[wildon]

News Source: Economic Times

TATA Motors, India’s second-largest car maker, faces the prospect of a churn in its distribution network with rival companies luring away two of its top dealers by offering better margins.

A slow-pick up in sales of Fiat Auto, whose vehicles are distributed in India by Tata Motors, may also have contributed to the exits. Pune-based BU Bhandari Auto , which became a Tata Motors dealer more than a decade ago when the automobile major entered the passenger car market by launching Indica, will distribute products of German car-maker Volkswagen , which is eyeing a larger market share in the booming Indian automobile market. Delhi-based dealer A-One Motors , promoted by Yadur Kapur, will focus on distribution of cars from Honda, BMW and Rolls-Royce.

The promoter of Bhandari Auto, Shailesh Bhandari, is currently in Germany to get a feel of the operations of his new partner. These two dealers together contribute 5-6% of Tata Motors’ passenger car sales, according to automobile industry executives. Tata Motors sold 1.3 lakh units for the period from April to September.

The Tata Motors spokesman confirmed the exit of the two dealers, but said that only seven dealers had left in the past three years. “This has nothing to do with their business or relationship with Tata Motors,” he added. Over the past six months, it has added 10 new dealers taking its total dealership network to 247 as its passenger car sales have been growing at the rate of 44% till September this year, the spokesman said. The company’s new CEO Carl Peter Forster is understood to be overhauling the entire passenger car segment by adding more dealerships to push volumes in a growing market.

Some of the existing ones are expanding network. “Margins are improving, and in the product schemes offered by the manufacturer, the contribution of the dealers has significantly reduced,” said Vinod Sharma, MD, Fortune Motors, a major distributor of Tata Motors vehicles in Maharashtra. Car sales in India are set to rise 12-13% in 2010-11. The Society of Indian Automobile Manufacturers (SIAM) forecast car sales to rise to 1.7 million units in the year to end March 2011.

Stagnating sales from Fiat was an issue, said one of the dealers. “There have been stagnant margins with our A-One business that caters to Tata Motors, while they are much higher in our other dealerships. The overall effect is also coming from Fiat cars whose sales have not grown as expected,” Mr Kapur said. Sales of Fiat cars dropped 8% to 11,863 cars during the past six months. “When we take up dealerships, we never leave it. However, this is a commercial decision,” said a senior offical at BU Bhandari. Multinational companies like Volkswagen, BMW, Nissan and Audi, which are ramping up their India presence, are poaching dealers of Tata Motors, Hyundai and Maruti-Suzuki to access central locations in major cities.

These players are offering 6-8% of the price of a car against 3-4% being given by Indian majors. Not many new entrepreneurs are venturing into the auto dealership business as it involves heavy overhead costs. The dynamics of the auto dealership business is undergoing a change with companies forcing dealers to dole out freebies leading to major decline in margins.

Does more dealers will opt for new MNC's for more margin? whats your thought?

[Palio_2005]

It's really a pity as I used to get my Indica and later my Palio serviced there. BU Bhandari was one of the most proffessional dealers with a fantastic infrastructure. I don't think it's only the margins which would lure the dealers away.

[auto-one]

Iam shocked to know this. B.U.Bhandari have been with Tata since long, and are known to be good in the business.
Is is only the margins, or some thing more, that makes the dealer take this decision? Customers in pune assocaite them with Tata-Fiat , and I personally feel they should have continued with the company.

[aargee]

Well, IMO, these things are bound to happen. Anyone working in Indian MNC & non-Indian MNC would know the difference in the working culture & I hope the same with Tata & VW working cultures too.

Probably VW group is trying to gain their tarnished reputation (meant Skoda here) through some good dealers in this country & this is one of their attempts.

[jinojohnt]

IMO, 'other car companies luring away dealers' is not good news for the Customer. If this becomes widespread, companies would hesitate to act against Dealers in case of 'genuine' Customer complaints.

[aargee]

Originally Posted by jinojohnt

IMO, 'other car companies luring away dealers' is not good news for the Customer.

Err...there're good & bad sides of the coin.
Look at it this way - Say ABC Tata motors were good enough to provide service & they've been lurked away by VW group.

Now Tata Motors could put XYZ in place of ABC who might provide even better service than ABC or worst than ABC. In our case, you're talking about the latter part.

Now, when ABC starts servicing VW cars, its good for customers who have VW cars right? That's why I said there're good & bad side.

Sorry about the OT.

[ACM]

Won't Read too much into this.

