The Race To Reach The Indian Auto Consumer

If youre buying a car in the year 2005, you will probably follow one of the three options:

Log on to the Internet network through your home computer, visit the sales catalogues/websites offering complete information on the brands, models, specifications, including options available with 3D graphics. Once you have selected the car of your choice, you would then choose the payment options or authorise your bank for payment. That would ensure that the order is registered with the company. And in less than a day, a gleaming new car might be delivered under your porch.

If youre not a techie, you could ask a car salesman to call on you. He will show you all the models and their features through his laptop computer screen. You can choose the engine, gearbox, body colour. the complimentary interior trim and all the fittings. He will also give you a simulated drive on various road conditions on the car you have configured. Once the payment terms are agreed upon, the order is logged directly with the company.

 

Or you can walk into one of the auto plazas/supermarket to check out the latest models across brands (Ford/GM/Telco/Maruti/Daewoo/Hyundai) or vehicle categories(compacts/ sedans/ SUVs/MPVs). Through a touch screen you can access all information, drive the models under consideration and choose the vehicle you want to purchase. A friendly sales counsellor will take care of all your requirements in terms of finance, old car, service packages and insurance, registration formalities. He will make sure that a defect free car of your chosen configuration, is delivered at your door step on the promised date along with all the documents. Apart from explaining all the car features, functions, driving and maintenance tips, he will even keep a tab on all your payment due dates concerning insurance, tax, loan, etc. Not only will he get your car serviced and delivered at your door step, on scheduled intervals or repaired, when required.

No, this isnt wishful thinking. Its a glimpse into the inevitable future. With the advent of the global auto majors, a quiet revolution has already started in the Indian automobile market place. Already, dealerships are being spruced up to offer the right ambience with distinct corporate identity. New entrants are seeking innovative means to reach out to Indian consumers. The manufacturers will ultimately take on the responsibility of ensuring a hassle-free car ownership experience for consumers and sales will shed its commercial garb to don a relationship robe.

Earlier, the emphasis was on expansion of the number of outlets and cities/ towns covered, through dealers points offering sales and service. In the regulated market of the 70's and 80's, where the products were mainly rationed, all the major automobile companies of India did not feel the need to lay emphasis on sales & service. Companies like Hindustan Motors, Premier Automobiles Ltd, and Telco followed a simple channel structure of a few select exclusive dealerships, with defined areas of business; a system where the companies and the dealers maximised their profits and the consumer was expected to fend for himself.

In the post-liberalisation environment of the 90's, the customer is well-aware of the fact that the choice squarely rests with him. Every company aspiring to gain a slice of the market, is talking about customer satisfaction /customer care and going all out to put the requisite infrastructure in place. As a result, the sales, service and distribution systems have gained a new importance as a competitive differentiator and a vital tool to establish bridges with the customer.

The developed markets of the West and East have different channel structures and each has been successful in its own unique market conditions. The auto manufacturers of USA and Europe mainly use a channel similar to that of India, i.e. company-dealer-customer, where the company-appointed dealers provide both sales and service. These dealer outlets, which mainly started as individual enterprises have gone through a process of evolution, with newer concepts emerging like large corporate dealer chains, and glitzy auto-plazas retailing a large variety of vehicles either across segments or brands and car supermarkets offering new and used cars.

The Japanese and Korean auto majors mainly rely on direct sales through salesman and company-owned outlets. The emphasis is more on a direct transaction, based on an understanding of the customer's needs, maintaining a long term relationship and brand loyalty. The Indian market, which already has players from all the three continents, is witnessing a varied approach in establishing a strong sales, service and distribution base.

Whats been the response from the established players? Maruti and Telco have adopted a policy of setting up competitive dealerships in the same cities/towns, appointing a large number of authorised service centres. For instance, Maruti already has 200 dealers and 1000 Maruti Authorised Service Centres, while Telco has 100 dealers and 450 authorised service centres). The introduction of mobile service vehicles is meant to make service more easily accessible. The accent is on more on extended coverage and a greater thrust on sales. However, customer service still remains a fancy slogan and the customer visits the dealer/service centres more out of compulsion than choice, wary of the unfriendly attitude, high billings and the long time taken. Neither have the sales process improved in terms of attention to customers, product information/ demonstration, pre-delivery inspection nor quality of free-services. The manufacturers (represented by dealers in front of the customer) still tries to give as little as possible in terms of warranties or service, while a tenacious customer has to either fight for his due or put up with the behaviour of the dealers.

