The Coronavirus pandemic has created a chaos in the Auto Industry and these trying times demand Disruptive Innovation in the way business is done!
The Automobile Dealerships Fraternity is one of the worst hit business in the current times. The Business was already grappling with the economic slowdown in the previous FY and the covid 19 pandemic made the situation even worse for the automobile industry. The lockdown in India meant that the OEMs and the dealerships were completely shut during the period and both the parties faced colossal business losses. The lockdown’s impact to the automotive sector has been so severe that the industry body SIAM estimates that the auto industry would have lost ₹2,300 crore turnover every day due to the lockdown. In dealerships perspective; the losses would actually be more lethal and it is time that they take adequate steps to slowly move towards normalcy.
Let us first see how the businesses have resumed post lockdown:
- Even as on date; all automobile dealerships are still not open! While the lockdown was imposed from March 23rd 2020; still many dealerships have their shutter down in India (specifically in areas where the covid spread is increasing and authorities have asked businesses to remain shut).
- The dealerships which have resumed operations are facing deserted showrooms, no buyers, existing booked customers shying away from the purchases!
- The drained economy has made things worse – Potential buyers have either lost money either in their businesses or the working class is just concerned about retaining their jobs. The overall sentiment isn’t very encouraging.
- Fear Factor among the prospects visiting the showroom – The new norms at the dealerships include plastic wraps on steering wheels and seats, home drop-offs for test drives and personalized new-car deliveries! Still customers fear visiting the showrooms to avoid contact.
- Will Test Drives cease to exist? For now, Yes! Customers are simply skipping Test Drives for now and are judging more on the knowledge gained online!
So what should the Automobile Dealerships do deal with the current situation? We strongly believe in the philosophy of ‘ADAPT TO SURVIVE‘ and the steps we recommend is as mentioned :
- Safe Dealership Environment: The Dealerships resuming business have to take adequate measures to ensure the safety of its employees and the customers. This can only happen with the rigorous implementation of Social Distancing, Usage of Sanitizers, Regular Cleaning of Touchpoints and Wearing of Masks. Any glitch can jeopardize not only employee / customer health; but shall also jeopardize the business operation itself.
- Effective Stock Management: Stock Carrying Costs is one of the highest expenditure for an automobile dealership and has to be immediately looked at. Dealerships should focus all efforts in liquidating the stock in hand and also get only those models/variants from the OEMs where they have a customer order. Or else stock carrying cost can drain out a significant amount of Dealerships Capital. The current stock levels at the dealerships is extremely scary (~4 times that at OEMs) –
- Strengthening Online Presence: While all the major OEMs have taken initiatives to serve the customers online; the dealerships would have to be even more proactive to approach the prospects online. We recommend that the dealerships approach natural ways to engage prospects (Ex: Dealership Website, FB/Insta/Twitter Page); rather than focusing on paid channels. This will ensure that they are able to serve the right set of customers and also enable them to strengthen their engagement on online channels. The catch here will be the faster time of response – Dealerships would have to be extremely active in terms of responding to the customer queries or they may just lose that customer!
- REDUCE COSTS: This is going to the biggest mantra for now. We have explained earlier on how capital intensive automobile dealerships are – here. It is high time that the automobile dealerships review their business costs and cut the optional expenses. Also it is imperative that dealerships running multiple outlets take a call on closing down the outlets which been unprofitable since more than 12-18 months. It does not make any practical sense to drain resources on non performing outlets at this critical juncture.
- Build Relationships: After a sale is commenced; generally customers are ignored. We haven’t seen a breakthrough CRM at any dealership who tracks customers important dates (like birthdays, anniversaries, etc) and take respective action to approach. However; this is the time that the dealerships value the relationship with their set of customers and INTERACT. A vehicle purchase is an emotional one and a healthy relationship between the buyer and the seller will make the entire ecosystem fruitful. Also a happy customer will always be a trustworthy source of references to improve business!
- Enhance After Sales Experience: Lot of efforts should be laid on ensuring that the customers have a fuss-free and delightful vehicle service experience. These are difficult times for all – and a bad after sales experience can be detrimental to any brand or dealership!
- Manpower Training: Manpower is undoubtedly the most important resource in any organisation. Automobile Dealerships consistently were facing challenges of having untrained/unprofessional manpower. They shall not get a better chance to equip their team with the right set of tools to serve customers better. A well trained manpower can definitely become a major USP in the current situation.
- Unite: We have seen automobile dealerships get into petty fights to secure a customer. Many a times higher discounts are offered; or even bad mouthing of competition is done to gain a customer. The fraternity needs to value the saying – ‘United we stand; divided we fall’. The dealerships have to unite together to ensure ethics are maintained in business across the channel and maintain adherence.
- Higher Margins: The Margins of Passenger Vehicle Dealers in India is among the lowest in the world! Also among all businesses; automobile dealership businesses command one of the lowest margins. It is a meager 4-5% in India; while a automobile dealer in Europe earn upto 14% in Europe. It is high time that the Vehicle Margin Levels are reviewed and increased to support the dealership business operations. However; this call has to be taken by the respective OEMs and dealers should unitedly demand for it.
As per FADA; the automobile dealerships across the country employs over 40 lakh people at dealerships and service centres. These include 25 lakh direct employees and another 15 lakh who are dependent on dealerships for their livelihood. It is extremely imperative that the automobile dealerships make a way out of this chaos till demand picks up. And yes; there will be a shift in consumer demand. People are going to want private transportation and would not want to use public transportation – But unless it translates into end sales; dealerships will have to survive till then!