Maruti Suzuki India Ltd. and MG Motor are the only mass-market carmakers in India offering over 5% average fixed dealer margins, but that's still short of the 7% demanded by dealers.
Average fixed dealer margin is the amount of money that auto dealers make by selling cars and is expressed as a percentage of the selling price.
According to a recent survey by the Federation of Automobile Dealers Association, the average fixed dealer margin is much lower than those offered in the U.S. (8%-10%), China (%9-11%), U.K. (6%-8%), South Africa (12%-14%) and some Western European countries (13%-14%).
Here's a look at the dealer margins offered by Indian carmakers across all models:
- Maruti Suzuki: 5.07%
- Hyundai Motor India: 4.38%
- Tata Motors: 3.74%
- Mahindra & Mahindra: 3.75%
- Honda Cars India: 3.41%
- Toyota Kirloskar: 2.32%
- Kia Motors India: 4.43%
- MG Motor India: 5.22%
FADA has written twice to the Society of Indian Automobile Manufacturers to increase the fixed dealer margin to 7% of the selling price.
"We are at such a low level globally—and otherwise also—in India at 4% to 5%, if you look at the kind of input that a dealer puts in specially in the last four-five years,” FADA President Ashish Harsharaj Kale told Press Trust of India. "Over time, profitability has come down. These (margins) were okay five years back (but not anymore).”
Kale said discussions have already started in dealer councils of respective original equipment manufacturers with dealers for margin revision. He said the idea behind seeking higher fixed dealer margin is to help the them tide over the tough times, especially due to coronavirus pandemic.
"Now with the coronavirus, with the kind of drop that we are going to see, SIAM has projected a (sales) drop of 35% if the GDP is 1-2%," Kale said. “Now projections are coming up for negative GDP so what is going to happen?”
“So, we thought the combined effort of reducing cost and increasing margin would be good for surviving this year. And then going forward, it will build up sustenance in our businesses.
“Whatever resources we have, we have been spending on upgradation—that's why we are hit much more badly. Dealers did not have enough sustenance to survive one and a half months with zero revenue situation and expenses continuing,” he said.
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