FADA President's Message November 2004
Keeping Pace with the Changing Scenario
Jayendra Kachalia, President
Dear friends,
Diwali marks the end of a long festive season in India. Hope, you would have had a lot of fun and joyous time during the festival season. Increased sales during the month-long festivities must have come as an icing on the cake.
The earlier apprehensions that the deficient monsoon and spiralling oil prices may slow down the economy, are turning out to be true. Mid-term Credit Policy Review by Reserve Bank of India has scaled down the GDP growth projection for the current fiscal to 6.0%-6.5% as against previous forecast of 6.5%-7.0%, hiked repo rate by 25bps effective 1st Nov.04 and revised its inflation forecast upward by 1.5% to 6.5%. A CII report also projects the GDP growth rate to be 6.5% during the year 2004-05.
The forecasts on GDP growth rate notwithstanding, the first seven months of the current financial year ending October 04 have witnessed a robust growth for the Indian automotive industry. The vehicle sales are growing and the auto industry is well into a two digit growth in line with the forecasts made by reputed think tanks and research houses like CRISIL, ICRA and NCAER (unlike in countries like USA and Japan where there is a hardly any growth visible).
All said and done, we, the automobile dealers, cannot afford to carry the baggage of past and to depend on sales margin alone in the current scenario in which discounts and freebies are the rule and not exception and the customer is the king. Market forces have brought in revolutionary changes in the dealership operations. The message loud and clear is that we must shed the passive habits and past practices. Automobile dealers have to be innovative and always on their toes to explore new vistas. We have to keep pace with changing needs of the customer and the society as a whole.
As aptly observed by Mr David Friedman, MD, Ford India, in the last issue and Mr Aditya Vij, President and MD, General Motors India, in this issue, the focus of dealers has to shift from selling products to selling services. The customer is the key in any business strategy today. Dealerships have to build up service brands of their own, particularly when product differentiation is getting blurred with the increasing international tie-ups and globalisation.
Mr Vij, in his article which appears elsewhere in this issue, has graphically illustrated the revenue model of today’s car dealerships, encompassing new vehicle sales, vehicle insurance, spare parts, repair & service, vehicle finance, extended warranty and used car division. He has driven home the message that there are opportunities galore for the dealerships to tap.
You will find from the graphic illustration that a car dealership today can expect to generate hardly a 20% revenue from new vehicle sales. Rest has to come from the other allied activities that one needs to focus on and convert into definite revenue streams.
Automobile dealerships must draw upon these valuable tips and ideas to sustain viability and profitability in this fiercely competitive environment and changing market scenario.
I am really grateful to both, Mr David Friedman and Mr Aditya Vij who have tons of experience in automotive business at international level for sharing their thoughts and ideas with us through the medium of FADA Journal. I am also grateful to industry leaders no less than Mr R Seshasayee, Mr Anand Mahindra, Mr Rajiv Bajaj, Mr Brijmohan Lall ji and Mr Jagdish Khattar, who have been kind enough to give us the benefit of their valuable thoughts and vision through their columns in this journal in the recent past. They have left with us a lot of food for thought.
Even for the sake of repetition and for our benefit, I take this opportunity once again to quote what industry leaders have to say on customer service & owning customer for life.
Mr. Jagdish Khattar |
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Reasearch has shown that cost of acquiring a new customer is much higher than the cost of servicing an existing one. |
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Purchase decision in automobiles is driven by positive references or “word –of- mouth” |
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Effectiveness of an “Opportunity Share” strategy versus a “Market Share” strategy. |
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Mr. Brij Mohan Lall ji |
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CRM- The correct perspective is to look at the lifetime ownership value of a customer. As per an estimate by Deloitte & Touche Auditing firm –A 5% increase in the customer retention could generate a 25% improvement in operating profit. |
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FADA, as an apex body of automobile dealers, is alive to the changes taking place at rapid pace in the automotive business. Of the major initiatives taken by FADA is the system audit of select dealerships by a consulting firm, which aims at streamlining operating systems, cutting costs and improving efficiencies. The study will recommend corrective measures with a view to ensuring sustainable growth & maximizing the returns from dealership operations. On-going training programme and learning by sharing of experiences and ideas through the media of Group 10/20, regional meetings and open house sessions are some of the other measures initiated by FADA aimed at equipping the automobile dealers to stand up to the challenges arising from changing paradigm of automotive business.
In view of the growing importance of workshop operations and services in automotive business in the current scenario, FADA has happily agreed to associate, on being approached by various organizations, with their forthcoming exhibitions/trade fairs focusing on after-market Automotive Care Products and Services.
One such exhibition – “Auto Serve 2004” – India’s 1st B2B Event on Automotive Care, Maintenance Service, Parts & Garage Equipments, is organized by CII between December 4-6, 2004 at Chennai Trade Centre, Nandambakkam, Chennai. Auto Serve 2004 seeks to showcase the latest in automotive services, vehicle care, collision repair, vehicle diagnostic, servicing & maintenance, workshop equipments and garage tools.
A similar Exposition is being held by UNIDO at Nehru Convention Centre Worli, Mumbai from 16th to 18th December 2004, which will have on display hand tools & garage tools by various manufacturers.
Yet another show “partmart & AUTOCARE” is being organized jointly by ACMA and CII from 9th to 12th February 2005 at New Delhi.
It will be advisable for FADA members to visit these shows to update themselves on the Automotive Aftermarket & Services.
I am pleased to inform that a FADA delegation, comprising 10-15 council members is all set to leave for China to visit Automechanika starting 2nd December 2004 at Shanghai. Besides the show, the delegation is also likely to visit GM plant and a couple of automobile dealerships there to learn about the Chinese automobile market.
Kindly feel free to send your suggestions and views to strengthen further the activities of FADA.
With best wishes,
Yours sincerely,
Jayendra Kachalia
President
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