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BW Businessworld

Is It All Doom And Gloom At Car Dealership?

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As market data clearly shows over the last months, key economic indicators for India have made for ever depressing reading. The slow down in G DP growth, industrial pr oduction (IP) and also slip in the value of the rupee against the US dollar have made observers jittery about India’s future growth prospects. While, expected increasing pressure on inflation from higher fuel costs is expected to negatively impact household expenses. Therefore, it is not surprising that the automotive industry is also feeling the pressure, with year-on-year new vehicles sales down 12 per cent in May 1, as fewer consumers visit their local showroom to buy a new-vehicle.

Recently, we asked over 600 dealers across India about their business and how satisfied they were with the support they were receiving from the manufacturer. The results from the 2013 J.D. Power Dealer Satisfaction with Automotive Index study, or DSWAMI for short, showed that one-in-five dealers expected to make a loss, up from 9 per cent, in the financial year 2012-13 and only 44 per cent of dealers anticipated to make a profit, down from 62 per cent the previous year.

Although the results of the study make for some sobering reading for a number of OEMs, it also highlights how important the partnership between the manufacturer and the dealer is on improving both positions.

Indeed, not all dealers are struggling in the market, and results from the study showed that Toyota and Maruti Suzuki were notable for the high ratings their dealers gave on measures around t he support and concern provided by the OEMs on their business requirements. Importantly, the majority of the highly satisfied dealers referred to a strong partnership existing among themselves and the brands they represent.

Fundamental for dealers’ viability is the ability to increase footfall and sales in th e showroom, as well as promoting increased loyalty for their service business. Notable in the finding is that after-sales and the spare parts represent more than 40 per cent of the revenue for dealers and new car sales account for only 28 per cent on average. Therefore, ensuring customers repeatedly come back to the dealership for service is a critical part of the dealers’ revenue stream. Brands that both support and encourage their dealers to provide excellent after-sales care, and support them with operational efficiencies in the supply chain, will be in a better position to secure future business for their network.

Moreover, those automakers who work closely with their dealers to make the service visit more enjoyable also benefit greatly in terms of improved customer loyalty. From the most recent J. D. Power In dia Customer Satisfaction Index study, 93 per cent of after-sales customers who reported the highest level of satisfaction (in the upper quartile of satisfaction) said they woul d definitely revisit the same dealer for both service work during and post warranty coverage. This was in stark contrast to less than half of customers wh o reported satisfaction levels in the lower quartile reporting similar intentions.

However, for an automotive brand to fully succeed in India and help maintain the viability of their dealer network they have to match the ever-changing customer requirements in their product lines. The DSWAMI results show over 85 per cent of dealers, including those of Maruti Suzuki, Hyundai, Mahindra and Toyota report they have the right model line-up to compete in the market, but for some notable volume players this is not the case. For two key volume brands, less than 65 per cent of their dealers agree that they have right product line-up to compete effectively in the market.

Honda, for example, whose dealers score the brand below the study average has a relatively limited product range. While, Tata despite having a st rong product range on “paper” arguably suffers from a relatively dated product line-up. This further underlines the importance the refreshed and new models, including Hond a’s first diesel model in India, the Amaze, have in promoting increased sales.

Moreover, from J.D. Power’s analysis on new-vehicle shoppers, the top three rejection reasons are related to high fuel consumption, the purchase price and thirdly the exterior design. This also underlines the need for manufactures to support their dealers with strong value propositions - that cross the whole model range - and are complemented with designs that match Indian consumer preferences.
Notable with changing lifestyles and aspirations, customers are becoming more discerning about the products they want, be it with the quality, ownership costs and styling of the vehicles offered. Strong sales performance of the Renault Duster, Maruti Ertiga, Mahindra XUV500, alongside the growing number of other smaller SUV models entering the India market highlights the importance that Indian buyers place on new vehicle segments. While, new entrants like Datsun, expected to introduce a range of new models in 2014 shows a growing tendency amongst foreign OEMs to focus on product designs more attuned to the needs of consumers in India.

Therefore, in a challenging sales environment it is important that OEMs work closely with their dealer network in order to increase service retention and deliver a product line-up that matches the needs and aspirations of Indian customers. Brands which have been able to support their network on these areas, have been given the thumbs-up by their dealers in the 2013 DWSAMI study and show that for some dealers hostile market conditions can be overcome through proactive planning and greater customer centricity.

The author is Executive Director, J.D. Power Asia Pacific