While Indian automobile industry had started opening up in early 80s with the entry of Suzuki, Toyota, Mazda, Mitsubishi, Honda, Yamaha in the form of joint ventures and technical tie-ups with Indian partners, the real thrust was provided by the liberalisation policies set in motion in 1990. 90s saw the advent of virtually all auto majors across the world into India. We had General Motors, Ford, Fiat, Honda, Peugeot, Mercedes and major component and systems manufacturers like Delphi and Visteon setting up their shops in India.

The era till 1990 was marked by shortages with the production of various categories of vehicles put together barely reaching 2 million mark and the exports never figuring in the manufacturers’ scheme of things. The shortages arose largely out of controls and ubiquitous licensing & regulation regime. The customers did not have much choice; the manufacturers and distribution network down the line had a captive market, which meant that they did not have to make any effort for marketing their products.

Much water has flowed the Ganges since 1990. The seller’s market has transformed into a buyer’s market. Today, the size of Indian automobile market is 9 million. The market is likely to double to 18 million in the next 5-6 years. The competition is the buzzword. The customer is at the centre of any marketing strategy chalked out by the manufacturers and their dealers.

The economic crisis faced by the country in 1990 proved to be a blessing in disguise. With a number of major international players joining the fray after the liberalised regime, the competition started hotting up and the Indian manufacturers and their channel partners were woken up from their deep slumber caused by the highly controlled economy. The Indian as well as foreign players started facing the heat while vying for their share in the pie. Thereafter began a mad scramble for chasing the rare commodity called the ‘customer’, who became the king and started demanding more attention. Manufacturers and, for that matter, automobile dealers could no longer afford to sit back and run their businesses the way they used to operate in the past.

With the developments taking place at an alarmingly fast pace, the automobile dealers find themselves in an unenviable position. There is a tremendous pressure on their viability and profitability because of rising expectations of the manufacturers on one hand and the customers on the other.

As in the case of other segments of automotive business, radical changes are sweeping the retail automotive trade too. Dealers jostle for the space not only with the dealers of other manufacturers but also with their fellow dealers within the same franchise. Fierce competition in the market place is leading to the shrinking margins.

Today, setting up an automobile dealership requires a huge investment due to the ever-increasing real estate prices and expectations of the manufacturers and the customers in terms of the architecture, construction, décor, ambience, infrastructure and facilities at the dealership showrooms and workshops. Simultaneously, operating costs are also skyrocketing due to greater marketing and manpower costs, further straining the viability of dealerships.

Another paradigm shift that has taken place in the retail automobile trade is the growing role of vehicle finance in the growth of automobile industry. It goes without saying that the easy availability of vehicle finance at competitive rates has made it easier for the people to own the vehicles. 65% of the 2-Wheelers, 85% of passenger cars and over 90% of commercial vehicles are financed today. The flipside of this development is the emergence of the clout of DMAs appointed by the banks and NBFCs in influencing the purchase decisions. These DMAs without investing much are intruding the territory of automobile dealers and giving the dealers a run for their money.

Retail automobile trade is learning fast to stand up to the challenge of changing paradigm and dynamics of automotive business. Gone are the days when automobile dealerships depended on the sales margins alone. While the threat of competition is getting intense by the day, new opportunities are opening up for the automobile dealerships. Insurance, finance, accessory sales and after-sales service and repair have become important components of a dealership revenue model.

In today’s context, there is a growing realisation that automobile dealerships’ role is not confined to mere sale and distribution of the vehicles as it used to be not long ago. With product differentiation in terms of features and technology getting blurred, the sales and after-sales experience at the dealerships and their workshops has become a major differentiator and decisive factor in providing a competitive edge and promoting a brand image. As such, the role of automobile dealerships as an important link in automotive business chain is more challenging than ever before. Phenomenal growth and consequent expansion of dealership network has created a situation where automobile dealerships have to contend with the competition not only from outside but also from within the same franchise. Therefore, they have to create a distinct service brand of their own to stay afloat in this highly competitive market.

In a dog-eat-dog scenario, it has become important for automobile dealers to keep their existing customers engaged, as various studies have revealed that it costs far less to retain an existing customer than to acquire a new one. E-connectivity has, therefore, come to assume an important role in reaching out to the existing customers and tapping the potential new customers.

In view of the shrinking margins, cost cutting through better utilisation of resources, performance-linked incentives, effective MIS, prudent inventory control and management, and adoption of automation & EDI is a key to acquiring a competitive edge.

In an ever-changing scenario, established management tools and techniques are fast losing their relevance. To stand up to the challenge of changing dynamics of automotive business, retail automobile trade can ill-afford to be bogged down by the past. The automobile dealers have always to be on their toes and geared to tackle the current and emerging challenges. Therefore, the importance of constant training & development of dealership personnel cannot be overemphasised.

Past trends and key economic indicators suggest that the Indian automotive industry is headed for a fast-laned growth, which should delight all of us in automotive business. However, managing growth has become a greater challenge. The tremendous growth has given rise to the environmental, safety and traffic management concerns. These concerns have, in turn, led to the rise of social interest groups and judicial intervention. Infrastructure inadequacy and variation and high level of taxes on motor vehicles at the State and local levels are the constant irritants. The uncertainty over international oil prices is always lurking at the back of our mind, as a heavy dose of increase in petroleum prices or an oil shock has the potential to put a spanner in the wheels of growth and spoil the party.

While the Government is doing its bit in developing the road infrastructure, the pace needs to be accelerated. Development of parking facilities, including multi-layer parking and automated parking systems, within the major cities also needs to be taken up with a sense of urgency. The taxes on motor vehicles at the central level have been rationalised from time to time. However, the State Governments, by raising taxes time and again, have sought to nullify the gains arising from the rationalisation of taxes at the central level.

All said and done, in spite of many such impediments, Indian automotive industry has stayed on course in the past and, I am sure, we shall stand up to the challenges confronting us on our way to growth and continue to forge ahead.