[GTO]

J.D. Power Reports: Increasing Number of Auto Dealers in India Foresee a Decline in Profits

One-in-five dealers in India expects to take a financial loss in 2013, more than double the number compared with 2012, and only 44 percent of dealers expect to make a profit for the 2012-2013 financial year.

Need to improve the supply chain

In 2013, the largest decline in dealer satisfaction is in parts operations, with notable brand level declines around the prompt delivery of parts and ease of ordering parts.

Decline in satisfaction with the product lineup

An attractive range of vehicles remains critical for both dealers and automakers to succeed in any market. The study shows a large variance in dealers’ opinions on the competitiveness of their brand’s model lineup. On average, 82 percent of dealers indicate their brand provides a model range that can effectively compete in the highly contested Indian auto market. However, fewer than 65 percent of dealers for some of the volume brands indicate the same.

Dealers must diversify to survive the headwinds

The study finds that it is important for dealers to diversify their revenue base in order to mitigate any sudden decreases in their income and protect their viability during a slowdown in new-vehicle sales. Dealers that increase their share of revenue on after-sales maintenance and repair work—as well as promote other parts of their business, such as finance and insurance, spare parts and accessories and used-vehicles—can better spread their risk.

The study finds that the main revenue sources for dealerships are service (29%), new-vehicle sales (28%) and spare parts (14%).


On average, 88 percent of dealers believe that they definitely would continue to work with their automaker in two years.

About the Study

The 2013 India Dealer Satisfaction with Automotive Manufacturers Index (DSWAMI) StudySM is based on responses from 618 dealership general managers or dealer principles across all main nameplates. The study was conducted in association with the Federation of Automobile Dealers Associations (FADA), and was fielded between February 2013 and April 2013.

[spyder918]

Interesting to know.. this has to be somewhere related to the sales slowdown, which has been reported recently..
I got to read some articles from sales point of view.. as below..

This one of 10th may..
Car sales in India fell for the sixth straight month in April, the longest stretch in at least 16 years, as high borrowing cost and a slowdown in the economy continued to weigh on what is considered as one of the potential growth markets globally for automobiles

Complete article on: http://online.wsj.com/article/SB1000...349957212.html

Some more analysis on the sales slowdown: 30th may
http://www.icis.com/blogs/chemicals-...l-for-rec.html

IMO, Also what interesting to see in the analysis is that the sales are still going good despite of -
- More people tend to buy a used car than before years
- Basic cost of living increasing in 2013 as compared
- Per GDP, India still remains in developing nations, on the poorer side
- Failures of some new car launches (easy to guess)
- To some extent... new technology introduced by quite few, that did not result in good sales number (average understanding of indian people)

[SmartCat]

Are dealership owners in India allowed to sell cars from multiple companies (at separate locations, of course)? That is, can the promoter of a Ford dealership sign up with M&M and open a new showroom?

[Pedaltothefloor]

That is terrible. I drive a brand that is probably running a loss for years but I didn't know it is a widespread phenomenon. Does this affect the premium brands like BMW, Audi as well?

[Me-hul]

Originally Posted by smartcat

Are dealership owners in India allowed to sell cars from multiple companies (at separate locations, of course)? That is, can the promoter of a Ford dealership sign up with M&M and open a new showroom?

Trident has both Chevy and Hyundai dealerships.

[oxyzen]

Car prices have not gone up linearly like depreciation. Ans so have not the dealer margins per car. In fact, due to the gradual increase in the number of dealerships and steady car sales, each dealer is probably selling less vehicles. But other overheads like Rent, Employee cost have surely shot up. It is not surprising to see the profits fall.

However, the service centers/workshops are a different scenario. The cumulative cars on road are increasing. So it is still a lucrative business. Correct me if I am wrong.

What I am really amazed is how dealers of Chevy, and Fiat keep up. Fiat does not sell anything practically and Chevy has too many dealers considering the cars they sell. What is stopping them from changing to Maruti, Hyundai or Mahindra.

[chinkara]

Originally Posted by oxyzen

Car prices have not gone up linearly like depreciation. Ans so have not the dealer margins per car. In fact, due to the gradual increase in the number of dealerships and steady car sales, each dealer is probably selling less vehicles. But other overheads like Rent, Employee cost have surely shot up. It is not surprising to see the profits fall.

However, the service centers/workshops are a different scenario. The cumulative cars on road are increasing. So it is still a lucrative business. Correct me if I am wrong.

What I am really amazed is how dealers of Chevy, and Fiat keep up. Fiat does not sell anything practically and Chevy has too many dealers considering the cars they sell. What is stopping them from changing to Maruti, Hyundai or Mahindra.

