Car companies are blaming everything but themselves for slow growth
When Maruti-Suzuki India Ltd catches a cold, the rest of the automobile industry in India goes into sneezing fits. If you analyse Maruti’s latest quarterly results, you can see that it could have easily avoided the pickle it finds itself in now. To start with, there’s the contentious issue of multiple-stage royalties paid out under, what can best be called, opaque conditions. There appears to be no clarity; but if one believes a global banker familiar with the way some of the suppliers, ancillaries and subsidiaries are structured, it is very likely that between 5% and 7% of Maruti Suzuki India Ltd’s turnover in India goes out of India as royalties.
And there is no denying that much of the research for the more successful models and variants from Maruti-Suzuki, like the Ertiga and the D’Zire, has been done almost totally in India. But the results appear to blame compensation to dealers for excise reductions on stocks held and employee benefits. The reality is the same with other international automobile manufacturers in India. All of them appear to be in India to blame anybody but themselves. And, at present, this can be drilled down to two specific aspects.
One, the industry has been asking for excise cuts, for years now. If excise rates had gone up, the moan would have been the same; so who benefits in such cases? Certainly not the customer, who is regularly faced with a series of bewildering advertisements on discounts and offers which evaporate into thin air when he visits the showroom. This is where the second reason trotted out—high marketing costs—kicks in. If ‘marketing’ means that your dealer’s salesman on the floor is unable, or unwilling, to provide a single composite proforma invoice spelling out exactly how much it will cost for a commodity called a ‘motor-car’, all your marketing is nothing but an attempt to fool the customer.
There is also the moan about high cost of manpower and labour. Why don’t we hear of labour problems or high cost from companies like Amul or Reliance?
In India, the customer votes with her feet and chequebook and is too polite to provide real feedback. The customer increasingly views buying a new motor vehicle as purchasing a commodity, having done all her research online, and taken guidance from a variety of external entities. A dealer becomes somebody who is providing a facility to fill up a KYC (know your customer) form full of useless information like ‘anniversary date’ and collect a payment—a layer of inefficiency she can do without, as she has got used to it with other purchases.
Which begs the question: Why can’t the KYC form and make/model interested in be completed online BEFORE? I, as a customer, select from a choice of dealers in my area, so that all of us are prepared—just like when applying for a passport?
It is one thing that people are buying fewer private cars for a variety of reasons—better public transport, improved online commerce and common sense frugality. Manufacturers reporting lower profits or losses and trying to pass price increases to consumers is another thing altogether. If car companies cannot reduce layers of inefficiencies in their own systems, then they’d better forget about getting more customers.
A visit to an automobile dealer’s showroom is, often, an event where the prospective customer is viewed as an opportunity for not just the sale of a product, but commission to a range of people involved. If you have dealt with second-hand cars salesmen in America, you will get what I mean—it is hustle, hustle all the way. Do anything, but close the deal.
BMW, on the other hand, has introduced a highly paid individual in their showrooms globally, borrowing from Apple, called ‘genius’, whose only role is to explain features of its vehicles and NOT to push a sale at all. Which, if you recall, is what a ‘showroom’ is meant to be. And the best showroom, nowadays, is, as many of us discover, online.
