New Delhi: The slowdown in India’s auto market is taking a heavy toll on what was once its prized possession - Dealership.
A number of closures by dealers of top Indian and multinational companies have caused concerns, even raised questions over the future of automotive retail in India. The prolonged crisis in automotive sector has pushed as many as 300 outlets to down shutters in the last 18 months. And, it’s not good news for the market.
The past few months have seen highest closures ever in auto retail with Delhi leading with closure of more than 50 outlets, followed by Mumbai & Pune and other metros. These closures are affecting the automotive retail as Delhi/NCR as well as Mumbai, which are the biggest automotive markets, account for 25 per cent of the 3.4 million cars and SUVs sold in India.
Every known brand is going through these shutdowns, including seasoned companies like Maruti Suzuki and Hyundai Motors which are facing dealer exodus. The passenger segment leader Maruti Suzuki operates the largest number of dealers with over 2200 Maruti Suzuki outlets and another 300 NEXA dealerships for its premium cars.
Worst hit are fringe brands like Nissan, Audi, Tata Motors, FiatChrysler, Ford, Volkswagen, Renault and Skoda Auto which have far fewer dealers across India.
Federation of Automobile Dealers’ Association (FADA), the apex body, has raised alarm over the ongoing crisis. Commenting on industry performance, FADA President, Ashish Harsharaj Kale, told BTVI: “The industry is facing an unusually high number of dealership closures in recent times, especially in Metro and Tier 1 cities, a substantial number of which were due to financial stress caused by accumulated losses and reduced access to working capital needs. We will be engaging with the policy makers along with the Reserve Bank of India to work upon a separate categorisation for auto retail and its funding requirements for long term sustainability of dealers.”
FADA says shrinking sales with much higher discounts have reduced dealers’ margin to mere 2% from the regular 4-5% and it will also be soon engaging with all stakeholders on business viability for long term. Besides slow demand, severe liquidity and lack of skills & leadership is also affecting the automotive business. The passenger vehicle sales decline almost 15 percent in April, after growing 2.5 percent in FY19 and eight percent in FY18.
The crisis is felt by new entrants like South Korean KIA Motors, MG Motors of China and French carmaker Citroen who are wondering how to appoint new dealers. Sources have told BTVI that many newly appointed dealers in many companies have returned their ‘Letter of Allotment’ and are avoiding entering the automotive retail business which requires new dealers to invest upto Rs 50 crore in big metros where land is expensive. Worse, online dealership too has remained unviable after companies like Maruti Suzuki, Hero MotoCorp, M&M & TVS Motors failed to trigger sales via their e-commerce partners FlipKart and Snapdeal.
List of Major Dealerships Closed in Delhi/NCR:
Audi Gurgaon & Central
Renault West & Gurgaon
Pearl Honda Gurgaon
Nawab Motor Skoda Noida
Toyota Lexus Gurgaon