How Much Capital is Required To Establish an Auto Dealership in India?


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I was wondering, how much does it cost to open a car showroom or a 2-wheeler showroom in India today, including the service centre and all, and can one open it on a rented property,is it safe?
How much a dealer earns on the sale of each car, I know the margin is relative to each brand and segment, So what about the most common cars like Swift,Wagon-R,Punto,Innova,Indica,i10 and all?
And If a dealer is unable to sell much cars initially then does the company helps him financially or he himself have to face the losses?
I know,these are many questions but I was very curious to know all these.
THanks! [:)]
 
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raj_5004

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Re: Cost of opening a Car/Bike dealership in India

First of all, starting off a showroom is not that easy. You need to send your whole profile to the manufacturer, whether you have any experience, whether you would be able to give good customer service, whether you have the necessary funds, whether the plot you have selected is in a good location of the city (also the manufacturer wont allow 2 dealers very near to each other), what will be your sales projection and how you plan to sell many cars, etc.

Then, it depends on the city. In a metropolitan city like Mumbai, Delhi, Bangalore, etc. where land is very very expensive, it would be a huge investment as a showroom with service centre needs a lot of space. So, if space or budget is at a premium, its better off to start with a bike showroom.

After everything is setup, I mean the building, you need to buy equipments for the service centre, which itself is quite costly. Every manufacturer has these pre-requisites that it's service centres should have all these minimum facilities, that you need to obey.

Even the showroom needs to be designed the way the manufacturer wants, they have a fixed format/layout for every showroom, which you need to keep in mind.

After everything is done, you need to buy test drive cars. Again manufacturers have a condition that you are supposed to buy and register test drive cars of every model and if possible all variants. But dealers normally buy only the top end.

Finally, it is the dealer's responsibility to sell cars, not the manufacturer's. So if a dealer is not able to sell cars and is going in a loss, then the manufacturer wont help him financially.

PLEASE NOTE THAT
a dealer makes more money in servicing and repairing cars rather than selling cars. He charges insane amount of labour charges which totally goes into his pocket. Of course, he gets a small margin on spares also. All these money he gets is much more than the margin he gets on selling new cars. Hence, a car showroom is more profitable than a bike showroom, as bikers rarely bring their bikes to the A.S.S. for servicing and repairs. Of course the downside is that, car showrooms require huge initial investment when compared to bike showrooms.

Finally, a manufacturer also has the rights to cancel a dealer's license if they are getting too many complaints or negative reviews about the dealer, from their customers.
 
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Re: Cost of opening a Car/Bike dealership in India

Dealerships run on 3S concept & have these 3 functions in them

Sales - least margin
Service - highest margin
Spares - depends on brand

You must have noticed in your service bill, for every part they replace they will charge for fitiing/labor charges & the MRP of the item (& taxes). If you source the same part from outside market (legal purchase with bill) they will cost you much lesser.

Even silly things are pretty costly, eg: my 800 wheel hub caps cost over 50 at the MASS & the same item costed me 32rs. with bill outside. Floor caps (those rubber gaps on the floor) costed me 50rupees, the same at showroom costs much more.

The dealership runs on Margins, max margin is in service (labour charges), if your dealership (lets say MASS kind of setup) gets more customers for body work etc you are sure to see good margins.

Dealerships get good margins on ICE & similar accesories sold. They also have tie ups with major distributors/ companies directly for bulk purchase.

Dealerships make a lot of money during some months of the year (say december) & some other months they will not have much work.

Dealers also sometimes get troubled with some major "Callbacks" - too many customers coming to the service center for simple part replacement.

