Posted by naveenroy

I'm reopening an old thread but thought it appropriate to ask this here.

How much of a profit does a motorcycle dealer make on each bike? I am not asking about profit after his overheads. I am looking for the price difference between the price the dealer gives him a bike and how much he sells it for.

Does anyone have any idea? Or an estimate? Guesstimate?

Normally it is around 18-24% on every bike including the sales & spares. The below link says it all.
http://www.bajajauto.com/dealerLocaterFaq.asp

[Altocumulus]

The money is more for the companies in selling spares and from service and not upfront in selling a car or bike. A 6L car if assembled at home by buying the spares from the market would cost you 14L. This is the reason why manufacturers stress on market share and give huge discounts. Increase in market share equals to more demand for spares and service, which equals to more profit.

[Guite]

Originally Posted by Altocumulus

The money is more for the companies in selling spares and from service and not upfront in selling a car or bike. A 6L car if assembled at home by buying the spares from the market would cost you 14L.

I got a real taste of the analogy of a 6L car costing 14L if built with spares at home when my car went for repair after an accident. There were many bits and pieces of parts replaced and the cumulative sum came to a mind boggling number.

This is the reason why manufacturers stress on market share and give huge discounts. Increase in market share equals to more demand for spares and service, which equals to more profit.

Same as selling a printer cheap and making profit from the ink cartridges? Looks like.