[volkman10]

Maruti to spend Rs 15,000 cr to double sales infra in 5 years.

Maruti Suzuki, which aims to increase its annual sales to about 2 million units by 2020, will invest Rs 15,000 crore over the next five years in procuring land for doubling its dealership network( currently at 1700) and expanding stockyard, warehouse and transportation infrastructure.The total money needed for creating additional sales-and-service infrastructure has been estimated to be Rs 30,000 crore. Of that, half the money will be invested by us, and the rest by dealers.
Most of the future dealerships will be set up on the land owned by the company. Maruti has set up a team, with executives hired from real estate firms, to oversee the land-procurement exercise.

http://www.business-standard.com/art...3000022_1.html

[Aditya]

Maruti Suzuki to invest Rs. 15,000 crore in expanding sales network and infrastructure. Post moved to a new thread.

[romeomidhun]

This news clearly underlines the fears of Maruti investors. Maruti will become just a marketing firm of Suzuki, and a 'real-estate' business.

Production of most of the high- margin products will be moved to Gujarat, I guess.

Otherwise, there is no logic to justify such a massive spending by Maruti.

[GTO]

Very shrewd, incredibly smart. At a time when other car makers are struggling to find new dealerships, Maruti is going all out to acquire land for its network! And why not? Maruti is sitting on a big pile of cash.

It's easier for any businessman to pay rent of a couple of lakhs to Maruti than buy property for a couple of crores. Plus, Maruti is assured of presence in that location too. If a dealer wants to move on, it can rent that same land (and dealership) to the next businessman in line. It's giving Maruti a lot more control over its network.

Such a dealer would be more of an 'office manager'. Maruti's land, Maruti's dealership design, Maruti's operating instructions.

"The dealers might find more profitable opportunities later. We have to think of the future. This challenge never existed in the past. But going forward, dealers will have many options - from opening a McDonald's or Haldiram's outlet to setting up a mall," said Bhargava.

. Sad but true. A big Haldiram store could make more money than a car dealership today.

Related Thread

[Karthik Chandra]

15K crores for acquiring land for dealerships, this is when companies are struggling hard to move inventory out of the factory and dealer stock yard.

That's why Maruti is the king, MSIL, for sure does not want to be challenged, for otherwise why would a market leader spend so much for acquiring land for dealerships, very very few companies can plan such an initiative.

Now MSIL zonal managers just need to meet up with big desi business magnets and they would have the agreements signed, since the biggest challenge for any business set up/showroom is real estate at the appropriate place. This more or less make or breaks the deal even if the dealer is cash rich. I've handled dealerships for telecom and it becomes very challenging to convince a dealer to come up with a showroom - Reliance communications had company leased showrooms for dealers to operate.

This move will also ensure that the showrooms remains where it is in case the dealer wants to resign, another dealer can come on board without major hiccups and start operations.

This will also give immense control over the dealership which in turn goes a long way in ensuring customer satisfaction, believe me when I say this, MSIL dealers are shit scared of the company. I've handled MSIL dealerships when I was working for SBI cards, we had a tie up with MSIL for Maruti Auto cards (credit card which gives you points when used in MSIL outlet, same can be re-deemed for service, parts and accessories) and have seen the kind of respect the regional managers command (both sales and service).

MSIL comes up with some thing or the other - more than anyone else, this would put pressure on HMIL, the challenger. Good for competition and competition means the customers get to be benefited

[libranof1987]

Talk about taking control of dealerships!

So, this would be Company owned but dealer operated correct?

Else where on the forum, we are talking about dealers moving across manufacturers far too frequently. This should make sure a MS presence at a specific place; irrespective of who is owning it.

Thinking out loud, is this a way to manage cannibalization within dealers?

Originally Posted by Karthik Chandra

This will also give immense control over the dealership which in turn goes a long way in ensuring customer satisfaction

+1

The kind of Quality Control and Assurance MS can achieve is significant.

[GTO]

More news rolling in.

Full Article on LiveMint.com

Maruti Suzuki India Ltd plans to acquire land at 5,000 sites across the country under a new subsidiary, which will then lease it out to build future dealerships, a top company executive said.

The company has hired three real estate executives with over 20 years of experience to identify these sites, chairman R.C. Bhargava said in an interview.

At an average surface area of roughly 5,000sq.ft, Maruti may buy as much as 25 million sq.ft, paying as much as Rs.30,000 crore over 10 years, Bhargava said. The leased land will be used to build dealerships,workshops and ware houses.

[SmartCat]

Rs. 4,000 Cr extra rental revenue (estimated) from Rs. 30,000 Cr investment works out to be 13.3% yield per annum. So its not a bad investment as such, if they manage to lease the entire area at those rates.

But I wonder if this is the best use of capital for a car company.

But Bhargava says (in Business Standard link) -

"The land cost today is making it difficult for dealers to invest. But if investments are not made, it will hurt us. We will buy sites where we want dealerships and workshops to come up in future," said Bhargava.

This makes me wonder if the estimated rentals are on the higher side. If the rental yield is really 13% per annum, it means land cost is more than reasonable

[V.Narayan]

This is a sensible business move by Maruti as it will help them in many ways - attract and retain the best dealers with the biggest cost item in their investment ie real estate and as John D Rockfeller said he bought land because they ain't making any more of it! I met a Board member of Maruti this evening and asked him about this. And he confirmed it is one arrow in their quiver to retain market leadership in their chosen segments. Maruti is building sustainability into its sales & distribution chain. With this support which kind of dealer will Maruti get to pick and choose (they already do) and which kind of dealer will Skoda or Fiat get. Good going.