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Nov, 01 2011

Dealers’ Drive to Profits

It's no more a bumpy ride for passenger car dealers, as driving the dealership lane can fetch more moolah. High investment and returns make car dealers the most sought-after. So, drive straight to pick your own brand and be a part of this profitable ventu

THE race is on. Brands are racing their way to gain maximum share of the burgeoning Indian automobile industry. In India, out of around 1,500 million units in volume of the automobile market, the passenger car and utility vehicles is 2.3 million. Dominant products of the Indian automobile industry are two-wheelers, market share over 75 per cent, and passenger cars, with a market share of about 16 per cent. Commercial vehicles and three-wheelers enjoy about nine per cent market share. With almost every car major already riding high on Indian car market, India is one of the hottest automobile markets in the world.

From Maruti to Mercedes Benz, Tata, Porsche etc, you name it and brands are there, making ripples in the business of passenger car segment. The competition is indeed nail-biting! The four car manufacturers ruling the roost in India are Maruti Suzuki, Tata Motors and Mahindra & Mahindra and Hyundai. In order to see their sales soaring, brands are weaving their dealership network like never before.

How dealers work?

Automobile brands in India have strengthened their presence via dealership model. Dealers are of utmost significance for a brand, as they play a role of a mediator. Dealers represent the brand, help in promotion of brand equity, car sales and also take care of after-sales services. Brands work closely with them to ensure high quality standards and better customer service. According to Manoj Dadhich, GM (Dealer Development), Ford India: “We work hard to ensure Ford dealerships across the country demonstrate our commitment to Indian consumers. Apart from offering best products like the 'Indian Car of the Year 2010-Ford Figo', the all-new global Fiesta, the ever favourite Fiesta Classic and Endeavour, the dealership also offers an unparalleled ownership and service experience to our customers. Our dealers in India are in-line with global standards and happy dealers pre-dominate in mature markets. Our dealer network is one big family with a long-term relationship. This results in profitability and good business for both dealers and original equipment manufacturers (OEM).”

The dealership model has undergone a sea change in the past two decades. Now they are not just limited to selling cars, but also promote the sales and after-sales services. Now, car stores are known to be a one-stop-shop for its consumers. To this, a Maruti dealer adds: “Dealership brings in personalised approach and focus of the manufacturer towards the needs and demands of customers.”

Driving opportunity

As per a recent research, India's domestic passenger car sales were increased by 28.91 per cent to 1, 48,681 units in December, 2010, as compared to 1, 15, 337 units in the same month in 2009. Whether a brand is targeting mid-segment category or high-end luxury cars, all car majors are on an expansion spree. Like retail and fashion brands, car majors, too, are targeting tier-II and III cities pan-India.

With humongous potential in automobile industry, potential dealers should gear up to take dealership of a brand they want to get associated with. All brands have a different selection process for a dealer. The selection process includes area, investment, existing dealership if any, qualifications, family backgrounds, existing business etc. Out of the mentioned factors, investment, area and location play a significant role. Whether it's a national or international brand, the time required in the selection of a dealer varies from three-six months. In case of Maruti, it usually takes six months and happens through dealer development network.

As told by a Zirakpur-based Maruti dealer Dhruv Garg, Chief Executive Officer, TriCity Autos: “I am associated with the brand for over three years. To take Maruti Suzuki India Limited (MSIL) dealership, a dealer needs to invest around Rs 6 crore (excluding land value). Whereas, Cc limits of Rs 6-8 crore and the area required is around 1 acre. The satisfaction level and faith in the brand makes it the best, Maruti has around over 55 per cent market share in India.”

Regarding expansion in small towns, Dadhich says: “Ford India continues to expand its dealer base in remote towns. We follow an aggressive service expansion strategy to address the cost of ownership by opening one service outlet every week in 2011-12. While in metros we opened outlets in Mumbai and Bengaluru; penetrating further into the tier-II and III towns, we recently inaugurated our sales and service networks in Mysore, Cuttack and Itanagar. Investment and area for dealerships are interdependent, given the potential of the city/location. Besides, these details are confidential and proprietary in nature.”

Whether its BMW X1, Audi A8, Porsche Cayenne or Mercedes S500, the luxury laden car street is also jam-packed with brands ramping up sales and dealership network. Last year stupendous growth was witnessed in this segment, as the luxury car sales grew 70 per cent to 15,000 vehicles. Less availability and fuelling demand has created a gap and to fill the void luxury car brands plan to drive down their brands to small towns too.

Dealership of a luxury car brand carries a posh price tag than a dealership of a brand that sells mid segment and small cars. To take dealership of Porsche brand, a potential dealer needs to invest around USD 1.5-2 million in 4,000 sq.ft. Presently, Porsche has eight dealers in New Delhi, Mumbai, Chennai, Kochi, Hyderabad, Ahmedabad, Chandigarh and Bengaluru.

Scouting for location to drive traffic

Careful exploration for site selection is important while opening a car dealership outlet. Whether it's a Skoda outlet or a Porsche, apt location tops the priority list of car brands. It's globally known that the best place to be is as close to your biggest competitor as you can be. Commenting on the same, a dealer with multi-location of a premium car brand says: “Location plays an important role while opening a car outlet. Every car brand usually prefers a location with other brands around. This trend is followed in most cities in India. This is done for the convenience of customers.” Dadhich says: “While choosing our locations we consider various factors such as proximity to consumers, upcoming markets and future infrastructure developments. For instance, Ford India is the first auto company, which has its dealership at a location like metro station in Delhi where there is a huge consumer footfall on daily basis. After location comes ambience. As informed by a dealer of a premium car brand: “The hospitality quotient required in this industry is way ahead of the hotel industry.” Agreeing to this factor, around 10 dealers of varied car brands said they try their best to please customers and make sure that customers get warm welcome at a car dealer's outlet. The more hospitable a dealer, the more number of sales can be added to his kitty.

Wah-wah-woom

To facilitate greater customer convenience and reach, car majors are making their presence felt in every nook and cranny of the country. The South Korean auto major Hyundai has a market share of 18.3 per cent in the country and company will launch 10 new cars in the country by 2015. To support its growth and expansion plans, Hyundai India Motor Limited (HMIL) has a 329 strong dealer network and 698 strong service points across India.

Ford India is constantly expanding its nationwide dealership network and continues to enhance its world-class after-sales offerings. They have increased their sales and service network to 190 outlets across 109 cities, of which more than 40 per cent are located in secondary markets to get closer to consumers.

In 2011, Ford continues to grow aggressively by opening one service outlet every week and intend to have over 200 dealerships across India. This will include 'hub and spoke' dealership models in far-off locations in tier-II and III cities. On the other hand, Porsche is planning to open its outlets in Rajasthan, Goa and West Bengal.

FUELLING FACTS

Overall automobile market

is a staggering Rs 2,15,000 crore

Passenger cars have a market

share of about 16 per cent

Out of 1,500 million units in volume of the automobile market, passenger car and utility vehicles is 2.3 million

India's domestic passenger car sales went up from 28.91 per cent to

1, 48,681 units in last year

DRIVER RETURNS

To take dealership of Porsche, a potential dealer needs to invest around USD 1.5-2 mn in 4,000 sq.ft

South Korean auto major Hyundai has a market share of 18.3 per cent in India and the company will launch

10 cars by 2015. For Maruti Suzuki India Limited (MSIL) dealership, a dealer needs to invest around Rs 6 crore

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