Introduction:
Automobile industry is facing a slowdown in sales and in the past 18months 286 dealers
have closed down. India is currently the 7th largest producer in the world with an average annual
production of 24 Million vehicles, of which 3.64 Million are exported.
The market volumes are expected to grow further due to positive economic sentiments and
huge untapped potential. The industry accounts for 45% of the country’s manufacturing GDP, 7.1
% of the country’s GDP and employs about 19 Million people both directly and indirectly. The
industry is expected to contribute significantly to Indian economy over the next decade. Intense
competition, changing regulations and introduction of new technologies are some of the major
factors affecting the automotive business environment. Announcement of GST implementation,
proposed advancement of BS VI to 2020, restricting higher cc diesel cars and introduction of safety
standards in line with international norms are some of the key issues influencing the industry.
Dealerships play a major role in representing the manufacturers in the market place through
meaningful customer engagement. Frequent product launches, shorter life cycle of products,
higher dealership investments and reduced margins are some of the major factors affecting
dealership profitability and sustenance. Significant shift in the buying behaviour of the customers
from ‘product’ to ‘product & service experience’ centric; and augmented use of digital platforms
are compelling dealerships to adopt industry best practices in delivering superior customer
experience. ‘Effective dealership management is becoming a competitive differentiator in the
automotive marketplace’.
Indian automotive market is witnessing five megatrends that will transform the
industry
1.Rapidly evolving customer needs:
With increasing spend capacity, high levels of product awareness, rapidly evolving
expectations and demand for personalised products & services, customers are taking the center
stage of the entire automotive ecosystem. Understanding changing customer needs and having the
ability to serve them differentially will be a key competitive advantage.
2. Disruptive impact of technology: at three levels
• On vehicles (e.g. electric, driverless, connected)
• On supply chain and operations (digitalisation, robotics, 3-D printing) and
• On business models (e.g. mobility as a service, vehicle sharing)
Automotive Industry participants must, therefore, reinvent themselves to find new ways of
creating and delivering value in the future.
3. Dynamic regulatory environment:
Major regulatory interventions, such as the accelerated transition from BS IV to BS VI,
adoption of electric vehicles, safety rules and stringent vehicle standards are leading to a shift in
vehicle technology. This is creating significant challenges, not only for automotive industry but
also in related sectors such as energy, oil & gas, transportation, and urban development.
4. Changing face of mobility infrastructure:
Development of smart infrastructure (e.g. smart cities), alternative modes of transportation
and the drive to enable electric vehicle charging infrastructure will change the face of mobility
infrastructure.
5.Global interconnectedness:
India is emerging as a priority market for global automotive companies. Indian companies
are globalising as well. Thriving in such an environment will need a clear strategy and the ability
to manage risks and build organization capability.
The ecosystem of the automobile industry:
Present Scenario of car dealerships in India:
Intense competition, changing regulations, and adoption of digital medium for customer
engagement are rapidly changing operating environment for dealerships
Challenges faced by dealership:
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Poorly defined and ineffective sales & service processes are often the root cause of substandard
dealer performance
Best practices have evolved across six areas in automotive dealerships to primarily establish
customer loyalty
1. Service marketing
Round the clock support:
• 24x7 workshop support – by a leading luxury car dealer in North India
• Replacement vehicles provided by dealers
• Dedicated customer care for customer queries –by a large car dealership in North India
Onsite support:
• Support vehicles on standby in any location – by a big dealer in North India
• Mobile vehicle servicing van capable of handling 29 after sales job – by a large
dealership company operates across multiple states
Eco friendly systems:
• Systems include water softening plant, forced ventilation in workshop – by a leading
dealer in South India
• Oil management system to reduce oil wastage– by a leading four-wheeler dealer
2.Customer engagement:
Infrastructure:
• Ambience and design of showrooms for enhanced engagement with customers – by a
leading motorcycle dealer in South
• Dedicated area for driver’s rest and entertainment – by a leading CV dealer in North
India
Product videos:
• Videos of upcoming product launches – by a leading car dealer in North India
• Customized product videos for different rural areas –leading car dealer in South India
3.Strategic planning of activities:
• Dealerships using industry analysis for planning their ATL/BTL activities – by a leading
four-wheeler dealer in North India
• Trained team specific to various product categories – by a leading SUV dealer
Digital showrooms:
• LED screens with real size images of vehicles– by a leading car dealer in South India
• Connected devices for real time flow of information – by a leading dealer who operates
in multiple states
Digital selling:
• Use of auto classified
• Listing products on local digital platforms - by a leading four-wheeler dealer in North
India.
