Nikunj Sanghi: ‘The future of dealerships will be about a smaller footprint but a far more productive infrastructure.’

by Mayank Dhingra 30 Dec 2020


Veteran automobile dealer, Managing Director of JS4Wheel Motor, and Chairman of the Automotive Skills Development Council  (ASDC), speaks on how auto dealers have weathered the Covid-induced loss of sales, gearing up for new business models and digitisation.  

What have been the key challenges from a business perspective over the last six to eight months and how are you seeing the situation evolve?
Let us go back a little. Immediately after May 15 when the market really opened up, the challenges were multifaceted. There were extremely controlled measures in place to allow resumption of business operations, even imposing stringent authoritative actions if there was a Covid-positive case reported in any organisation. So, that was one challenge.

Secondly, opening up was partial with the demarcation of different containment zones within a city. Then there was a supply chain and logistics constraint. In all this scenario, the first one to open up as a segment was really the two-wheeler space, and we saw an upsurge in two-wheeler sales in the June-September period, with a lot of manufacturers even claiming reaching pre-Covid levels.

One of the reasons for this growth was the robust demand from rural markets which had no public transportation and an added restriction on shared mobility. To add as a contributory factor, the agricultural economy did not stop even in the peak of the Covidcrisis.

So, the rural economy sprung back in action earlier than the urban centres, but as these areasalso opened up, we saw revival of demand especially in entry-level passenger vehicles, as well as compact SUVs. As we kept progressing, we observed that passenger vehicle sales continued to pick up but somewhere the two-wheeler demand did taper off.

Now, as 2020 comes to a close, I would say that most of it was pent-up demand with high chances of the fourth quarter of FY2021 becoming slow and not typically being an easy one. This is simply owing to the resurgence of a second wave of the Covid-19 pandemic, implying in restrictions such as night curfews and lockdowns getting reimposed in many areas. These restrictions will definitely have an impact on demand.

What was the scenario of discounting during the festive season and also in December 2020?
With most of the OEMs across segments having felt a strong tremor to their bottom lines between April and June, as well as the supply chain in some key industrialstates such as Maharashtra, Gujarat and Tamil Nadu continuing to be impacted, the discounts and consumer schemes on new cars have been up to 25 percent lower during the festive season of 2020 compared to previous years. Moreover, with the supply chain constraints hampering a good inventory build-up at dealers, even the year-end discounts have been lower compared to the past.

What are your thoughts about an end-to-end online retail infrastructure?
I think it would not happen immediately simply because if we look at the most-developed markets like the US and Europe, almost 75-80 percent of the new purchase inquiries are being handled digitally. And people who are eventually coming to the showroom, have already completed most of their purchase journey online. For that to happen in India, it will take quite some time.

How is the dealership business going to transform given the greater advent of digitisation tools?
It’s not that car dealers will shut shop. The showrooms might become smaller and there will be various AR and VR interactive tools even enabling a virtual test drive of the vehicle. So, definitely the business model will change.

While there is a lot of discussion on having smaller showrooms, it will take some time to get this implemented on the ground, foremost because there are existing showrooms that are huge. So, there will be challenges regarding how to utilise the extra space that would be freed up. But, in the mid- to- long-term, we will definitely see infrastructure getting cut down, especially with the new showrooms that are meant to come up.

These will probably be smaller, for instance, a good car brand in a main metro couldwork out of 20x25 feet front showroom space. The future of dealership business is going to be about smaller footprint but a far more productive infrastructure.

Are digital-marketing spends taking precedence in your overall marketing expenditure to boost sales?
The proportion of inquiries coming in digitally are increasing by the day, leading to an increase in our budgets towards digital spends on a month-on-month basis. Most dealers are getting digital savvy with their own websites, Facebook and Instagram pages as well.

Have you had instances of executing completely digital vehicle transactions and delivered cars to customers at their doorsteps?
While we have booked cars digitally, in most cases we have seen that buying a car continues to remain a passion and holds high emotional value. Therefore, that sense of celebration of buying a vehicle either new or used continues in the minds of the customers.

Even though the booking and initial formalities are done online, about 20-25percent of the purchase journey is still done physically and it would likely remain so because financiers also need to fulfil their checks and balances for verification of the buyer’s credentials as well as certain documents need to be physically endorsed.

Do you see aftersales evolving after the Covid-19 pandemic is over?
With respect to aftersales, in the urban areas, people are preferring pick-up-and-drop facilities and there is a contactless service experience being offered by almost all OEMs. The same is not true in case of semi-urban areas where customers are still coming to the service centres themselves.

But, at the same time, there are various digital tools such as WhatsApp being utilised which can pre-book a slot at the service centre and relay all details to the service advisor, for the job card to be opened digitally without requiring the signaturesof the customer. Even in case of digital payments, one can see a definite trend in the rural markets where customers are becoming tech-savvy and using online payment tools for making contactless payments.

We are also seeing an uptick in doorstep service inquiries. While these initiatives are expensive proposition for dealers, they are undertaken from the perspective of customercentricity and serve the purpose of maintaining a long-term service with the customer.

Have service volumes picked up considerably or continue to be low?
With work from home being enforced by most organisations, the mileage being covered by vehicles has dropped significantly. So, for one set of customers, the servicing is being deferred unless absolutely essential, while in the other case, there has been a huge pent-up demand for preventive maintenance owing to the vehicles lying stationary for prolonged durations. In a nutshell, the service reporting trends are healthy and have almost reached pre-Covid levels, but at the same time, the amount spent per repair order has also come down drastically.