[CoconutCar]

Greetings to fellow members

I am along with certain other people, in the process of establishing a car dealership.
We already have land on the main road with a good front. I am intentionally keeping information about location and state confidential

Brands for whom we are preparing an application are -
1) Toyota
2) Mahindra
3) Kia

In my city, Toyota and Kia are absent. Mahindra exists but in a decrepit condition. A nearby city which has the presence of all manufacturers is 70 km. So all purchases by our city dwellers are made from there. If we get Mahindra, It will not just be personal cars but pick-up and commercial vehicles as well.

We are from an established business background in the textiles industry but have no prior experience in the automotive dealer industry.

I request Inputs/insights/suggestions from members based on their knowledge and past experience.

I went through the FADA report for dealer satisfaction and Kia scores the highest while Toyota and Mahindra aren't far behind and have respectable scores.

Regards

[youknowitbetter]

Go for Mahindra. Following reasons:

1) Commercial vehicles will also be a reasonably big business which you will get along with passenger vehicle dealership.
2) Great product offerings. They are investing heavily in EV space as well.
3) I am guessing, Toyota with its colab with Maruti is technically available in your city

[GTO]

Great shortlist of brands! All 3 are strong, well-invested in products and have profitable (premium) cars.

Start with applying to all 3. Get the ball rolling. It's not that, if you apply, you will get approved. Start networking with car dealers to know the local market & understand the business. I don't know what kind of demand is there in your local area & surrounding towns, so it will require a lot more research.

Since you're going to be investing multiple crores in the dealership:

- Read this thread (How much does it cost to set up a car dealership in India?) & the others we have on the dealership business.

- It would be great if you or your family members take up a job with a prominent car dealer. The knowledge you gain in the 1 or 2 years will be incredible. Think of it like an "MBA" in car dealer management.

- Research, research, research. Once you get talking to the OEMs, start getting very specific sales & demand data from them.

- Hire a couple of experienced & seasoned dealer folk in managerial positions at your showroom. It's a very capital & operations intensive business.

[vrprabhu]

In addition to what GTO says, consider the following -

1. Servicing the vehicles sold and already running (people will definitely opt for a local dealer rather than going 70 kms away) in the place will be a regular income - so you need to get a good set up in place for this. Manpower and training requirements for this needs to borne in mind.

2. Which of the three will you be able to market easily - you may consider a small field study on this. In fact, visiting the other two car dealers (who aren't present now) would be a good idea.

All the best

[sf71hvettel]

I have a certain degree of experience in this field, so I'll pitch in with my thoughts-

1. Apply as a single or family business owner. OEMs will not grant dealerships to any proposal which is a partnership of different families. There are too many instances of disputes and dealership collapse.

2. Generally, the online application section for OEMs is totally ignored. They will put ads out in newspapers or their websites when they are actively searching for dealerships in your area.

3. The area requirements differ per brand, but generally the showroom is 5000-10000 sqft and the workshop is 30000 sqft. The initial capital outlay apart from land is around Rs. 7-10Cr, depending on the brand.

4. The Vahaan website is very useful for market research. In July, your district had a TIV of 318 cars (Maruti 151, Hyundai 50, Mahindra PV+CV 87) Totytoa/Kia have an all India market share of around 5-7%, which would equate a monthly volume of 20-25 cars. Not sure if that will be sustainable.

[anjan_c2007]

It is important to specifically get sales data for your proposed area of operation, of different models of the respective manufacturers and how these fare in your area. Toyota models other than those Maruti rebadged ones sell at a premium, cost wise to others. Hence if one Toyota Innova Hycross or a Toyota Fortuner is sold it would be equal to two to five Mahindra XUV 300's or the Kia Seltos. A market value comparative chart of cars sold in your area will be a better indicator.

As regards the servicing, Mahindra commercial vehicles may frequent your showroom when under warranty but they will prefer "jugaad" jobs later on in non-ASC workshops.

All such pros and cons need to be studied but as GTO has rightly said you need to apply to all the three companies in the first instance. Because these carmakers are also very selective.

An interesting incident though could be off topic here. A particular company invited applications for its authorised service centre in particular city. Two of my friends applied. One was selected and he got his existing workshop revamped and then started the ASC. The other who also owned a workshop got jealous and since this ASC repaired cars other makes earlier, during its initial months post the ASC's inception its loyal customers continued to send their cars of other brands here and the ASC owner obliged them. The other person (also a friend) who was deprived of the ASC, clicked images of cars of other brands parked here in the new ASC on the sly and sent them to the car maker. The ASC owner got a stern warning from the car maker and he thereafter curtly denied entry to any other brand. This shows how these carmakers and the ASC's and those deprived of ASC's operate.