4.Employee engagement:
Manpower development:
• Skill development programs
• Employee off site programs
• Participation in local events- by a leading four-wheeler dealer in North India
Containing attrition:
• Attractive reward programs
• Career planning & corporate culture
• Offering cross roles to widen skill sets - by a leading car dealer in Central India
HR effectiveness:
• Defined roles and responsibilities
• Support to increase productivity
• Transparency in goal setting and performance management
5.Network management
Improving operational efficiency:
• Designed a time motion study to improve operational efficiency of network workshops-
by a leading CV dealer in South India
Cross utilisation of best practices:
• Sharing of best practices across multiple dealerships
• Movement of manpower between dealerships for leveraging skill sets for performance
improvement
6.Value added services:
Loyalty schemes:
• Tie up with local retail chains & fuel stations for increasing customer loyalty
• Convenient and easy financial services to support sales
The recently concluded fiscal has emerged as a good year for auto industry coupled with
commercial vehicles touching a new high of over one million domestic sales and passenger
vehicle managing to be in green zone despite a high base.
This may tell the rollicking story at manufacturers but the other part of the sector like
retailing witnessed one of the most difficult years in the last one decade. The trade was faced
with increased investments in renovations and expansion projects, increasing manpower costs,
high cost of funding coupled with low levels of liquidity and large spread over models many of
them are hardly selling.
The growth is concentrated in only 20 percent of the total models on sale. The large capital
stuck owing to GST, excessive competition among dealerships are the major reasons that is
plaguing dealerships -the most important segment of the automobile value chain.
Adding to this is the lack of capacity to pass on costs to consumers due to weak customer
sentiment, incessant OEM demands to protect brand scale and identity, ever increasing customer
expectations with ever shortening product cycles, and worsening credit situation among banks,
you have the potential keg of disaster.
The auto dealership fraternity is of large 15000+ members and employing over 15,00,000
people. Contrast this with the fact that the top 4 largest dealers operating about 300 outlets in the
country employees more than Maruti Suzuki India - the largest passenger vehicle manufacturer
in the country with over 50 percent market share.
Future of dealership in India:
Diversifying risk, managing ownership transitions, implementing operational improvement
programs and realizing gains locked in post-sale customer engagement are some of the common
challenges faced by many dealerships. Poorly defined and ineffective sales & service processes
are often the root cause of substandard dealer performance. While high marketing expense, interest
cost, manpower cost and capital expenditure are identified as major challenges to dealership’s
growth and sustenance, focus on primary drivers while improving internal inefficiencies will help
improve overall dealership profitability.
Rationalizing and optimizing the costs by adopting ‘best in class’ systems & processes will
facilitate in realising higher profits. Implementing best practices from industry to establish
customer loyalty, identifying ‘value protection’ & ‘value enhancement’ factors across dealership
and adopting robust ‘Dealership Evaluation System’ will facilitate in achieving superior customer
experience going forward.
Multiple channels and formats will coexist to satisfy different market segments. It is expected to
have much more variation in channels and formats in a physical sense and more distinct
positionings in terms of the purchase and ownership experience. As we can see the natural
resources such as petrol and diesel are getting exhausted. Hence the companies will shift towards
electronic vehicles.
Dealerships will need to adopt a holistic approach that aligns their strategic plans, organization
structure and processes, people capabilities and business processes to drive and enable growth.
Strategic Growth:
Dealerships need to have an in-depth understanding of their OEM’s strategic
objectives in order to identify their own strategic thrust areas. That should form the basis for a
comprehensive growth strategy that charts out the segment specific growth requirements (that
includes adding new product lines or exiting from existing ones), strategic plans and support
required from the OEMs. In addition, dealerships may also need to look at diversification
opportunities with non-auto OEMs that would help offset the inherent cyclicity of the automotive
industry.
Dealerships need to have an in-depth understanding of their OEM’s strategic
objectives in order to identify their own strategic thrust areas. That should form the basis for a
comprehensive growth strategy that charts out the segment specific growth requirements (that
includes adding new product lines or exiting from existing ones), strategic plans and support
required from the OEMs. In addition, dealerships may also need to look at diversification
opportunities with non-auto OEMs that would help offset the inherent cyclicity of the automotive
industry.
The dealerships of electric vehicles would be growing in the coming years.
These are the effective ways to improve the performance of car dealers in India.