1) Dealer who exit are at times kicked out by the vendor company - that is mostly the case. Else they do add on companies but do not need to give up a company dealership to do this.

Case to point.

1) Bharti Motors - Stopped GM (chevrolet) and have moved to TATA & FIAT. This happened to coincide with an errant dealier malpractice news.

2) Skoda kicked out Numer Elins - The same guy has now started a multi brand outlet.

3) Wasan Mumbai was originally TATA, then TATA and Ford, then TATA, Ford & FIAT and finally is now for TATA, Ford, Fiat and Toyota.

To take one - one does not need to give up another, no business man would give up an dealerhip for one brand - one does not know when the next upswing of a product will happen, in anycase, TATA and FIAT have been JOINTY registering month on month highs for the last few months when put together.

Don't believe in this Luring away bit at all. It's just a pure business for them.

[neoonwheels]

According to the news I got, 2 new dealers are coming up in Pune for TATA-FIAT and 1 service only station. Soon the names would be out.

[coolclouds]

Originally Posted by ACM

Won't Read too much into this.

1) Dealer who exit are at times kicked out by the vendor company - that is mostly the case. Else they do add on companies but do not need to give up a company dealership to do this.

Case to point.

1) Bharti Motors - Stopped GM (chevrolet) and have moved to TATA & FIAT. This happened to coincide with an errant dealier malpractice news.

2) Skoda kicked out Numer Elins - The same guy has now started a multi brand outlet.

3) Wasan Mumbai was originally TATA, then TATA and Ford, then TATA, Ford & FIAT and finally is now for TATA, Ford, Fiat and Toyota.

To take one - one does not need to give up another, no business man would give up an dealerhip for one brand - one does not know when the next upswing of a product will happen, in anycase, TATA and FIAT have been JOINTY registering month on month highs for the last few months when put together.

Don't believe in this Luring away bit at all. It's just a pure business for them.

100% sure. Similar is the case with "Popular motors" for Maruti/Hyundai and EVM for Maruti/Volkswagen.

[Palio_2005]

Well BU Bhandari also has dealership of Mercedes. so he is familiar with the erman way of working. Maybe he was fed up with the hapazhard way of working by Indian/Italian companies (both are not known for structured way of working). On other hand they also had dealership of Honda but closed it in 3-4 months

[ACM]

Originally Posted by Palio_2005

Well BU Bhandari also has dealership of Mercedes. so he is familiar with the erman way of working. Maybe he was fed up with the hapazhard way of working by Indian/Italian companies (both are not known for structured way of working). On other hand they also had dealership of Honda but closed it in 3-4 months

your post leads one to further feel that if they did not manage to get along with the Japs, indians and Italians, etc, it may actually be the other way round and it may be the companies that felt that they need something / someone better?

[neoonwheels]

Originally Posted by ACM

your post leads one to further feel that if they did not manage to get along with the Japs, indians and Italians, etc, it may actually be the other way round and it may be the companies that felt that they need something / someone better?

BUB has always been a good dealer. I am taking my car to them since 2006. They have won many accolades in their 10 years partnership with TATA (and then FIAT).

[ghodlur]

Originally Posted by ACM

Don't believe in this Luring away bit at all. It's just a pure business for them.

Abolutely. The reason for Wasan Motors in giving up their Ford Dealership in Thane to Shreeji Ford ( belong to Balaji which has Tata dealership) & moving to Chembur was attributed to the low turnover fact. I think they are getting sufficient bookings at Chembur.

With the robust car sales in the past few month, the poaching of dealers with better incentive offers is bound to be there. It all depends whether the new dealer lives up to the customer expectation otherwise the churn out would happen faster than expected.

[RX135]

This is sort of baffling.

BU Bhandari was always considered a good dealer. They have Honda 2 wheeler as well as Mercedes dealership other than Tata-Fiat.

I am sure, they were doing brisk business with Tata-Fiat, but VW probably is planning to do something bigger and may have come up with even more lucrative deal for BU Bhandari. Though a dealer can sell multiple brands, VW may have put that condition in return.

I doubt if Tata-Fiat would have wanted to terminate them. But, all this is just speculation and an outsider's view. You never know what the real deal is, unless you are privy to the inside information.

[pgsagar]

So what if Tata Motors loses two dealers? They will get other two. Why does this thread sound like it is Tata Motors' loss? It might be other way around as well. Can't it be dealers' loss? After all they were making money, too. And who knows, may be they didn't quit Tata motors but their dealerships were cancelled by TM. In any case, is it first of its kind to merit a thread unless it is a veiled attempt to poke fun at TM?