Kia Motors is currently locating potential locations for new dealerships with the goal of expanding into underserved areas including Northeast India, Northern Telangana, Karnataka, and Western Rajasthan. “According to Bhat, we are picking areas that will make it easier for us to get to nearby towns and districts.
He claims that these dealerships are being built on a lesser scale in order to save money and speed up the break-even process. The vehicle is sold through the closest large shop in the smaller regions where Kia Motors has been operating through i2S dealerships, which are service and spare part modules. “We are already conceptualizing a strategy that will provide more than the present i2S dealerships, particularly for smaller areas, Bhat continues. Mobile service vans have also been introduced for regions without dealerships.
Smaller-town dealerships for the corporation are crucial to its marketing efforts. For instance, the business launched a roadshow in 26 locations last year to increase brand recognition prior to the launch of Seltos in the market. On the occasion of “Hindi Diwas,” Kia Motors launched a digital brand film for Sonet, according to Shakti Upadhyay, GMmarketing and PR, Kia Motors India.
Although it may have big intentions, observers say Kia Motors’ success in the hinterland will depend on its dealership strategy there.
“Amit Kaushik, country head for Urban Science, notes that while it is a smart idea to enter these markets through service outlets, the company’s success depends on whether it is working with current dealers. The most important component is service, and by providing the facility, most dealers are able to recoup around two-thirds of their investment. The sustainability of current dealers, however, could be impacted if the corporation hires new dealers for servicing.
According to industry estimates, depending on the service load, establishing a service dealership for a mass-market brand requires an expenditure of Rs 5080 lakh. A Kia Motors authorized dealership in a tier I city could cost between Rs. 6-7 crore (including retailing, spare parts, servicing, etc.).
According to Kaushik, another difficulty for the companies is determining the potential of these areas in the absence of proper data.
According to experts, customers in smaller towns tend to favor well-known manufacturers like Maruti Suzuki and Hyundai. It is unclear whether they would be eager to spend on a novel and expensive brand.
The competition in the SUV market, according to VG Ramakrishnan, managing partner of Avanteum Advisors LLP, will only become worse as more automakers introduce new cars in the future. Hyundai Creta is currently a serious rival to Seltos. Think about this In September 2020, Kia Motors sold 9,079 Seltos, while Hyundai sold 12,325 Cretas.
“It is unlikely that Kia Motors will earn a sizable market share in the other sectors where it is strong globally. In light of the automaker’s past failures with Carnival, Ramakrishnan asserts that it must develop a market for these niches.
In This Article...
Is the Indian Kia dealership profitable?
MUMBAI: In the fiercely competitive passenger vehicle market in India, South Korean automaker Kia Motors has emerged as one of the most quickly to achieve operational profitability.
The company produced over 100,000 vehicles in fiscal 2020, the first year of its operations in India, and reported sales of Rs 10,838 crore at a time when the local market experienced its worst performance in a decade.
According to its Ministry of Corporate Affairs records, Kia reported an operational profit, or earnings before interest, tax, depreciation, and amortization, of Rs 308 crore for the year ending March 31, 2020. However, Kia ended the year with a net loss of Rs 326 crore due to interest payments and a hefty depreciation expense.
If Kia is successful in producing 200,000 vehicles during the current fiscal year 2021, the firm may have a revenue of close to $2.4 billion (Rs 17,000 crore), according to ETIG estimate.
Over 105,000 units were sold during the previous fiscal year, with exports accounting for nearly a fifth of the overall volume.
In a market where industry titans like General Motors, Ford, and Volkswagen struggled to reach a 2-3% market share after having been active for more than a decade, Kia has so far in FY21 taken a 5% market share and is vying for third place behind Tata Motors and Mahindra & Mahindra.
Kia now holds a 1315% market share in the industry despite having only three utility vehicles in its model lineup.
In India, the total sales of Kia and sister business Hyundai Motor in FY20 were 63 percent greater than those of Maruti Suzuki, the market leader. They each held roughly a 2324 percent market share.
Up till FY20, Kia has spent Rs 8,771 crore in its operations in India, of which Rs 2,501 crore came from the prior year.
In FY20, it realized an average of Rs 10.2 lakh per vehicle, which was 1.52.1 times more than the next two largest automakers, Hyundai and Suzuki.