Coming to HR,
You will need this kind of setup
Sales:
Drivers - Test Drive cars - Sometimes customers & the Sales Consultant both dont know driving & they need a test drive.
Sales Coordinator
CRE - Customer Relationship Executive
Sales Consultant - Showroom Sales, Field Sales, Corporate Sales
TL Sales
Sales Manager & Corporate Manager (Sometimes both roles are handled by a single person)
GM Sales (only if the setup is huge)

SERVICE
Technician
Supervisor
Workshop/ Floor Manager
Service Advisor
Service Manager
GM Service (again only if setup is big - multiple service centers etc)

BODYSHOP
Technicians
Denters & Painters (not on rolls of company - usually through a contractor)
Service Advisor (trained for Bodyshop specifically)
Bodyshop Incharge/ Manager

SPARES: (Not much idea)
Stores Incharge
Stores Manager (very rare, atleast in my clients case)

Admin & Housekeeping staff etc etc.

One of the biggest running costs in a dealership is the salary of all employees.

Hope above information was helpful to you.

Your profit depends more on how many cars you service per day & less on how many you sell. However your future profits are coming from the sales you make today,as some customers usually feel comfortable with the place where they bought the car than any other.
 
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Thread Starter #4
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Re: Cost of opening a Car/Bike dealership in India

That seems, one has to have crores of rupees! But how many crores, any idea? :p

What about a 2 wheeler showroom, like Bajaj/Hero/Honda?
Is it very cheap as compared to the car showrooms?
I think one must have a mba degree or a solid experience in same field to do such thing, as there seems to be a lot of people with whom he will be dealing directly.

Thank you for the replies, that explained everything! [:)]
 
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Re: How Much is Cost of Opening an Automobile Dealership in India?

Finally, it is the dealer's responsibility to sell cars, not the manufacturer's. So if a dealer is not able to sell cars and is going in a loss, then the manufacturer wont help him financially.
I have some confusion here. I heard that most of the manufacturers give cars to dealers on credit (e.g Honda and Suzuki), but for Tata-Fiat, dealers have to purchase it paying "NAKKAD".

Which means manufacturer can deliver cars depending upon the competency of dealership and pressurize unlike that of TATA-Fiat.

Somewhere this logic does strike well for why Tata fiat dealers do not have much cars in their stockyard and sales and marketing is also is in oblivion.

Any Idea about this ?
 
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Re: How Much is Cost of Opening an Automobile Dealership in India?

I heard that only a part of the car's exshowroom price needs to be deposited by the dealer to the mother company. Once the car is sold/ 30 days from delivery the dealer needs to pay the rest of the money. The source from whom I received this info is working in a dealership, however I am not sure.
 
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Re: Cost of opening a Car/Bike dealership in India

That seems, one has to have crores of rupees! But how many crores, any idea? :p

What about a 2 wheeler showroom, like Bajaj/Hero/Honda?
Is it very cheap as compared to the car showrooms?
I think one must have a mba degree or a solid experience in same field to do such thing, as there seems to be a lot of people with whom he will be dealing directly.

Thank you for the replies, that explained everything!
MBA is not required, MBA doesn't make one smart. What one requires is on ground business acumen which is not taught in any MBA schools, including the IIMs or ISBs. What you require is financial muscle & interest with proper plan to run it.

What I would like to know is the procedure to get Authorised Service Centre for XYZ car maker. Atleast start with this & then think of showroom, if needed.
 

raj_5004

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Re: Cost of opening a Car/Bike dealership in India

What I would like to know is the procedure to get Authorised Service Centre for XYZ car maker. Atleast start with this & then think of showroom, if needed.
Every parent company's website has a link/section dedicated for prospective franchise/dealers. One can start by applying there.
 
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Starting a Motorcycle Dealership – Need Advice

How to start a motorcycle dealership?. Planing to start a small dealership in the future. Anybody can throw some light to this?

1) What are the formalities?
2) Minimum cost?
3) Basic requirements?

Regards
 
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Re: How Much is Cost of Opening an Automobile Dealership in India?

@carruns buddy i think you need to get franchise and contact company first! dealership business is very costly. you need to be crorepati in advance or win kbc first! [glasses]
 
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