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Car Dealers List Out Steps To Improve Business Viability
The section most hurt by dropping car sales are dealerships. A decline in sales, the highest since 1976, has meant that only 42 percent of dealers in India would be profitable, as per a recent J.D. Power study.
The drop in sales has been an on-going process, with sales having dropped by 10 percent in the last three years.
Adding to the burden are increasing cost of manpower, interest costs and rentals for showrooms and service centres. In the end, only the top 3 percent of dealers in the country will post a profit margin of 3 percent, reports ET.
In view of car dealership business becoming less financially viable, the Federation of Automotive Dealers Association commissioned a study on dealer viability through consultant firm Frost & Sullivan.
Titled "Assessing Industry Best Practices will help both OEM's and Dealers to Develop Business Viability", the study came up with a few suggestions for dealers and manufacturers, implementing which will ensure profitability, according to Frost & Sullivan.
After interacting with top 60 dealerships in six Indian cities and senior management of leading car companies, the study came with the following four suggestions:
- Managing vehicle inventory efficiently - Maintain stock of 20-30 days only
- Constantly monitoring dealers' business health - Conducting monthly and quarterly reviews with the dealers
- Monitoring network expansion - Appoint new dealers only after having prior discussion with existing dealers and offer existing dealer to expand first.
- Offering viability support during business slowdown - Increasing sales margins, offer interest free credit for 28 days etc,.
The study says that by efficient inventory management alone can improve profit margin by 1 percent and implement all four suggestions would double the existing average figure of 2.5-3 percent.
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