Maruti Suzuki, MG Motor only firms to offer 5% average fixed dealer margins
Currently, only Maruti Suzuki India and MG Motors offer average dealer margins of five percent in the mass segment, which is less than 7 percent of the selling price that automotive dealers demand from automakers.
According to a recent survey by the Federation of Automobile Dealers Association (FADA), average fixed dealer margins in India are much lower (8-10%) than countries like the US; 13-14 percent (9-11 percent) in China, France, Germany, Italy, Spain, Belgium, and Denmark; 12-14% in South Africa and 6-8% in the UK.
According to the study, among the major volume payers in the Mass PV segment, Maruti Suzuki India has an average dealer margin of 5.07% across all models; Hyundai Motor India up 4.38%; Tata Motors up 3.74%; Mahindra & Mahindra 3.75%, Honda 3.41%, Toyota Kirloskar Motor 2.32%, Kia Motor 4.43% and MG Motor India 5.22%.
FADA recently wrote to Siam on a two-year letter from the automaker to increase its fixed dealer margin to 7 percent of sales. When contacted for comment, FADA President Ashish Harsharaj Kale said, “We are very small globally, or 4 to 5 percent in India. Considering the amount of input provided by a dealership in four to five years.”
He said dealers have expanded infrastructure and increased business costs based on OEM inputs. “Over time, profits have declined. Five (five) years ago, these (margins) were confusing (but not anymore).”
According to the FADA study, Maruti Suzuki (MSI) offers its dealers a fixed margin of fewer than four lakhs between 5.58% and 6.05%, while Renault India offers 4.32% to 4.33%.
MSI dealer margins range from 2.9 percent to 5.68 percent for vehicles ranging from Rs 4 lakh to Rs 6 lakh, while rivals Hyundai Motor India have 4.22 percent to 5.57 percent. Mahindra & Mahindra (M&M) dealer margins ranged from 4.35% to 4.54% and Tata Motors 3.59% to 4.42%.
MSI dealer margins were 4.43 percent to 6.32 percent, Hyundai 4.55 percent to 5.52 percent, and M&M 3.93 to 4.18 percent. Tata Motors is up from 3.02 percent to 4.46 percent.
MSI’s regular dealer margins of Rs 8 lakh to Rs 12 lakh are 3.79% to 5.84%, Hyundai 3.28% to 5.24%, M&M 2.75% to 3.91%, Tata Motors to 3.08% and 4.44%; Kia Motors ranged from 2.47% to 5.15%.
Hyundai fixed dealer margins for vehicles ranging from Rs 15 lakh to Rs 20 lakh were up 3.93% to 4.39%, M&M 3.55-3.92%, Tata Motors 3.75% to 3.9% and Mia Motors 4.7-5.74%.
“We have already begun discussions with the Dealer Councils of Original Equipment Manufacturers (OEMs) to get dealers to review the margins,” Kale said. The idea behind finding a high fixed dealer margin is to help them in difficult times, especially due to the coronavirus pandemic.
“Now with the coronavirus, the kind of drops we see are expected to drop 1-2 percent of GDP and Siam 35 percent (of sales). Now the projections are for negative GDP, so what’s going on?”
“Therefore, we thought the joint effort to reduce costs and increase margins would be good for this year, and then moving forward will increase the survival of our business,” he said.