[GTO]

So, the group is hanging out over the weekend and as usual, the men start talking about cars. Someone spoke of a dealer friend going through rough times (VW outlet) and that he's looking to switch brands. We then started discussing the obvious = which car brand is worth investing in today?

Well, the first & obvious answer is (provided by Blackwasp) = DON'T invest in any car dealership . Not unless you already have the real estate, or are looking to convert black money into white. They say the best way to become a millionaire is, become a billionaire & then open car dealerships!

Still, we can all fantasize, right? All of us love cars and I'm sure everyone here has dreamt of a car dealership at some point in their lives. If you had to open a car dealership in 2020, which manufacturer would you trust your career, money & future with? Please also vote in the multiple-choice poll above.

• Hyundai: I'd pick Hyundai because their average selling price is far higher than Maruti's. Hyundai is a strong no.2 which still has a lot of opportunity for growth (e.g. MPV segment). The service revenue is healthy & the company has a w-i-d-e range of products, right from economy hatchbacks (which still carry a bit of a price premium) to sedans that sell reasonably well (Verna) and blockbusters like the Creta. It's a company whose decisions I usually find myself agreeing with. I also believe that Hyundai has the in-house capability to meet emerging technologies like Electric Cars easily. Drive the Kona; it'll leave you convinced.

• Mercedes: Love everything about the company. I think Mercedes today is in the best form its ever been. Solid management, no.1 rank in the luxury segment, sexy cars, design leaders, F-A-T service margins, extremely profitable used car divisions and future ready (Merc's R&D budget is higher than the profits of many car manufacturers). Plus, there's always something special about representing the hallowed 3-pointed star. I would consider a BMW dealership as well if they improved their marketing push in India.

• Kia: Hyundai's sister concern is here to stay. Talk to them and you'll realise they're thinking in terms of 5 & 10 year plans for India. Kia wants as wide a spread of products as Hyundai and is pushing all the hot buttons. The Seltos has been a smash-hit, next up is a premium MPV and later, a Compact SUV. The brand is fresh & their small group of existing dealers can't order enough money-counting machines! From all the new brands that have entered India, this one is the most promising.

• Skoda: Surprised? Don't be. For one, I'd like to show Skoda & its dealers what customer service is really about. Second, after the consolidation we've seen in the VW India group, Skoda has a bright future. All of their cars are premium-priced, including the overpriced Kodiaq which still does 150 units / month. The overall sales are small, but I'd rather sell one car & make 10 bucks on it than sell 10 cars and make a buck on each (e.g. Maruti or Tata). Despite the bad rep, the Skoda brand does stand for 'affordable luxury' & their cars are simply amazing. Skoda's dealer network is small & the future product road-map looks promising. On a lighter note, Skoda also allows its dealers to openly fleece customers so there's an opportunity right there.

• Maruti True Value: Not only do I love pre-owned cars, I believe they make for an outstanding business opportunity too. The used car market grows even when the new car market shrinks, and the margin on a 5-lakh rupee used car can be THRICE that of a 5-lakh rupee new car. Believe it or not, Maruti True Value sells more (used) cars than the no.3 automaker in India, Mahindra.

I wouldn't put my money in Maruti - at least in Bombay - because their average selling price is way lower than Hyundai's, there are too many Maruti dealers here and the internal competition is cut-throat. If volumes rise, they bring in new dealerships instead of increasing sales for existing ones. Neither would I bet my money on inconsistent brands like Tata, Mahindra, Renault, Ford, VW etc. who have too many misses for every hit product of theirs. With these brands, life would be a continuous roller coaster ride. Not included Fiat in the poll as they've had "zero" dispatches in 3 months.

Related Threads:

Financials of car dealerships

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Behind the Scenes - A salesman's life

Slowdown bites dealers hard

Setting up a car dealership

[GTO]

Thread moved from the Assembly Line to the Dealerships Section!

[WhiteFang]

I would go with Kia. They are new to the scene and seems to have got a clear plan. As a new entrant, I would not have to bother much about the visibility, showroom foot-fall and piling up of stocks which would not be the case with most other manufacturers.

Initially, I thought of MG as well, but their relation with General Motors dissuaded me from thinking further.

[KL01toKA03]

I would pick Kia, Mercedes, Maruti, and Toyota.

Kia - Once Kia launches cars across various body styles, they will overtake Hyundai in sales. Kia has everything that Hyundai has, while looking a lot better.

