[V.Narayan]

^^^^^
Very valid points Hayek. Inventory - aaahhh that saviour that makes many a balance sheet balance! A few dozen cars can be hard to fudge. Spare parts may be different though.

[thecarguy]

So the Sales Manager is not picking up phone calls and the I've been told the showroom is closed. What is the possibility that the car will be delivered if it is has arrived at the showroom? My father will write to Audi India tomorrow.

[//HB]

Originally Posted by V.Narayan

I wonder why this happened. ‎

I can tell you a lot of such cases are typically a combination of BOTH factors - as for the malafide intent, we do see a tendency for people to dip into the business kitty to fulfill personal needs OR wants, very often this is what drags them to the point of no-return. While also true that their kind of business certainly would be demanding a high level of sunk costs upfront, and moreover it certainly wouldn't be too hard to mess with things like inventory, receivables etc and dress up the books.

Originally Posted by Hayek

But for that to happen with low velocity, high value products like luxury cars seems incredible. How do you claim to have an inventory of 200 Audis when you have less than 30?

Certainly doable. Manage the audits and the ball keeps rolling and gathering more and more of the same, only to crash when the real underlying position is exposed.

As @Turbanator rightly pointed out, I would guess that the most likely tipping point would have been when the loan / interest servicing started showing tell-tale signs of default, and the physical inventory audit must have let the cat out of the bag.

[Turbanator]

Originally Posted by V.Narayan

Was it genuine malafide intent which it might be or was it yet another case of a SME business over borrowing to fund working capital and struggling with paying in advance to the OEM, high rents, low velocity of cash, GST sucking up working capital etc.
‎

I heard they own the places so rentals were not a concern but this may be wrong. They used to splurge a lot on events and all that, VW must have supported but you have to still pay a lot. Audi & Porsche in India, are not doing any good so their dealers will also be in the similar position. Even if the dealer had the right intentions, they need sales to make up for all the expenses and they had a pretty large infrastructure & manpower to support. They used to run of the best coffee shop at the dealership and that too absolutely free, someone heading their pantry was an Ex-5 Star guy

Originally Posted by thecarguy

So the Sales Manager is not picking up phone calls and the I've been told the showroom is closed. What is the possibility that the car will be delivered if it is has arrived at the showroom? My father will write to Audi India tomorrow.

I am afraid, things will be difficult for you. Hope you have not paid a large amount. I doubt Audi would have shipped the car, even if it had, it can get tricky as no one will able to invoice you. Best will be to speak someone at Audi and see if the car can be delivered via another Dealer.

[thecarguy]

Originally Posted by Turbanator

I am afraid, things will be difficult for you. Hope you have not paid a large amount. I doubt Audi would have shipped the car, even if it had, it can get tricky as no one will able to invoice you. Best will be to speak someone at Audi and see if the car can be delivered via another Dealer.

Well we did pay a substantial amount as we were close to final inspection and delivery. Audi claims to have not received any money at all. Will send legal notice to both parties before this weekend.

[GTO]

Originally Posted by thecarguy

Will send legal notice to both parties before this weekend.

Sorry to hear about your predicament.

First, try to talk to Audi. Once you send a legal notice, all conversations are off and it's only between the lawyers. Therefore, before going legal, talk & meet with them. They know their dealer is at fault and will try to make up. Companies hold big security deposits from dealerships just for cases like these.

[Turbanator]

Originally Posted by thecarguy

Well we did pay a substantial amount as we were close to final inspection and delivery. Audi claims to have not received any money at all. Will send legal notice to both parties before this weekend.

That’s not a good news. Technically, before they gave newspaper advertisement about cancellation, Audi India can also be held responsible but I am afraid, it can be a long process. As GTO has suggested better Talk with company officials if possible unless you are from a legal background.

