Dealers want more from Indian OEMs

JD Power's innagural dealer satisfaction survey has interesting findings

Autocar Pro News DeskBy Autocar Pro News Desk calendar 02 May 2011 Views icon6463 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Dealers want more from Indian OEMs
In 2010, Nissan Motor India and Volkswagen India were some of the more aggressive players setting up new dealerships at a scorching place to reach out to new buyers outside of the major metros.

Setting up a dealership is not easy. Apart from finding dealer principals with the requisite financial muscle as well as good reputation, the increase in real estate prices and other overheads add to start-up costs.

This has, in no way, dampened the enthusiasm of new players in the dealer segment. However, hiring and retaining personnel is already a major problem and will continue well into the near future.

Whether it is setting up a dealer point or a new sales channel, the need of the hour is out-of-the-box thinking. Last month, in a first of its kind, Tata Motors displayed the Nano at select outlets of the Big Bazaar retail chain.

Volkswagen India has signed on as the sponsor for two seasons of the popular Indian Premier League cricket tournament. Likewise, companies which want to increase their market share as well as mindshare have to be constantly on their toes.

Autocar Professional sent out a comprehensive questionnaire to over 25 OEMs to find out how they are tackling the challenges of selling their vehicles in one of the world’s fastest growing markets. The answers of the companies which responded appear below:

TATA MOTORS

Tata Motors has increased its dealer network by 26 percent over the last five years. At present, it has 254 dealers across 194 cities.

When establishing a dealership, the company says it takes into account the following parameters: the potential of the town, number of existing dealerships, the expected volumes from specific products, dealer viability and competition. Moreover, the company feels that the key differentiators of the company’s dealerships are internal growth opportunities, a wide range of cars and an open work culture. As a result, the company has claimed that its attrition rate is just two percent per annum.

As far as the split of dealerships across the country, Tata Motors has said 13 percent are located in metros, 19 percent in Tier 1, 15 percent in Tier 2 and 52 percent in Tier 3 and rural markets. The rate of expansion has been the same in the last two to three years.

Since every dealership is handled by a territory sales manager and a customer support manager, company officials visit dealerships twice or thrice a week. Dealerships based in the four metros are visited daily by a company official.

As far as its dealer profile is concerned, less than 10 percent of the dealers operate authorised dealerships for more than one brand. As regards their profitability compared to other business options, and with more automotive OE players entering the market providing more franchise options, a key challenge is handling the rising costs of real estate in India.

HONDA SIEL CARS

Despite a recent announcement about trimming production by 50 percent in India in the wake of the March 2011 earthquake and tsunami in Japan and the difficulties faced by suppliers to keep parts supplies on time, Honda Siel Cars India (HSCI) plans to boost its sales by expanding its dealer network.

“We have aggressive expansion plans for this year and are looking forward to expanding our footprint by increasing the base to 150 outlets in 91 cities,” a company spokesperson told Autocar Professional.

At present, HSCI has a network of 125 dealers across 77 cities. “Dealers play a crucial role for the OEMs, providing customers with an enhanced purchase experience along with best after sales. They are the face of the company for customers and public in general," said the spokesperson.

FORD INDIA

Ford India recently introduced a new retail concept to promote its new Fiesta saloon. The company has launched a digitally interactive Fiesta Café, believed to be a first in the Asia-Pacific region for Ford Motor Company. The Fiesta Café is expected to gauge customer interest while showcasing Ford’s new technologies in the saloon so that the next level of retail at the dealership outlet, can be rendered smoother, said executive director – marketing, sales and service, Nigel Wark.

The company’s retail strategy has received a major boost as a result of the launch of the Figo in March 2010. Interestingly, Ford even established a record of opening 28 dealerships in a single day in February 2010, which led to good sales of the Figo. At present, Ford has 170 dealers in 100 cities with the company gunning for more as its volumes and customers grow.

The dealer-OE success story primarily revolves around a mature relationship maintained between the duo. "About 50 percent of them have struck relations in the past two-years and are relatively new,” says Wark. Building a team of strong dealers was particularly significant for Ford’s entry into the volume segment with the Figo, so the company opened dealerships in Tier 2 and 3 cities to tap the large customer base.

