Automotive Retail in India
Indian automotive retail in the organised sector encompasses an extensive network of automobile dealers & workshops, gas dealers, auto parts retailers and used car marketers. The total revenue accrued from the automotive retail sector in India is running into thousands of crores, provides direct employment to around 5 lakh people, making it a significant stakeholder in the growth of the automotive industry in India. The auto retail sector is a buoyant market with a very promising future, as it waits to be accorded its due recognition as a vital link in the organised retail sector. The auto retail sector is an amalgamation of auto dealership (which includes new & used cars along with light commercial vehicles), service centres at the gas stations like fuel sales, forecourt shop sales, car wash (excluding the non-fuel sales like food) and auto components sales of parts - accessories, tires and rubber(replacement tire for cars and other light vehicles).
The emerging auto retail sector has very high potentials; however, the auto retail companies have to be well prepared to meet challenges and roadblocks in the context of the existing Indian market. Market analysts have identified a few challenges like;
- » Demography: auto retailers have to keep in mind that the potential Indian consumer in this retail vertical has an average age of 30 with a lifestyle and basic needs quite different from their earlier (older) customer base( in India and elsewhere, be it Europe or America)
- » Low Average Income Level: in spite of the spiraling economic growth, the average income level is one of the lowest in the world, and small cars continue to be a mainstay in the market. The margins would be low and the auto retailers have to customize their business models and formats to suit the scenario.
- » Rapid Urbanization: due to rapid urbanization, availability and the high cost of prime real estate has become a serious challenge. Presently, almost 60 to 70 % of the total cost of setting up a dealership goes into real estate cost.
- » Customer Loyalty: with the entry of multiple players in this retail vertical, customers have the benefit of choosing from a wide range of models and services at varying price brackets. Auto retailers have to constantly rework on its strategies to maintain their customer base and to attain new ones.
- » New Contenders: many of the big OEMs (original Equipment Manufacturers) have set up their own parts and service centres; other players like Reliance have entered the arena with independent garages. Auto retailers have to come up with apt and innovative tactics and stratagems to be in the reckoning.
In the foreseeable future, retail in rural India is in for a big surprise as a number of auto retailers are waiting to enter the market. With encouraging trends like high productivity of agro products and improved communication facilities, almost 50 % of the 20 million rural households have become potential customers for the auto retail companies. Lots of auto companies are geared up to explore the huge potential of the thriving rural auto retail market.
