Maruti to lease showrooms to dealers

According to a media report, Maruti Suzuki is planning to build new showrooms at its own cost and lease them out to dealers. The aim is to absorb a major chunk of the capital costs of its dealers and maintain their profitability.

The new showrooms would be built and owned by Maruti Suzuki using funds from the company's estimated cash reserves of more than Rs. 30,000 crore. The facilities will be leased out to dealer partners, as some might not have the capacity to make large capital investments especially in Tier 1 cities, where property rates are expensive. The operational expenses however will be borne by the dealers.

Setting up a dealership in major cities is estimated to cost between Rs. 5-6 crore. Dealers also have to incur other expenses that include rentals, creating showroom interiors and setting up service workshops. Also, dealer margins have reportedly gone down since modern cars have become more reliable.

Therefore, investing in infrastructure would not only help dealers, but also accelerate the expansion of Maruti's dealer network. The company reportedly plans to setup 100 new dealerships by 2030.

Source: LiveMint