Categories: Business

Auto dealers seek higher sales margin, cost reduction measures to tide over dwindling profitability. Vehicle dealers wrote to Siam, demanding increase in sales margin

Photo: PTI FILE PHOTO

Auto dealers seek higher sales margin, cost reduction measures to tide over dwindling profitability

New Delhi. Vehicle dealers' association FADA has sought to increase the vehicle sales per vehicle margin to at least seven percent. Sales have dropped significantly due to the long-term slowdown in the vehicle market and now the corona virus epidemic. This has increased the operating cost of the dealers.

The Federation of Automobile Dealers Associations (FADA) has asked vehicle companies to reduce the cost structure at the dealership by at least 20 percent to make the business economically viable. In a letter to the Society of Indian Automobile Manufacturers (SIAM), a vehicle manufacturers' association, FADA President Ashish Harshraj Kale has stated the need for immediate action on behalf of Original Equipment Manufacturers (OEMs) or vehicle companies. He said that his profits have been steadily decreasing due to high costs and low operating margins.

Kale said that while staff payments, interest costs and rent have skyrocketed, dealers' margins have not been increasing compared to expenses. Kale said Indian dealers operate at a margin of three to five percent less. It is much lower than other countries of the world. He said that the average net profit on the total turnover of vehicle dealerships in the country is only half to one percent.

The letter said that this margin of dealers has also been affected due to sluggishness in the vehicle market during the last 15 months. Declining sales have led to the loss of many auto dealers. Kale said dealerships in India have to spend on average 85 percent of their total cost. It consists mainly of manpower, interest and infrastructure expenses.

This post was published on May 31, 2020 7:49 pm

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