Automobile dealers expect weak earnings in FY19: Report

More than one-fifth of automotive dealers in the country expect reduced earnings in the year ended March 2019 over a year-ago period amid the industry reporting some 5 per cent growth in vehicle sales during the period, the report said Friday.

The domestic automotive industry saw a marginal increase of 5.1 per cent at 26,267,783 units in the financial year ended March 2019 as compared to 24,961,312 units sold in FY18, as per industry body SIAM.

The industry produced a total 30,915,420 vehicles including passenger and commercial vehicles, three and two wheelers and quadricycles in April-March 2019 as against 29,094,447 units in the same period of 2017-18, registering a growth of 6.26 per cent.

"More than one-fifth population (21 per cent) of dealers across the three automotive segments --passenger vehicle, commercial vehicle and two-wheeler -- expect their financial performance to be poorer in the fiscal year ended March 2019 compared with FY18," according JD Power- FADA India Dealer Satisfaction with Automotive Manufacturers Index (DSWAMI) StudySM, released Friday.

The study was conducted by JD Power in partnership with Federation of Automobile Dealers Association (FADA).

There are around 15,000 automobile dealers pan-India, as per FADA.

According to study, among those who expect a poorer performance this year, 71 per cent said that they did not achieve their revenue target for the year.

"The automotive industry, especially the passenger vehicle and two-wheeler segments, are facing serious headwinds due to several external challenges on the revenue side," said Kaustav Roy, director and country head, India, JD Power.

"Additionally, an increase in the cost of doing business have also affected the dealers outlook and financial performance.

Strategic use of the various business levers, with a strong focus on customer retention, hold the key to long-term sustainability," he added.

Dealership business is facing its toughest challenges in recent times and the entire business model needs an overhaul to keep up with the changing dynamics of our trade, said Ashish Harsharaj Kale, F A D A President.

"We are hopeful that the findings of the survey will act as a beacon for the entire automotive eco-system, leading towards a healthier business environment for the industry, especially for the automotive dealer fraternity at large," he said.

Online purchase of vehicles is seen as an important future trend by almost one-third (31 per cent) of all dealers across the three segments, as per the study, indicating that digitalisation will lead the way.

In addition, as many as 43 per cent of dealers believed that investment in digitalisation is likely to bring about a reduction in manpower costs for their business.

Besides, the study also suggested that the dealers are looking for more collaboration as 10 per cent of the respondents felt that it was not easy to do business with their original equipment manufacturer (OEM).

These dealers have satisfaction scores that are, on average, 247 points (on a 1000-point scale) lower than those who find it easy to do business with their OEMs, it said.

The study also found that on average, as many as 85 per cent of dealers believed that they definitely will continue to work with their automaker for the next two years.