Even as you are going through this story, an automotive dealership somewhere across India would be closing down its shutters, and the situation has been so scary that more than 500 outlets have gone out of business in the past few months.
The slowdown in auto is taking a heavy toll on ‘Dealership’ raising questions over the future of automotive retail in India with almost two outlets going out of business every week. According to industry veterans prolonged crisis in automotive has left many dealerships bleeding, while intense competition has led to abrupt closures across India.
While the menace has been spread evenly across in the past few months, Delhi is leading the closure with over 50 outlets going out of business, closely followed by Mumbai & Pune amongst the major metros, where dealer density too is maximum?
As per Atishay Jain Dealer principal of Nissan, VW, Kia, in Delhi NCR, auto retail is amongst the first sector to take a hit because of negative market sentiments. After IL&FS crisis in Sep-18, The NBFC too have become very cautious in their retail lending which is leading to additional sale loss. Specifically, for metros, increasing fleet penetration & rise of share mobility has caused a systemic shift in buying patterns of users, and we do not foresee any recovery anytime soon. We sincerely request our parent companies to support us in tackling huge inventories, increasing salary costs due to newer brands coming in, and managing current setups with high rentals.
These closures have affected the automotive retail as Delhi/NCR as well as Mumbai, which are the biggest automotive markets and generate more than a quarter of the 3.4 million cars and SUV sold across India. Passenger vehicle sales decline 17% in April, after growing 2.7% in FY19 & 8% in FY18.
Not just the smaller brands, but even well entrenched players like Maruti Suzuki and South Korean Hyundai Motors are facing dealer exodus in the past few months. Maruti Suzuki, the passenger car leader also operates the largest number of dealers and has close to 2200 retail outlets with another 300 under its NEXA premium channel. Industry insiders say both Maruti channels are under tremendous pressure.
But the worst affected are the smaller brands like Nissan, Audi, Tata Motors, FiatChrysler, Ford, Volkswagen, Renault & Czech Skoda Auto which despite less number of dealers across India are facing severe crisis of selling their cars across major markets.
The dealer body Federation of Automobile Dealers’ Association, the Apex Body has raised the flag on the crisis saying that rising cost of operations in metros is killing the retail format.
Commenting on industry performance, F A D A President, Ashish Kale said, “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. F A D A 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.”
It’s not just the slowing demand, severe liquidity and lack of skills & leadership in the sector is also affecting the automotive business. Companies pushing inventories is also raising the cost for dealers which are now stocking much more numbers coming from periodic new launches and fresh variants hitting the market.
The pinch of dealer community is also being felt by new entrants like South Korean KIA Motors, MG Motors of China and French carmaker Citroen who too face challenges in appointing new dealers. Industry sources say that many of the newly appointed dealers have returned their ‘Letter of Allotment’ on high investment projections and are totally avoiding entering automotive retail business.
Setting up a retail business is quite an expensive affair and investments for new dealership can go up to Rs 10-25 crore in metro cities, where owning the land is most expensive.
List of Major Dealerships Closed in Delhi/NCR:
Audi Delhi West
Raj Hyundai
Marketing Times Maruti Suzuki
Sterling Mahindra (4 outlets)
Audi Gurgaon & Central
Volkswagen Peeragarhi
Volkswagen Faridabad
Volkswagen Saket & Okhla
Ridhi Ford
Delight Honda
Hana Hyundai
Grace Toyota
Porsche Gurgaon
Renault West & Gurgaon
Pearl Honda Gurgaon
Nawab Motor Skoda Noida
Jai Skoda Peeraghari & Bikiji Cama
Treo Nissan
Toyota Lexus Gurgaon
Pahwa Ford Lajpat Nagar
