The slowdown in the economy has created a lot of trouble for the car manufacturers in India. The tight financial situation, resulting in higher interest costs has given car manufacturers a lot of sleepless nights. The same situation befell car dealerships in India. The dealers were choked up with high inventory requiring large investments. There were frequent differences between dealers and car manufacturers as who will bear the cost of the unsold cars.
These problems are not acute for car manufacturers like Maruti Suzuki,
Hyundai Motors, Mahindra and Tata Motors which record huge volume of sales. But other car manufacturers have been facing the heat of the economic slowdown. But off late the car manufacturers have been using novel methods to keep their dealers happy and contended.
Domestic car manufacturers have decided not to push their dealers to lift more vehicles which has resulted in two benefits- drop in inventory and reduced burden of loan interest. The move is aimed at reducing the burden on dealers who usually raise money to lift more vehicles from manufacturers to reach targets.
It has been noticed that the call given by the car manufacturers has recorded in an immediate drop in interest costs by 20 percent. Several times, during the economic slowdown, auto dealers through their respective associations had requested car manufacturers that if their inventory levels kept rising they would have to surrender their dealerships. The interest costs were making their business unviable.
A few months ago, Maruti Suzuki had made a conscious decision to not burden dealers with more vehicles that they could handle. During the past few months, Maruti Suzuki has deliberately restrained from pushing more cars to dealers showrooms, which allowed the company and their dealer to manage inventory better.
Chocking up more vehicles with dealers resulted in tight working capital for the retailers. The high interest cost eats up a lot of their financial resources, pushing man dealer to the brink of closure. Hence, car manufacturers are trying to not push their product in a hurry and cause losses to their dealers who are the interface between car buyers and manufacturers. The slowdown in the industry had pushed the inventory (stocking up cars) level to as high as eight to ten wheels or even more. Normally, dealers maintain inventory for four to five weeks.
As the auto industry started facing a slowdown, the car manufacturers had asked dealers to buy more vehicles from them, forcing them to take large loans and high interest costs.
Indias second largest car manufacturer Hyundai Motors too has cut down on metal pushing. Hyundai has always been a very caring towards their dealers.
Toyota Kirloskar Motors, the Indian subsidiary for the Japanese giant
Toyota Motors has been holding monthly meetings with its dealer to estimate the number of vehicles required. Toyota markets premium luxury vehicles like Corolla Altis, Camry, Land Cruiser Prado and MPV Innova.
In another case, Tata Motors has agreed to refund dealers the cost of unsold Nano application forms. The company had sold 6.10 lakh forms, but had finally registered 2.03 bookings. The move has helped ease financial constraints for Tata dealers, who were left stocked with 50 percent of unsold forms. The car market is struggling for volumes and manufacturers do not want to put the dealer through any strain which could result in negative vibes between them. Car dealers will heave a sigh of relief with this move.