Like other vehicle manufacturers, Ford India has put in place a number of processes to keep its dealers abreast of evolving Ford technologies that encompass leadership training, service and business management sessions.

Wark says that Ford earmarks different budgets for each relationship building exercise in the dealer and service network that include dealer development, training, competency building and branding initiatives at the showroom as well as public relations exercises.

"Our dealers in India are in line with global standards," elaborates Wark but admits that happy dealers predominate in mature markets. For instance, in North America where Ford has its roots, it is one big family with a long-term relationship. But he adds that the dealer OE relationships are also strong in fast developing economies where quality, capability and good business exists. "Finally the bottomline is profitability and good business for both dealers and OEs," says Wark.

GENERAL MOTORS INDIA

General Motors India is mulling plans to invest in Data Marts. The Data Mart is a data bank wherein GM has access to all data of its dealerships pertaining to vehicle inventory, spare parts, service records, enquiry position, conversion position, order position and details of pending orders. "We believe that a satisfied and motivated retail partner is crucial for creating 'Customers for Life'. As part of GMI's long-term strategy, it has been maintaining a cordial relationship with them so that an environment of mutual support and trust with our retailer partners exists," says vice-president, P Balendran.

Ensuring the financial stability of authorised dealers, frequent visits from field staff, sales and marketing support to resolve any queries or concerns are some of the ways the company motivates its dealer network, a spokesman said.

In fact, the first Dealer Satisfaction Survey with Vehicle Manufacturers conducted by J D Power has rated Chevrolet second among equals in India. GM’s recent internal Dealer Satisfaction Index has also notched a high overall score of 76 against the targeted sixty-three.

"This is a reflection of strong bonding with our dealer principals," says Balendran.

At present, GM India has 235 sales points and an equal number of service outlets on board. Its plans are to put in place at least 300 sales points and an equal number of service outlets by the end of this year. But Balendran clarifies that there is always scope for improvement in any business. "To further strengthen our dealership performance, we follow a local version of our global programme called 'GM Difference’ which is known as ‘Project Lagaan’ in India’. Project Lagaan involves implementation of quality processes at all dealerships, thereby ensuring customer satisfaction.

GMI is also pushing the reach of its network especially service outlets to gain customer confidence. While citing dealers as brand ambassadors, Balendran says both GM and dealers are equally responsible for the company’s high performance.

To be considered as a partner in the true sense, GM has spearheaded some initiatives like appointing a Franchise Operating Team, holding quarterly Retailer Business Plan meetings and periodic reviews.

"Our supply chain is streamlined to ensure that there is minimal back order on vehicle or parts supply. We have also opened additional area offices and placed field staff at other key markets to ensure better reach to dealers," adds Balendran.

The company’s sales and aftersales field staff monitor and coach dealers on improving processes to ensure customer satisfaction. Warranty claim settlement processes are also clearly defined. Training is given both on technical and non-technical issues to develop manpower skills at dealerships.

All these initiatives have increased customer loyalty at corporate showrooms as well as employee retention at workshops. Balendran says that sales have doubled for the company in the last two years, along with the awards.

VOLKSWAGEN INDIA

Volkswagen India’s ad blitz has been a key part of its market strategy. The company has 71 dealerships in 57 cities. In appointing a dealer, the carmaker lays emphasis on the dealer principal, his cultural fit to represent the VW brand, management style, business acumen, preferably automotive experience, and inclination towards customer service, the company says.

Financial ability to invest in infrastructure, capabilities to raise working capital and have strategically located facilities are also important factors considered while appointing a Volkswagen dealer. Key differentiators of its dealer network are quick start-up and high degree of standardisation. Volkswagen India has a relatively young network, established over the last three years and hence the attrition rate is insignificant, the company claims.

Since its entry into India, Volkswagen has established its network primarily in metros, Tier 1 and 2 cities. However, the expansion is aggressive and the company is now entering into Tier 3 cities like Gorakhpur, Asansol, Kannur, Salem, Satara, Bharuch and Bhatinda.