Auto servicing does not really work that way. Essentially, it is a capacity game. Each service centre will have a finite number of bays, where mechanics will work on cars. Typically 1-2 mechanics per car.

Therefore service centre profitability really depends on 2 metrics: revenue per bay per day and revenue per mechanic. Both these are limited by the number of cars that can be physically handled by the mechanic / bay.

Hence you see these 24 hour service centres. They are not just for customers' benefit, but actually for profitability.

Also, typically number of bays / cars each service centre can handle is limited, so that too impacts profitability. Not much fun if you have to make the same investment all over again. And add the same overheads (GM etc.)

Not mentioned here, but another thing that has impacted service centres is part margin. Both Maruti and Tata have reduced some part prices in the past few years. Even with % margins remaining same, the ₹ value has declined.

So next time you see your friendly neighbourhood ASS trying to chipkao (surreptitiously add) fictitious treatment / unnecessary part changes, you know why.

[scopriobharath]

Well Well Well !! - I was expecting this.

Over the years, The average dealers and the Average manufacturer have been a greedy lot.

There are incidents reported where spares are purchased from the Manufacturer at a lower price than the cost price and the customer's price for the same spare has been overpriced when needed for service / replacements. Decision makers thought only about short term profit, but no one thought about long term sustainability.

Also - Even the A.S.S have cheated customers even in petty ways like charging for Engine Oil changes, but not changing oil. The Scam of Engine Oil Flush is very common nowadays.

The FNG garage industry has mature a little and the FNG mechanic can suggest a replacement part which costs less than oem spare. I know some indica cab owner-drivers who have dumped ASC from day 1, eventhough they risk loosing warranty. FNG Does not charge unwanted things and does not force flushes and other additives like in an ASC.

The Sales industry has also witnessed lot of scams like selling demo vehicles, using customer vehicles as test drive vehicles, hiding the fact that a vehicle has been damaged etc.

With these behaviours and attitude, with TBHP sharing experiences, a decline was expected.

[Shiv_1984]

Mod Note : There are several spelling & grammatical errors in your posts. This negatively affects the forum experience for other readers.

Kindly ensure that you proof-read your posts prior to submission. Also, it would be a good idea to use spell-checkers.

[GrammarNazi]

Originally Posted by smartcat

Are dealership owners in India allowed to sell cars from multiple companies (at separate locations, of course)? That is, can the promoter of a Ford dealership sign up with M&M and open a new showroom?

KHT sells Tata, Fiat And Chevy. It depends on the owners capability to not only make a compelling case/request when applying for a dealership, but also capability of investment into the business. Managing so much needs serious maturity & business acumen, few would have the courage to put so much at stake.

[GTO]

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.

Looking at the monthly sales figures, dealers of the following brands have it really tough:

Tata
Chevrolet
Nissan
Skoda
Fiat
Volvo

I bet these brands constitute for 75% of the loss-making dealer group.

Honda dealers were going through difficult times, but things will look up now with the Amaze (and other diesels which are on the way). Ford dealers only had the Figo to bring some volume.....bet they can't wait for the EcoSport.

Here's an interesting paragraph from Forbes India:

Wasan had been waiting for this opportunity for a long time and he didn’t hold back. Sales had plummeted to 225 units per month compared to an average of 900 units in 2008-09. Despite all kinds of marketing pushes—buy a Nano with a credit card, exchange your old motorcycle for a Nano—the car had remained a non-starter. It was the same story with the Manza, the Indica, the Safari and the Aria. There were hardly any footfalls in his showroom and his sales staff was demoralised.

“With these issues, I will not have enough money to even pay salaries to my staff. In fact, I have been thinking of closing this dealership because I have been making losses for the last two years,” he told Slym.

[sivadeep]

Too many brands, cars, models for a low Indian customer base with a poor market/economic conditions. I guess in US or any other developed countries were customers retain their cars typically for 3-4 yrs and in India this may be quite higher may be 7-10 yrs before switching to new cars

[pacman2881]

Originally Posted by smartcat

Are dealership owners in India allowed to sell cars from multiple companies (at separate locations, of course)? That is, can the promoter of a Ford dealership sign up with M&M and open a new showroom?

Sundaram Motors (part of TVS group) are dealers for four manufacturers - Mercedes, VW, Honda and Chevrolet.
One interesting thing is their Honda and Chevrolet dealerships are two sides of the same building in Mount road, Chennai . Have a look at the image-



Image source - sunglazing.in

I presume this sort of scale will be helping dealers than standalone ones.

[wildon]

Originally Posted by Me-hul

Trident has both Chevy and Hyundai dealerships.

and they are the dealers for Renault too..

[Me-hul]

Originally Posted by wildon

and they are the dealers for Renault too..

Do they have it in Bangalore?