General Motors India and Mahindra-Ford followed a similar route with limited number of dealers in selected cities to sell their Astra and Escort models. However, both of them furnished their dealerships with standardised corporate designs and colours. Ford brought in its global practice of naming all dealers with the Ford suffix. None of them has so far offered service as a separate retail product to all car owners in India, though Mahindra-Ford has started catering to non-Ford cars in its service centres. Daewoo Motors stirred up the industry by offering a number of attention grabbing services like direct customer calls with liberal test drives, a help-line, stand by cars/mobile service cars and free trial cars. The company went in for a rapid roll-out by appointing multiple dealers across a large number of cities. Yet the poor quality of dealerships and the inability to deliver on promises have eroded customer confidence for Cielo cars.

Interestingly, Mitsubishi-Hindustan Motors is reportedly adopting a direct sales route, relying more on trained salesmen equipped with computers to convey the product features. Honda-Siel has appointed dealers across key Indian cities, which comprises bulk of the car sales. Honda is stressing on extensive dealer training to offer a high quality interface at dealer points. Considering the formidable reputation of the Japanese manufacturers in automobile service standards, Indian consumers can look forward to value-added comprehensive car care, in the true sense, designed with the customer in mind and not organisational convenience.

Hyundai Motor India is trying to add some novelty in the retail scenario by adopting a hybrid system of large model showrooms (auto plazas) and a larger number of smaller outlets to provide easily accessible sales and service facilities. It is a good adaptation of the concept of dealers, sub-dealers and authorised service stations. These concepts have been used by Indian manufacturers individually in the past for two and four wheelers. But for the first time, manufacturers are trying to put up an integrated retail and distribution system to meet customers requirements.

One common thread that emerges across all the manufacturers is that servicing facilities need to be more broad-based and the customers are increasingly expecting the companies to take care of these new generation cars. Sheer distribution width is not enough. Instead it is working hours, home service, standby cars and an overall fairness in billing, which is the need of the hour. This can only come from an inherent commitment by the manufacturers to serve their car owners and not only sell cars. Over the last 6 years, the average US dealership revenue earned from service and spares has risen from approximately 30 per cent to approximate 45 per cent, emphasising the greater focus on service.

The divergent trend of huge car supermarkets selling, both new and used cars versus a large number of smaller dealers/sub-dealers, has different implications for the consumer and the manufacturer. While the consumer, on the one hand, gets a wide choice (sometimes across brands) in a world class environment of a car supermarket, the smaller outlets provide proximity. Personalised service can be built into both the systems and a direct sales force enables the company to reach the potential customer's home. For the manufacturer, the smaller dealerships offer exclusive brand focus with greater control, whereas the larger dealer chains and supermarkets offer cost efficiency and visibility, but demand large investments.

In the last 10 years, the number of new car dealerships in the US have decreased from about 25,000 to 22,500. Unable to compete against the chains and supermarkets, the smaller proprietor owned dealerships are either

closing down or merging. Ford and Chrysler have started consolidating their dealerships across some of their divisions in US.

The Indian market, which is going through a transition phase, poses a challenge of geographical spread (23 cities spread across the 4 regions account for more than 85 per cent of total sales) and location constraints in congested cities. A composite structure of competitive dealerships (offering sales and comprehensive service facilities) added to a large number service outlets and a direct sales team, appears to be the right mix for any brand looking at large numbers. The emphasis on each of these components would depend upon the target customers, model positioning and strengths of the company, as some of the activities of retail and distribution of automobiles, can be outsourced. However, it is a certainty that the days of condescending dealerships and dubious garages are limited.

Once product parity creeps in, the battle for market share will be influenced by the manufacturers brand equity and retailing strength. Clearly, a good reliable product isnt the only attribute the customer is seeking. Instead, it is the ownership experience and pride, which will determine brand preference in both the small and large car segments. n

(The author is a senior consultant with the Mumbai office of Coopers and Lybrand Pvt Ltd. The views expressed in this column are his own and not that of his organisation)