Tata Motors’ passenger vehicle division and Kia’s revenue were almost identical in terms of sales, but the two businesses’ operational profits show a marked difference. In FY20, Kia reported a margin of 2.9 percent, compared to a negative 9.8 percent for Tata Motors.
Maruti Suzuki and Hyundai had operating profit margins of 9.7% and 10.06%, respectively.
The Indian subsidiary’s outstanding volume performance is assisting Kia Motors in expanding its scale in terms of worldwide operations. According to a company presentation, India’s contribution to Kia Motors’ worldwide revenue increased in the quarter ending in July-September from 1.4 percent to 3.9 percent.
The largest growth in any market for Kia Motors internationally was seen in the Indian unit’s car dispatches, which increased by 175 percent in the third quarter.
Is the Kia dealership successful?
The data shows that Kia produces an operational profit per car of Rs 91,390 as opposed to a meager Rs 45,810 for a Tata vehicle. It’s also interesting to note that Kia sells cars for an average price of Rs. 10.43 lakh, which is much more expensive than Maruti Suzuki and Hyundai. Together, these two have a market share of about 68 percent. However, it also implies that they have products that lean more toward the lower price ranges. This implies that these cars’ operating earnings will be significantly lower. In contrast, Kia’s fleet consists entirely of premium SUVs and SUV-like vehicles. These segments’ products have higher average expenses overall and better profitability. That is the key factor behind Kia’s success in making such high profits from its Seltos and Sonet models. That is the main factor behind Kia’s better profit margins than Maruti and Tata.
How can I obtain an automobile dealership in India?
Simple Steps for Opening a Car Dealership in India
- Plan your business first.
- Create a legal entity as the second step.
- Step 3: Submit Your Tax Return.
- Step 4: Open a business credit card and bank account.
- Create a system for business accounting in step five.
- Get the necessary licenses and permits in Step 6.
How do I get a dealership?
Starting a successful dealership business in India involves a number of processes. To start a dealership business, you should ideally take the eight stages listed below.
Choose a Product
Selecting the products you want to offer is the first step in becoming a dealer. You need to be aware of what goods are popular in your neighborhood for this. Spend some time getting to know the individuals in your neighborhood, their tastes, and purchasing patterns. To acquire a sense of the goods you can sell, you might also speak with other nearby vendors.
Rope in Suppliers
Once you’ve chosen the goods you wish to offer, it’s time to get in touch with the neighborhood vendors who can order them for you. In order to save money on shipping and product testing and to limit your interaction to a small number of nearby local suppliers, it is preferable, especially if you are a beginner.
Establish a Workplace
The following step in launching a profitable dealership is to open a store, preferably in your neighborhood. Don’t forget to reserve a space for stocking your merchandise while establishing your business. You can start off by doing it from home and save money.
Find a Franchisor
If you think it would be too difficult to start a dealership from scratch, you may always own a franchise. In this scenario, you wouldn’t need to open a store; instead, you would own and manage a franchisee of a well-known brand.
Don’t Forget to Set Up a Credit Policy
A strong credit policy is one of the nuances of operating a dealership business. Verify your buyers’ identities and their ability to make purchases from you. Additionally, be sure to check their credit and build up your credit policy system in accordance.
Build a Strong Network
Creating a strong network of other dealers, distributors, and suppliers is one of the greatest ways to learn how to launch a dealership business. Be aware that one of the most important components of the dealership industry is networking.
Have a Purchase Policy
The best approach to operate a dealership is to purchase goods in bulk, repackage them into smaller pieces, and then resell them for more money. You can generate good earnings in this method.
How do you launch a new vehicle lot?
How to Start Your Own Auto Dealership Franchise in 7 Easy Steps
- Study the industry.
- acquire financing
- Creating a business plan
- Locate a Place to Set Up Shop.
- Get the appropriate documentation.
- Obtain the DMV’s OK from them.
Kia losing money in India?
The domestic market experienced its worst performance in a decade in fiscal 2020, the company’s second year of business in India, but it nevertheless manufactured more than 100,000 vehicles and reported Rs 10,838 crore in revenue. One of the quickest to achieve operational profitability in India’s fiercely competitive passenger vehicle market is South Korean automaker Kia Motors.
