Car dealers find relief as makers agree
The slowdown in auto industry has rendered a severe blow to the car manufacturers in India. But, car dealers too have not been able to escape its effects in the last few days. They were heaped with the tall inventories and high costs of interests. As such there was constant sparring between the two parties as to who will bear the cost of the high inventories.
The problem was not so much with the car manufacturers like top selling brands like Maruti Suzuki, Hyundai Motors and Mahindra and Mahindra, which record large volume of sales. As such many car manufacturers have come forward to ease the tension and keep their relations with the car dealers a happy one.
The domestic car manufacturers have asked the dealers not to lift more vehicles. This has resulted in two benefits – drop in inventories and reduced burden of loan interest. The move is aimed at reducing the financial crunch faced by all dealers.
Normally car manufacturers push dealers to buy more vehicles in view of continuous demand. Dealers maintain inventories for four to five weeks in advance. However, when they were pushed to collect more cars, it chocked their finances resulting in tight working capital. The high loan interests also added to their woes pushing them to the brink of closure. After continued negotiations between the two parties, car manufacturers have asked dealers to stop lifting unmanageable stocks. The inventories went as high as eight to ten weeks or even more at many places.
After the initial call to drop numbers, several dealers have reported that their expenditure on loan interest have dropped by 20 percent. The high interest costs were making their business unviable.
During the continued slowdown in auto industry, car dealers through their respective association had told car manufacturers that if there was no immediate drop in inventories they would have to surrender their dealerships. The ballooning costs of maintenance was too high to maintain, a respectable working capital, complained many dealerships.
Noticing this, Maruti Suzuki had made a conscious decision not to burden dealers. They asked them to not lift vehicles more than they could handle. During the past few months, Maruti Suzuki has deliberately put a constraint on its policy to push vehicles to car dealerships. This has evidently helped the company and their dealerships to manage their inventories better.
The second largest car manufacturer of India, the Hyundai Motors too has cut down on pushing its products. The company has always been known to take care of the dealers.
Another car manufacturer Toyota Motors has managed the crises efficiently, by holding monthly meetings with the car dealers to prepare an estimate for the number of the vehicles required. Toyota currently markets premium luxury vehicle like Corolla Altis, Camry, Land Cruiser Prado apart from fast selling Innova.
In a bid to keep its dealerships happy, Tata Motors has agreed to refund dealers for the unsold Nano forms. The company had sold the dealerships 6.10 lakh forms, but had grossed Rs 2,500 crore after registering 2.03 bookings. Most dealers were left with more than 50 percent of the application forms.
The move by the car manufacturers will ease with the dealers. In turn the dealerships could heave a sigh of relief as their business become more manageable. Again the signs of recovery in the auto industry could help lift spirits and bring back the good old days.
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Article Source: ArticlesBase.com - Car dealers find relief as makers agree