I am sure, there will be more similar cases more so with Porsche. This again shows the importance of not paying a large amount before actually seeing the vehicle. Personally I have never paid any advance except for Gypsy and recently on a Toyota but both amounts were insignificant wrt to the cost of the vehicles. But with Porsche they will normally not process order especially the one which you want to configure. There were similar stories in the past with their Importer.

Wonder, what happens next - Do they reimburse the customers or leave them to fight in courts where Banks May have the first rights?

Perhaps, Porsche should go the Lexus route and sell/ service their cars via VW Dealers, at least they won’t run in a hurry.

[GTO]

Remember I mentioned this floorplan financing scam is common? Here are two detailed stories on the same:

AutoNews

Jalopnik

The first one was uncovered very recently.

[//HB]

Originally Posted by GTO

Remember I mentioned this floorplan financing scam is common? Here are two detailed stories on the same

Quoting from the above - How likely would this below be as a game-plan for exiting this situation Audi India ? More so since they were supposedly (one of) the top dealers in the country ?

(The Brand) likely doesn't want the stores to go dark and could be trying behind the scenes to find another operator for the stores or negotiating with the owners to have them sell the dealerships within a certain time frame

[sgiitk]

Apparently, they had about 30% of the Audi sales, and also were the biggest Porsche outlet. Seems they are all UK citizens and were about to do a Mallya. They got caught just in time.

I am sure Audi & Porsche will do something fast.

[GTO]

Originally Posted by //HB

How likely would this below be as a game-plan for exiting this situation Audi India ? More so since they were supposedly (one of) the top dealers in the country ?

A new management / owner on the current premises would be the first choice for Audi, Porsche & their customers. However, it won't be simple. The property is apparently owned by the dealer and hence, they should be willing to sell. Then, there is the question of satisfying all the lenders.

Can definitely happen, but Audi, Porsche & the potential new owner would have to dig deep into their pockets. Possibility of everyone pulling it off seems low.

[Turbanator]

Originally Posted by GTO

Can definitely happen, but Audi, Porsche & the potential new owner would have to dig deep into their pockets. Possibility of everyone pulling it off seems low.

Correct, if we see the recent examples of BMW in Ahmedabad or Toyota in Indore/ Pune, new Dealers have made new premises, perhaps they have got old manpower but that's about it. Audi is looking for new Dealers for a couple of months whereas Porsche in private

On another note, does it actually makes sense for someone to Invest and open a Porsche Dealership? The whole of the North is open. Beyond Ahmedabad, there is no Dealer. Though sales will be limited given their models and pricing in the Indian market but if someone can run a smaller sales but a fairly equipped workshop, should it make sense? Like Lexus operating from Oberoi here in Gurgaon and cars getting serviced at their Toyota workshop.

[Porcupine]

Originally Posted by GTO

A new management / owner on the current premises would be the first choice for Audi, Porsche & their customers. However, it won't be simple. The property is apparently owned by the dealer and hence, they should be willing to sell. Then, there is the question of satisfying all the lenders.

Can definitely happen, but Audi, Porsche & the potential new owner would have to dig deep into their pockets. Possibility of everyone pulling it off seems low.

Would it not be possible for the new appointed dealers to just shift the showroom to a new premises like after the Porsche debacle in Mumbai? Seeing as even operating out of the same premises for a new dealer could have a delay due to previous dealers still owning the property.

[//HB]

Originally Posted by GTO

Can definitely happen, but Audi, Porsche & the potential new owner would have to dig deep into their pockets. Possibility of everyone pulling it off seems low.

The reason I thought this to be a very likely outcome is because
(a) even though premises maybe owned, but most likely will be financed, not outright purchased.
(b) seeing the pressure to repay, a very logical outcome for Zenica (and no doubt pushed by financiers) would be to liquidate the premises as a way to repay substantial debt.
(c) this would work well for Audi too, given that they would want to get the business up and running again as soon as possible.

[GTO]

A bit OT, but Porsche sure is having a terrible month. A top USA dealer's VP & his Indian-origin wife have scooted off with $2.5 million in customer deposits - full story.