J D Power: Attractive vehicle range critical for dealers and automakers to succeed

May 31, 2013: Maruti Suzuki India and Toyota Kirloskar Motor have fared particularly well in the latest J D Power Asia Pacific 2013 India Dealer Satisfaction with Automotive Manufacturers Index (DSWAMI) Study released today. Dealer satisfaction levels for both manufacturers have improved from 2012. The 2013 Study is based on responses from 618 dealership general managers or dealer principles across key OEMs. The study was conducted in association with the Federation of Automobile Dealers Associations (FADA), and was fielded between February 2013 and April 2013.

“The success of Maruti Suzuki and Toyota not only demonstrates the automakers’ commitment to ensuring the dealers’ operations are viable, but it also their active support regarding such areas as training, marketing and sales activities,” said Mohit Arora, executive director, J D Power Asia Pacific.

On average, 88 percent of dealers believe that they definitely would continue to work with their automaker in two years. Among dealers in the top quartile of satisfaction, 98 percent expect to be working with the same automaker in 2015. In contrast, dealers who rate their experience with the automaker in the bottom quartile of satisfaction, only 72 percent expect to be working with the same nameplate in two years’ time.

Overall, one-in-five dealers in India expect to take a financial loss in 2013, more than double the number compared with 2012; only 44 percent of dealers expect to make a profit for the 2012-2013 financial year.

“Declining profitability for dealerships in India not only highlights the impact that the slowdown in new-vehicle sales has on the viability of a growing number of dealers, but also underlines the importance placed on automakers to provide adequate support to their respective networks” said Arora. Now in its third year, the study measures dealer satisfaction with vehicle manufacturers or importers in India and identifies dealer attitudes regarding the automotive retail business.

The study provides feedback on how dealers view their relationship with automakers, the outlook on their financial viability and identifies areas for improvement. In particular, with the slowdown in India’s GDP growth and decline in new-vehicle sales, the study is able to provide automakers with important information on how best to assist dealers in achieving their overall business objectives.

In 2013, the largest decline in dealer satisfaction is in parts operations, with notable brand level declines around the prompt delivery of parts and ease of ordering parts. “This highlights the need for some automakers to further support dealers with an improved and more efficient supply chain,” said Arora “Improving the speed of parts delivery not only allows for work orders to be handled more efficiently, but also ensures customers are not troubled by unexpected delays or extended wait times.”

Contemporary model line-up is key
An attractive range of vehicles remains critical for both dealers and automakers to succeed in any market. The study shows a large variance in dealers’ opinions on the competitiveness of their brand’s model line-up. On average, 82 percent of dealers indicate their brand provides a model range that can effectively compete in the highly contested Indian auto market. However, fewer than 65 percent of dealers for some of the volume brands indicate the same.

“With changes in customer preferences, the industry needs to adapt by providing a contemporary line-up across the main and niche segments,” said Arora. “The importance for both automakers and dealers in the market is the need to increase customer traffic in the showrooms with an attractive model range.”
The study finds that it is important for dealers to diversify their revenue base in order to mitigate any sudden decreases in their income and protect their viability during a slowdown in new-vehicle sales. Dealers that increase their share of revenue on aftersales maintenance and repair work— as well as promote other parts of their business, such as finance and insurance, spare parts and accessories and used-vehicles — can better spread their risk. The study finds that the main revenue sources for dealerships are service (29 percent), new-vehicle sales (28 percent) and spare parts (14 percent).

SHOBHA MATHUR