[Turbanator]

Originally Posted by CoconutCar

Brands for whom we are preparing an application are -
1) Toyota
A near by city which has presence of all manufacturers is 70 k.m

Super hard to get. Usually, Toyota will give another location to the existing setup. Also from whatever I am aware, least profitable to work. Things are better now due to the delivery position but you have to consider the downturn cycle too, which no one is thinking about currently.

2) Mahindra

No clue, but with their product range, you will be in good hands. It should be the easiest of the lot to get as they mostly have a smaller group of dealers. Not one with multi branches.

3) Kia

Good earnings for sure. People love the features on their cars and these are priced well. In the initial lot, they got mostly Mercedes dealers (Don't know why but here in the North, almost everyone had one).

Mostly these manufacturers come with advertisements and appoint based on the demand survey. This is also their internal requirement as else it can appear that someone is being supported. So, most likely, even if you apply, they will return to you only when they have an opening. Any contacts at the right place will surely help. If you don't have one, try to speak to someone very senior at these dealerships if you know him/ her to understand the process.

We are from an established business background in textiles industry but have no prior experience in the automotive dealer industry.

A lot of Groups have done extremely well in Textile. The foremost difference is, currently, you take care of only a few of your customers/ officials, but in a Car dealership, you have to deal with people exponentially over your current. This can get tricky for someone who is not used to public dealing.

Though, you can always get the manpower like a lot of large groups like Motherson, Uttam here in North have got multiple brand dealerships, but the more successful like Pasco are the ones who have always been in this business, and their owners themselves are involved in Day to day business. If you plan to find someone to look at this business in totality (CEO/ Director) that person has to be known and not someone whom you can just get in as you have now got the dealership. Not to the Airline level, but this business is also very risky even though looks flashier. So, a company like Mahindra should be a great start in my opinion if you are keen to start something.

[condor]

What is the feedback on how each OEM treats it's network / service dealer ?

End of the day, which ever you are able to start - three factors will be important:
1. Customer base (of the OEM) in the area
2. OEM support
3. Your efforts.

Your margins will be a result of all these three. I am not listing competition, since you have already short-listed the brands.

[Chethan B G]

Gestation time will be lower with Mahendra, followed by Kia and then by Toyota.

When you are investing in a new business, the lesser the time you require to break-even the better. Market is going good right now with high waiting times and good bookings, which leads to minimal inventory and discounts. But things can change quickly and it’s better to be less burdened during tough times.

Having service and sales head with experience makes sense. But you need to invest your full time into the new business, at least during the first decade of operation. Remote operations with huge investments and overheads, can be a big disadvantage.

If you are right now considered as a textile man, your aim should be to work towards getting your name itched in the automotive industry, by the next decade or so.

With your experience in business, waiting for some experience in the automotive industry doesn’t make sense. You should go ahead with the plan ASAP and make good use of the present market conditions.

All the best!

[PaddleShifter]

Is it only a dealership or a sales + service centre (I guess so)?

Sales + service: If you can get a Kia dealership, you can tap into their service revenue and make a good amount. Heavy inflow of cars will ensure you make good amount of money.

Sales only: I guess Toyota is the best followed by Mahindra. Kia volumes come from upto Rs15-17 lacs ex-showroom products. Mahindra goes upto 25 lacs while Toyota dealers can surely make a lot from per unit sale of Fortuner/Innova Hycross compared to other brands.

P.S.-

1. The dealer here in Rajasthan has two sales outlets on a single plot: Aravali Kia and Aravali Toyota. I guess he is getting both volumes (Kia) as well as margins (Toyota).

2. Read a post above about Toyota being a low profit dealership business. Kindly take my opinion with a pinch of salt as I dont have data to back up what I have claimed above.

[CoconutCar]

Greetings everyone

@youknowitbetter
Yes your point is valid. Nexa showroom exists and js doing great. So Toyota's Glanza and Hyryder are implicitly available, so is Hycross with Invictus

@GTO
1. I am having a hard time convincing people on Kia. Primary focus is on Mahindra and Toyota
2. Yes, will apply for all 3 as it seems to me, getting a dealership is about having right connections more than having right Financials. A bit of luck and chance is involved
3. That is very much desirable.
4. sf71hvettel has provided an excellent source for granular details which I will be working on today itself
5. we know a person who is GM of a Toyota dealership. He is providing details. If things come to fruition, we will definitely request him to consider what we have.

@vrprabhu
Existing Mahindra dealership which is in decrypt condition is closing down. We are hopeful that soke manpower might be available from there.

