Data reveals that city count of automobile dealerships that have shut shop over the past 18 months accounts stands at 271; with 245 passenger vehicle dealers shutting down. This trend follows a general slowdown across the automobile sector which has been going on ever since the last festive season in the country. The Indian automotive retail sector has suffered losses of at least Rs.2,000 crores while with dealerships turning nonviable, over 3,000 persons have lost their jobs.
There is an overall liquidity crisis in the market. This has had a negative impact on the automobile industry with company dealerships shutting shop across major cities such as Mumbai, New Delhi, Pune and Chennai. Statistics from Federation of Automobile Dealers Associations (FADA), the apex body of vehicle sellers, reveal that over the past 18 months a total of 34 dealers shut down in Mumbai followed by 27 in New Delhi, 24 in Pune and 15 in Chennai.
Among the automakers in India, Nissan had the most number of dealerships shutting down at 44 while a total of 39 Hyundai dealers, 21 Renault dealers and 20 dealers each of Tata Motors and Maruti Suzuki also pulling down their shutters.
Though one of the main causes, it is not only a dearth of buyers that have caused this slowdown in the automobile sector. This retarded growth is coupled with various other factors such as a tightening of liquidity, banks showing more caution in disbursing working capital loans and channelizing of funds towards more profitable ventures such as real estate.
It is also learnt that automobile dealers in India are surviving on margins ranging between 2.5% and 5% as compared to 8-12% globally. Higher rentals, increased employee costs, higher insurance and the introduction of the Goods and Services Tax (GST) has also had a negative impact on both two and four wheeler dealers in the country who fail to achieve sales targets.
In response to the FADA report, Renault has stated that though 21 dealers have shut shop; these facilities are taken over or new facilities have been created in the same market. They reveal that these closures occurred due to financial concerns of channel partners. Nissan India says that numbers revealed by FADA regarding their dealer shut down are incorrect. As per Nissan, 20 of their dealers have shut down, and not 44 as mentioned by FADA.
Sibendra Barman, Vice President of Sales Marketing and Customer Support at Tata Motors states that during the past 18 months though the company severed relations with 21 dealer principals, there were over 54 dealer principals added which have provided the company with over 80 dealerships. Mahindra have stated that in the past 18 months 5 dealerships shut down across 5 states in south India but this is not something unusual. Maruti Suzuki and Hyundai Motors have refused to comment on this issue.