With spiking demand, auto dealers on an expansion mode

As the demand for automobiles in the Indian market has spiked, the number of automobile dealers has gone back to the pre-pandemic levels.

Dealers had shut down as many as 286 showrooms between 2019 and 2020 across India after auto sales dipped due to the pandemic. According to the Federation of Automobile Dealers Association (FADA), dealers are now in an expansion mode in order to reach more customers.

Larger base

“As dealers earn money they search for potential pockets in territories where they can expand with the focus being to reach a larger customer base and many dealers are in expansion mode in rural parts in the country. Dealerships had an impact before Covid-19 when multinational companies had taken an exit from India that led to financial crisis leading to the closure of many dealerships across India,” said Manish Raj Singhania, President, FADA, which has 15,000 automobile dealers as its members.

Business outlook of the dealers have changed over the last five years with many preferring on expansion of their outlets inside the city and rural areas rather than increasing the number of dealerships. The composition of automobile dealerships in the last five years remains 60 per cent in urban and 40 per cent in rural areas in India.

“The automobile dealers could sustain during Covid-19 because of the transition from BS4 to BS6 engines. The financial burden was less for the dealers during the pandemic but OEMs faced tremendous pressure in terms of supply. Even after the opening of the lockdown, we are regularly facing a short supply of vehicles,” Singhania said

Festival demand

The dealers that are selling limited available stocks continue to witness increased demand for four- and two-wheelers during the festival season.

“The demand for vehicles has increased and we are witnessing good sales during the festive season. The demand is back to how it was in 2019 before the pandemic,” said Sanjay Jain, an automobile dealer.

Issues plenty

One of the issues being faced by dealers is the delay in getting the vehicles registered in many cities.

“Even with increased demands from up country market areas and dealers expanding their reach, issues in registration of vehicles is a constant concern. A consumer, after making a purchase of a vehicle, wants the delivery quickly but time is spent on registrations of vehicles. Going forward, we urge the government to streamline across cities the regulations and introduce faceless registrations,” said Sachin Mahajan, state chairman of FADA for Maharashtra who has a light commercial vehicle and a two-wheeler dealership in Nashik.

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