At VW India, the dealer development team is responsible for infrastructure creation and establishment of systems. Operations are handled by the sales and aftersales team who visit dealerships frequently. Seventy-five percent of its dealers have more than one auto brand.

As regards the future of automotive retailing, in Delhi, Mumbai and Bangalore, the scenario going forward will change soon as property prices are very high. VW India says customers are reluctant to drive long distances, through traffic snarls, to visit showrooms. Therefore, these cities will witness boutique showrooms in malls where the brand can be experienced with one or two cars kept on display and test drives offered at these locations.

The challenges of setting up a dealership necessitates major infrastructure for servicing, parking and stocking. In expanding dealership network, which is a long lead time process, a lot of time is spent securing strategic sites, converting them into brand-specific facilities. The delay is attributed to complicated land dealings, site mobilisation and conventional construction methodology. Prefab structures take lesser time. However, investors are inclined towards RCC structures to exploit the floor space index. In Tier 2 and 3 cities, getting investors to match brand needs in terms of profile, cultural fit is a challenge.

Considering the lead time in construction, VW India has introduced an innovative concept of ‘Quick Start Portable Facility’. This is a modular steel fabricated structure which is transported to the market and assembled to create selling and servicing capacities. A permanent facility is built alongside while business is run from the modular facility. When the permanent structure is ready, business is relocated to new facility; the modular facility is dissembled and transported to another market. Volkswagen started business from such facilities in Raipur, Madurai and Meerut.

In 2007, VW India entered India with one car, the Passat. At the time, the strategy was to set decent outlets, get started, establish the brand and then to expand into bigger facilities. Now after covering metros and major markets, the company will spread its reach into smaller markets with smaller retail formats to suit the business needs.

VW India's retail philosophy is based on developing dealer groups within the family which would commit more personal involvement and resources. It says the future of automotive retailing lies with the groups who could transform themselves into corporate bodies instead of remaining as mom-and- pop shops.

In setting up a dealership, VW India’s first principle is ‘Put the food where the mouth is’. Primarily, the network is set up where the market exists in the form of population, economy and purchasing power, and the propensity to buy. A lot of attention is spent on building, selling and servicing capacities in those markets. Recent rapid economic development and industrialisation has turned small towns in India into emerging markets for carmakers. Moreover, the real estate boom has been prime mover in these markets. Hence, it is imperative for a dealer development team to identify such markets and establish the brand presence there. The fast-growing towns of Rohtak Hissar, Haldwani, and Siliguri are such cases. HYUNDAI MOTOR INDIA

Hyundai Motor India has 321 dealerships across 225 different locations. By the end of this year, it will have 340 dealerships across India. The number of dealerships have more than doubled in the last five years. For Hyundai, the key parameters in setting up a dealership include customer-oriented approach, financial soundness of dealer and ideally located infrastructure.

The key differentiator at its dealerships, says the company, is the quality of service provided. Dealerships are manned by trained staff who have been carefully selected. In addition, most dealerships are one-stop shops for finance, exchange, accessories and of course service and spares, after purchase. Dealerships are ideally located so they are easy to access with valet parking facility. Inside, they are spacious and have facilities for watching product-related DVDs and detailed interaction with showroom staff. There is also a play area for kids. So efforts are made to ensure that it is indeed a happy and memorable buying experience.

HMIL is strongly focusing on rural areas which hold a strong potential for growth. HMIL has 239 dealerships in semi-urban rural areas. In addition to this, there are 300 touch points (sales executives and mobile vans) dedicated to the semi-urban and rural areas and this number will also go up to 1,000 by the end of this year. As regards the future, Hyundai says the trend of online sales of vehicles is gradually gaining acceptability by the customers. This trend might become popular with time.

MERCEDES-BENZ INDIA

Mercedes-Benz India has 59 touchpoints in 28 cities across the country. According to the company, it has over the past year seen a tremendous growth in upgradation of existing networks. It has set up shop in cities like Surat, Thiruvananthapuram, and Nagpur. The company, which recently started a second shift at its Chakan plant, says it will continue to expand aggressively in the future as well.