Maruti/Nexa - If one goes by the current numbers, Maruti is a safe bet. Unsure of what the future holds when the auto world goes electric.

Mercedes - Still retains a certain charm for the aspirational middle class. Buying a Benz will remain a dream for many.

Toyota - As car ownership reduces, it would make sense to invest in a brand that is popular among the cab operators. They have a strong understanding of hybrids, and should be ready when electric cars become common.

[blackwasp]

Originally Posted by GTO

Well, the first & obvious answer is (provided by Blackwasp) = DON'T invest in any car dealership . Not unless you already have the real estate, or are looking to convert black money into white. They say the best way to become a millionaire is, become a billionaire & then open car dealerships!

Bingo. Seeing the margins on the cars in mass-market (sub 20L cars), I would say you are better off investing your money elsewhere as you would get more returns. Only case for a dealership is if you have the real-estate ready on your ownership.

Maruti True Value: Not only do I love pre-owned cars, I believe they make for an outstanding business opportunity too. The used car market grows even when the new car market shrinks, and the margin on a 5-lakh rupee used car can be THRICE that of a 5-lakh rupee new car. Believe it or not, Maruti True Value sells more (used) cars than the no.3 automaker in India, Mahindra.

I don't think the company gives just the True Value on its own. The whole idea of Maruti is to have most things in-house - insurance, used car sales (to sell cars people come in for exchange), servicing and commercial.

A used car showroom would make much more sense as the margins are fat and slowly people are realising the value proposition in them.

I wouldn't put my money in Maruti - at least in Bombay.

True.

If at all I had to choose a dealership, I would first start off with a service centre. Manufacturers today offer long warranties (recently Honda announced 10-year plans) and service packages so that's guaranteed business. A service centre also means insurance claims, body shop and paint shop which is far more lucrative than any dealership. My choice would be either a Skoda, BMW or Mercedes. Once it is up and running, depending on the demand, would then consider opening a dealership.

My choice of the location would be Tier 2 cities like Kolhapur, which have a good number of rich folks and at the same time the real estate & other costs are at a fraction compared to metros like Mumbai. Remember, a 50L Merc will cost the same in Mumbai or Kolhapur, but the real-estate price is 50% or less, salaries are on the lower side as well and lesser competition from rival dealerships.

Originally Posted by WhiteFang

As a new entrant, I would not have to bother much about the visibility, showroom foot-fall and piling up of stocks which would not be the case with most other manufacturers.

Thats today, what's to say their next 2-3 cars are not a dud? You are investing crores of money + operational costs mounting to tens of lakhs per month. You can't just bet on a one trick pony. And for a new car, margins are definitely on the lower side as even the company knows its an easy sell.
Eg. I know for a fact that margin on a Compass would easily be 2-3X that of any Seltos variant.

You need to see the ROI here. Once you sit down with the numbers, you will realize the low margins even for the highest selling cars.

Originally Posted by KL01toKA03

Maruti/Nexa - If one goes by the current numbers, Maruti is a safe bet. Unsure of what the future holds when the auto world goes electric.

Margins on MSIL cars are just too low to invest that kind of effort and endure the hardship. If you buy a WagonR today, the dealer makes more money by selling you Maruti insurance and accessories than selling the car.

[libranof1987]

Should a used car dealership: self-owned, not tied to a manufacturer (not True Value, First Choice), be an option by itself. There might not be official figures considering that it is fragmented, unorganized and unregulated but most pre-owned car sales happen through that platform.

[Octy17]

Voted for Skoda, Renault and Kia.

Skoda - one word INDIA 2.0. Lots of products coming up from the VW stable. The icing on the cake is Zac Hollis who is always ready to cater to customers needs. I thought I will never say this, Skoda has improved vastly in terms of service after Zac took charge as Director. I see them growing in the next 2-3 years for sure.

Kia - new entrant and they will go aggressive in terms of product portfolio and after sales. I can confidently say that they will be able to go past Hyundai in the coming years.

Renault - Another brand that has a bright future and huge potential. Going by the success of the Triber and Kwid this is one brand which will show substantial growth in the coming years.