@sf71hvettel
1. Yes we have applied only as family business owner. Infact both partners are among family
2. As of now, I have applied online only. Mahindra's form online has various Stages. I have filled up the Stage 1 form. I am pretty sure that we will need to find someone in senior position. I will also go through advertisements
3. Land/Financials are sorted. However, since in case Mahindra offers everything from - car to bus - tractor pickups, I think a full fledged Mahindra will go over 20 Cr easily as stock requirements will grow. I found out, that Toyota and Kia want a significant investment on interiors as compared to Mahindra
4. Thank you for this Vaahan portal resource. It is excellent. This is the crux of why I came to TeamBHP

@anjan_c2007 unfortunate what happened between two friends

@Turbanator
Your words of caution are appreciated. I am young and so I try to get things done via procedures. However I have learnt over time, that in reality procedures are just a facade. In the end, most of the times things boil down to connections.

I am personally feeling, that I will be good hands on customer friendly dealer. I have been reading TeamBHP since long time and read through various horrific stories of people suffering. My sentiments were always with customers rather than dealers. It will be interesting to see what is the view from the other side. However in case of Mahindra, I know I will be in rough waters because orientation and demaneor of customers wanting Tractor/Bolero/"Kaala Skaarpiyo"/Jeeto Pick up is different form XUV700 AXL.

@condor Kia has the highest score in dealer satisfaction according to FADA survey

[blackwasp]

Originally Posted by CoconutCar

I am along with my certain other people, are in process of establishing a car dealership.

Lovely initiative and all the best. I would like to add just a small tip from my end. If you plan to finance your his new enterprise from banks, check out sentiments towards carmakers from them. For instance, I know that bankrolling a Maruti / Toyota dealership is very easy. Banks will be practically coming to you for taking finance from them.

Also, when it comes to business, please choose mind over heart. While all three have strong potential, I would take my bet on the Mahindra as they have a strong presence in the commercial segment. The commercial sales is what will keep your dealership in the green in tough times.

I have a some experience working in a dealership and let me tell you it is not at all easy unless you (the owner) takes an active roll. Where I used to work, either the owner, his son or the owner's wife were always present everyday. They might come in late and go early, but none the less, they were seen almost always.

You also need to understand and build up a culture. Majority of the sales and service personnel are paid quite a paltry amount and this leads to people trying to make a quick buck. In every dealership that I know of, some one or the other was pocketing some extra cash or an accessory. This might be independently or via knowledge of seniors. This might be a way of life for some, but you might get a culture shock coming from the textile industry.

Let me share an example - Rs. 500 voucher for fuel (to bring vehicle from stockyard to dealership, or to fuel up TD cars) is given to the driver to fuel up. The pump guy will fill in say 400 bucks of fuel and give 100 to the driver.

There are many such instances, so nothing to be alarmed but all these will not come to light unless you are hands on.

[M.Dua]

Unlikely scenario that you will be approved, basis my first hand knowledge neither Toyota, Mahindra, KIA or Hyundai will offer you a dealership unless you are already present in the same space, a cousin of mine with reputable moneys and space was denied even Ford dealership for the same reason. He had to start the business with Mitsibushi to prove the mettle, needless to say not a very profitable venture and closed in three years (they are still a prominent name in a Tier 2 city in 2 wheeler space)

If still in any way you are able to opt for it, it will boil down to the demand in your location more than a preference over some brand. Car brands are very city centric, example - I don't see many Tatas in Delhi but Hyundai/Honda are in every garage, likewise when I visited Kolkata it was full of TATAs, even all cabs were TATAs. So you will have to research your city but as I said it is very unlikely that you will get a choice, its the brand that will chose you.

[UD17]

Originally Posted by vrprabhu

In addition to what GTO says, consider the following -

1. Servicing the vehicles sold and already running

+1 to that.

Knowing the VIO (Vehicle in operations) for all 3 OEMs will help. That is a reoccurring business + give a sense to what is popular in your city.

If the city is Saharanpur (as your location shows) then Dehradun is the nearest option for buyers, which is quite cumbersome to drive. In and around Dehradun i see lot of Mahindra's. Toyota on the other hand is quite popular in that belt for tourism (Hardwar, Rishikesh, all 4 Dhams etc.).

Please also check which OEMs provide best dealership margin.

[sf71hvettel]

Originally Posted by CoconutCar

Greetings everyone
3. Land/Financials are sorted. However, since in case Mahindra offers everything from - car to bus - tractor pickups, I think a full fledged Mahindra will go over 20 Cr easily as stock requirements will grow. I found out, that Toyota and Kia want a significant investment on interiors as compared to Mahindra

Just to clarify- my investment projections for Rs. 7-10 Cr are just for civil work, CI/SI elements and other capital investment.

The working capital (stock) requirements would range in the region of Rs. 10-20 Cr over and above the initial capital investment. However, most banks will be willing to fund an inventory funding limit if you can provide some collateral around 50-75% of the loan value.