According to its Ministry of Corporate Affairs filings, Kia reported operational profit, or earnings before interest, tax, depreciation, and amortization, of Rs 308 crore for the year ending March 31, 2020. However, Kia ended the year with a net loss of Rs 326 crore due to interest payments and hefty depreciation costs. If Kia is successful in producing 200,000 vehicles during the current fiscal year 2021, the firm may have a revenue of close to $2.4 billion (Rs 17,000 crore), according to ETIG estimate.
Over 105,000 units were sold during the previous fiscal year, with exports accounting for nearly a fifth of the overall volume. Kia has so far in FY21 taken a 5% market share in a market where global behemoths like General Motors, Ford, and Volkswagen struggled to cross a 2-3% market share even after being present for over a decade. Just behind Mahindra & Mahindra and Tata Motors, she is rapping on the podium.
Kia now holds a 1315% market share in the industry despite having only three utility vehicles in its model lineup. In India, the total sales of Kia and sister business Hyundai Motor in FY20 were 63 percent greater than those of Maruti Suzuki, the market leader. They each held roughly a 2324 percent market share.
Up till FY20, Kia has spent Rs 8,771 crore in its operations in India, of which Rs 2,501 crore came from the prior year. In FY20, it realized an average of Rs 10.2 lakh per vehicle, which was 1.52.1 times more than the next two largest automakers, Hyundai and Suzuki.
Kia’s revenue was almost on par with Tata Motors’ passenger vehicle division. However, the operating profit situation for the two businesses shows a clear divergence. Kia Motors’ Indian subsidiary’s strong volume performance is assisting in the company’s expansion of its global operations.
What is a vehicle dealer’s profit margin?
April 14, 2021 update – Many of you may have asked how much money auto dealerships make in India and how they might make money in various methods. You are in the right place therefore, since we have described the Indian car dealership margins in this article.
original post 10 June 2020; One of the world’s biggest marketplaces for automobiles is India. India sells about 40 lakh (four million) passenger vehicles annually. The automakers either produce or import their vehicles in India before selling them through dealership channels in this country. To draw in more customers, every firm aspires to establish a wide presence throughout the nation. They need a strong dealership network in order to accomplish that. You’ve probably all wondered how much money these dealerships actually make from selling automobiles alone. Therefore, we shall describe the car dealership margins in India in this article. We’ll also talk about the FADA’s recent demand, which is for manufacturers to fix dealer margin in India.
The OEMs should set the dealer margin on vehicles at 7% of the selling price, according to the Federation of Automobile Dealers Associations (FADA), which made this announcement recently. FADA recently sent SIAM (Society of Indian Automobile Manufacturers), the trade group for the automotive sector, two letters requesting an increase in the set dealer margin to 7% of the selling price. The warning has reportedly been delivered to all automakers, according to SIAM. Additionally, according to FADA, certain automakers have responded positively and pro-actively, and discussions about margin revision with dealers have already started in the automakers’ dealer councils.
A recent survey by the Federation of Automobile Dealers Associations (FADA) revealed that India’s average fixed dealer margin is substantially lower than comparable data worldwide. According to the report, the majority of Indian automakers offer less than 5% of the typical set dealer margins, or between 2.9 to 7.49% on Ex-showroom price across all categories. The largest average dealer margins are offered by MG Motors and Maruti Suzuki in India, at 5.22 percent and 5.07 percent, respectively. These numbers, however, are still well below world standards. For instance, the dealer margin for automobiles is between 8 and 10 percent in the United States, between 9 and 11 percent in China, and between 13 and 14 percent in France, Germany, Italy, Spain, Belgium, Denmark, and South Africa.
The average margins that some automakers in India offer to car dealers are shown in the following table, from highest to lowest:
According to FADA, an average fixed margin of 4-5 percent is insufficient given the amount of investment required of dealers and the significant ongoing costs they must incur. Ashish Harsharaj Kale, the president of FADA, commented on the matter by saying, “If you take a look at the kind of input that a dealer puts in, especially during the last four to five years, we are at such a low level globally and elsewhere also in India at 4 to 5 percent. Profitability has decreased over time. Five years ago, these margins were acceptable, but not now “.