[Ajay_the_Don]

Originally Posted by GTO

• Skoda: Surprised? Don't be. For one, I'd like to show Skoda & its dealers what customer service is really about. Second, after the consolidation we've seen in the VW India group, Skoda has a bright future. All of their cars are premium-priced, including the overpriced Kodiaq which still does 150 units / month. The overall sales are small, but I'd rather sell one car & make 10 bucks on it than sell 10 cars and make a buck on each (e.g. Maruti or Tata). Despite the bad rep, the Skoda brand does stand for 'affordable luxury' & their cars are simply amazing. Skoda's dealer network is small & the future product road-map looks promising. On a lighter note, Skoda also allows its dealers to openly fleece customers so there's an opportunity right there.

I would second here with GTO. Skoda cars are brilliant piece of engineering backed up by many enthusiasts. They are also long lasting cars - I have noticed many old-gen Octavia and Laura still plying on the road. The brand echoes with affordable premium cars in the market and a good A.S.S will make it a much better brand to own.

[Sasanka_Sanga]

I would go with the Mahindra’s and the Tata’s for obvious reasons being Indian brand and they have raised their standards tremendously in the recent past.

Tata’s tank named Nexon
Mahindra’s Marazzo that scored an NCAP rating of 4

Enough to prove that they are the pride of India.

[Axe77]

Not sure if this is off topic but I am keenly awaiting one particular member's post here - Bharatbits. He has checked every / almost every single dealership in the poll. :-)

May i assume he wants a car dealership at any cost, whatever the brand may be? What gives buddy?

[dhanushs]

My vote goes to

• Hyundai
• Mercedes
• Toyota

Mistakenly clicked on Mitsubishi instead of Mercedes... Such different brands... The reason I chose Mercedes is that good profits per customer, which means lesser customers to deal with. Good products and very good support to the dealership. Well... In a way, Mitsubishi is also same, fewer customers to deal with.

Hyundai and Toyota are the brands that give importance to the dealership. Also, the fact that the service makes money than sales. Hyundai and Toyota customers mostly use the A.S.S for work. Didn't vote for Maruti because too many small cars and too many customers to deal with. Also, not all Maruti customers visit the showroom for everything. Most of them, just buy it and drive off.

Kia is still new and not a lot of products. Which actually means the timing for the business is good, and you become the expert of Seltos which is a great car. However, my habit while spending money is to wait and see..

[AnandB]

I think Tata has huge potential which is not being tapped be it on local-level or company-level. Just in the other thread of Tata planning to open 100 new dealerships, a member mentioned awful customer experience with no call back to a prospective customer. Maruti and Hyundai shine here in both sales and after-sales and subsequently are the reason they are 1 and 2. The current gen are good looking cars and diesel engines are good too while priced lower than competition except for some stupid omissions like no auto-gearbox and deletion of features. I think with heavy focus on ground level marketing they can do much better than they do.

[TorqMaster]

Location is critical- if I can have a dealership for the big threes and Jaguar LR in an industrial place (thinking of Coimbatore, Tuticorin) where there is a lot of cash flow and rapport with local authorities, we may be able to do good business.

[Rahul Rao]

I have a few relatives who own dealerships in smaller towns. A few days back I was discussing this with a brother in law (wife's first cousin) who owns two dealerships both in smaller cities in Maharashtra.
His first is an Enfield dealership which does extremely well.
His second was a Maruti dealership which surprisingly used to just covers its costs due to extreme low margins, and no responsibility taken for spare supplies damaged in transit, and very low labour charges from maruti for recall and warranty related work. Two years ago he shifted to Tata, and is reasonably happy due to better margin on spares, better packing which leads to negligible transit damage. His choice was dictated by Tata cars being third most in nos in villages in 50 km radius. Maruti and Mahindra make the largest numbers there.
While discussing with companies, his opinion was that Skoda, Toyota and Ford treat their dealers well, but his city did not have enough market for a second dealer for the brands. Tata, Mahindra, etc are also ok, where as Hyundai and Maruti behave as if they do not need dealers. He had almost finalized with Toyota, as the previous Toyota dealer there was closing down, but they had very strict norms which were not viable as his workshop was in an older building.
VW and Honda were not considered for reasons unknown to me.



Rahul

[RYP]

Hyundai & KIA for me. Simply they are more future focused than rest of the competition. As GTO said, "Drive the Kona; it'll leave you convinced", it can't be put any better. I drove one and was completely impressed, my next car would definitely be an EV.

Toyota is betting on Hydrogen Fuel cells and belittling on Li-ion. I see no future in them, Hydrogen is NOT the future IMHO. From being an innovator with Prius and the situation they are in right now w.r.t to EV tech its quite appaling.