FADA Wants Manufacturers To Increase Fixed Dealer Margin To 7% Of Selling Price

FADA says that Indian auto dealers operate on one of the lowest sales margins, starting as low a 2.9 per cent for passenger cars. The auto dealers' body has requested for a fixed dealer margin of 7 per cent of the selling price.

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FADA says that Indian auto dealers operate on one of the lowest sales margins

Highlights

  • FADA wants a fixed dealer margin of 7 per cent of the selling price
  • FADA says that Indian auto dealers operate on one of the lowest margins
  • Current dealer margins for PVs range from 2.9 % to 6.32 %

The Federation of Automobile Dealers Associations (FADA) has recently requested for an upward revision of the fixed dealer margin on vehicles to 7 per cent of the selling price. The dealers' association says that it has sent out multiple communications to Society of Indian Automobile Manufacturers (SIAM), who on their part have conveyed the same to all manufacturers. Now, FADA has announced some of the manufacturers are positively looking at revising the margins and have already started engaging with their dealer councils or senior dealers on the same.

Also Read: Coronavirus Lockdown: FADA Seeks Government's Support For Auto Dealers

FADA has also reached out to its dealer members, requesting them to initiate discussions with the respective OEMs, if not done so already, to upwardly revise fixed margins to a minimum of 7 per cent. In his communication to dealers, FADA President, Ashish Kale said, "Remember, this time it is not the question of profits, but is a question of our survival together we have to make sure that we survive through this crisis and beyond the crisis, build up sustenance to absorb any future disruptions."

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The current dealer margin for a passenger car is 2.9 to 5.68 per cent on cars in the ₹ 4 lakh to ₹ 6 lakh range

FADA says that Indian auto dealers operate on one of the lowest sales margins, ranging from 2.9 to 7.49 per cent, across all categories. In comparison, dealer margin on passenger vehicles in the US is 8 to 10 per cent, in the UK it's 6 to 8 per cent, in China, it's 9 to 11 per cent and Russia and South Africa it is 12 to 14 per cent. In fact, to bring in more transparency, FADA recently conducted a study on OEM wise fixed dealer margin across various price bands or segment types.

Commenting on FADA's initiative, Nikunj Sanghi, Managing Director, JS Four Wheels said, "It's a very right step, and it was long overdue. Without the revision of dealer margins, it will be very difficult for dealers to survive. I personally feel that volumes per dealership will go down in the present conditions, and the kind of cost the dealers have, unless the margins are revised, they will not be able to remain financially healthy.

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Luxury carmaker Mercedes Benz offers 4.56 to 6.75 per cent dealer margin

The current dealer margin for a passenger car is up to 6.05 per cent on cars under ₹ 4 lakh, 2.9 to 5.68 per cent on cars in the ₹ 4 lakh to ₹ 6 lakh range, and 2.60 to 6.32 per cent in ₹ 6 lakh to ₹ 8 lakh range. For car above ₹ 20 lakh, the dealer margin ranges from 2.45 to 4.99 per cent. Among Luxury brands, BMW offers the highest dealer margin of 5.71 to 7.49 per cent, Mercedes Benz offers 4.56 to 6.75 per cent dealer margin, and Audi offers 4.53 to 4.69 per cent dealer margin.

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The dealer margin is much higher for luxury motorcycle brands like Harley-Davidson at 11.43 - 14.55 per cent

Two-wheeler manufactures offer similar dealer margin ranging from 3.01 to 4.57 per cent for bikes under ₹ 50,000, 3.76 to 6 per cent in two-wheeler in the ₹ 50,000 to ₹ 75,000 range, and 3.77 to 6.68 per cent for vehicles in the ₹ 75,000 to ₹ 1 lakh range. The dealer margin is much higher for luxury motorcycle brands like Harley-Davidson and Triumph. The former offers a margin of 11.43 - 14.55 per cent, while Triumph offers 8.28 - 9.68 per cent dealer margin. The dealer margin on commercial vehicles is the lowest ranging from 1.28 per cent to a maximum of up to 4.62 per cent.

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We have reached out to manufacturers like Maruti Suzuki, Tata Motors and Mahindra, for their comment on FADA's request. However, so far, our emails remain unanswered.

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