While appointing a new dealership, MBIL takes several factors into account. Like the potential of the city to sell a minimum volume required for a sustained period to justify the investment; the location of the dealership; the dealer’s industry reputation as well as social reputation, financial credibility, and availability of adequate space for setting up authorised service stations.

While most of its dealerships invest in infrastructure including land, MBIL contributes by providing corporate guidelines, corporate identity set-ups, and marketing collaterals.

Mercedes-Benz says its dealerships are lifestyle destination centres. They have drive-in valet service, a luxurious customer lounge, Cafe Mercedes along with a wide range of vehicles on display, accessories and wheel configurator, engaging audio-visual presentation, boutique collection and a special play area for children. MBIL believes its dealers’ 24X7 Road Side Assistance(RSA) Programme is one of the best in the industry. Some of the main highlights of the RSA are as following:

• Quick recovery of vehicle on a flat-bed truck by the nearest Mercedes dealer.

• A privileged pick up from the breakdown location.

• Provision of availing a premium stand-in vehicle as a substitute.

• Convenient air travel options.

• Arranging comfortable accommodation.

• Medical help in the event of an accident.

• Legal advice.

• Urgent message relay.

Initially, MBIL set up dealerships in metros and big cities. However, over the years it has set up service points in Tier 2 and 3 cities to cater to the customers. The company is further expanding its Tier 2 and Tier 3 facilities. The company has a dedicated network development team in charge of network expansion across the country. There is a well thought out, effective system and process in place regarding coordination with the dealer network. The team works with close coordination with the dealerships and frequently visits the dealership network. In addition, there are colleagues in sales and aftersales marketing department who are responsible for their markets and they spend a lot of time in overseeing the operations.

Among the main challenges that MBIL faces in expanding its dealerships is recruiting and retaining the right talent. “Though we have an effective training system in place to train the dealership personnel at par with MBIL standards and requirement, finding the right talent is a challenge,” a spokesperson said.

CARNATION AUTO

Carnation Auto Services has 24 Auto Solution Hubs across 15 cities, all company owned and operated. According to chairman and managing director, Jagdish Khattar, Carnation has been very aggressive in the first years. The 24 hubs were established between March 2009 and March 2011.

Carnation is now in consolidation mode for both processes and operations. It is also preparing itself for its second phase of growth which will be a combination of company-owned and operated hubs and franchises.

According to Khattar, when Carnation decides to go forward with a franchisee model, one quality it will look for in a prospective associate is the passion and interest that the person has in the model. Other prerequisites are resources and management capability.

The investment in the hubs varies with the size of the location and the offering at that particular hub. Some aspects remain standard, like equipment and civil work. Without the infrastructure, the investment is in the region of Rs 1-2 crore.

According to Khattar, the key differentiator of its network is its focus on customers for a gamut of offerings. “We can take care of multiple cars and diverse car needs of the customer,” he says. Most of Carnation’s hubs are in the metros but new hubs have also been set up in Karnal, Amritsar and Jalandar. At Carnation, regional managers are responsible to oversee detailed operations of the cluster of hubs.

Carnation is focusing on training and retraining of employees and making them competent on most makes and models. In terms of marketing strategies, Carnation is focusing on the catchment area of the hubs and hence using below-the-line activities to reach customers.

“Market dynamics will change in the future with customers wanting to explore with newer entrants which will be aggressive to make up for the time lost. The situation as of now is tilted towards a couple of manufacturers who have bulk of the market share. As the market share gets distributed between more manufacturers, a new format of sales will emerge that will be convenient for buyers," says Khattar.

The internet will play a key role in influencing and enabling car sales; the other could be sales through multi brand players. Khattar says customers will prefer going to places which showcase more than one brand of cars. Also, new standalone dealerships will have challenges to be viable as they will not have enough volumes with a view to bring down costs and hence multi-brand sales outlets/malls may emerge.

Manpower is one of the key challenges Carnation faces as also timely availability of spares. In addition, training the manpower to make them capable of handling multiple makes and models has been an area of focus.

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