[kutts]

My attention happened to fall on an advertisement posted by Mahindra calling for persons interested in opening dealership at Palakkad, Kerala for their small commercial vehicles division.

The thought came to my mind - Why not I do it ? My mind is by now bombarded with a lot of questions more than answers and thought of reaching to fellow Bhp-ians on their experiences and advice.

Summarizing what I learnt by now.
1. Need a showroom of about 1500 - 2000 sq ft. Should cost about 50 lakhs to setup.
2. Need a 5 bay service area. Should set you back by another 50 lakhs for space and equipment.
3. Need a yard to hold one month stock. You could get the land on lease.
4. Need to procure a months' stock. This would need about 50 lakhs.
5. Banks are willing to give you loan to buy stock with the collateral being the stock.
6. You need atleast a 50 member strong team. Need to recruit people right from the GM to the cleaning staff.
7. You need to get proper mechanics who knows the stuff. Since this is commercial vehicles, the vehicle owners would be tough to handle !
8. Need to have enough capital to take care of operational expenses - eg salaries , electricity, generator and what not for a minimum period of 6 months. Set you back by another 70 lakhs atleast.
9. Have a strong marketing team to get your break even targets.

Anything else ?

Things that are really bugging me (I am leaving the theory part away and just thinking practically)

1. How do you know the market potential ?
2. There would be dealers already in the market. So how could you get the numbers that you could possibly get ?
3. Are there anything else (of course I would have missed) to work out a P&L ?

[SmartCat]

I don't think setting up a dealership is an ideal business for somebody who is new to the industry. Ideally, you should have worked in an automobile dealership to understand how things work and what is involved in running a sales & service dealership.

I suggest you have a chat with seniors / managers at other dealerships to understand how things work. Perhaps you could approach Mahindra passenger dealership owners/managers with your questions (Passenger, because Mahindra commercial dealers would probably see you as their competitor, and may not open up).

[AbhiJ]

This is information from a friend who has a family business of car dealerships (He is second generation).

Usually car dealerships loose money / just break even.

Most dealerships survive from the associated service centres.

[scopriobharath]

Originally Posted by kutts

My attention happened to fall on an advertisement posted by Mahindra calling for persons interested in opening dealership at Palakkad, Kerala for their small commercial vehicles division.

The thought came to my mind -

Commercial section might not be the best profitable venture, if profit is your motive. If it is your ambition / passion please go ahead and open one.

Things why you would lose money.

1. Break-even is very very tough based on sales alone.
2. You would need to "cheat and lie" in order make fast buck (unethical but most service stations do that).
3. Most commercial vehicle owners dump the A.S.S after warranty is over and shift to local mechanics / FNGs.
4. It will be like running inside a train in an attempt to reach fast, for the sales team to meet targets and break-even.
5. Tata Ace is the Champion in the segment, eventhough Mahindra may be superior in reality. Word of mouth from fellow Ace owners would definetly influence a decision.
6. You would have to account for "losses" from damages while at yard or from Yard to dealership et all. This is why we see so many threads discussin how dealers cheat customers.
7. You would need to invest in 10-20 temporary (TEMP) plates to drive to the RTO.
8. Not sure about Palakkad, but you may need to bribe the local police, the local goon and the local politicians month on month(In Chennai it is true)
9. Bribes for getting government / local body approval for starting dealership (needed in chennai, not sure about palakkad)
10. Mahindra would push you to work on "replace" model whereas the commercial owners would prefer "Repair" model. Hyundai A.S.S asked me to replace the silencer for 6000/- . I got it "welded" outside for 200/- .

[sweetvar26]

So for those of you who have knowledge about this, how much cost are we looking up to set up an Audi showroom and service, apart from the land costs? Does the land have to be owned or could it be leased out?

Just looking at all the requirements for an Audi showroom actually.

Thanks

[Rahul Rao]

Don't think about dealerships unless you are already in the business. Sales are a loss making proposition, and you do not recover even overheads and interest cost. Service cross subsidises sales, comercial vehicles may not come back for service.
Now some RTO's are stopping handling charges, IT department has clearly said that any handling expense done on behalf of some one else will be added to your profit, that means not just the expense, but also income tax on it, as far as I know in Kerala all vehicles have to be driven to the dealership and back involving cost.

Rahul

[GTO]

Since a lot of people who want to venture into automotive retailing come to this thread, I'm posting an insightful video by a first-generation car dealer. He's damn sharp & speaks well too.

Interesting how he got into the car business because of underworld threats

https://www.youtube.com/watch?v=vXEBEKK14Eg&t=778s

https://www.youtube.com/watch?v=eZsHyQpfPPw

[GTO]

Here's the story of a 1st-generation entrepreneur who now sells 450 cars / month through his car dealerships - Economic Times Article.

Later Berkeley Motors was appointed as a dealer partner for Mercedes Benz India. In 2012, Maruti Suzuki India forced Berkeley Motors to choose between them and Mercedes Benz. Dahuja opted for Mercedes Benz and exited the Maruti Suzuki dealership. He also opted for the immediate competition Hyundai and now owns three dealerships of Hyundai. About this decision, he says, “It was a momentary decision to exit the Maruti Suzuki dealership.”