Anand Mahindra, Chairman, Mahindra Group, has hit the nail on the head when he said auto manufacturers should set store by sales made by dealers to customers rather than by what the manufacturers' ship to the dealers across the country for compiling statistics on car sales. His sage counsel was in the context of the sustained slump in car sales, with dealers nursing a huge stock of unsold cars.
What Mahindra said has considerable validity in itself statistically speaking as shipment statistics to dealers do not tell the full story of the state of the car market. But more importantly, the larger message that can be gleaned is the tacit reiteration of the shopworn cliché, 'Customer is the King'. Mahindra might not have put it in so many words, but the car industry must have a consumer focus is the unstated message.
Indians splurged Rs 19,000 crore in just six days at Amazon’s ‘Great Indian Festival’ and Flipkart’s ‘Big Billion Day’ sales. The combined gross merchandise value of the e-commerce majors from this season’s festive sale was 30 percent higher than in 2018 and 77 percent more than the year before.
Elsewhere, India’s largest carmaker Maruti Suzuki posted its first increase in sales after seven months. It sold 48,000 cars on Dhanteras day alone. The white goods and home appliances sector, too, registered a 25 percent increase in volumes.
It is trite that consumers are by and large price-sensitive. They lap up discounts. The surging e-commerce business in India is substantially due to the consumer proclivity for bargain hunting. Car manufacturers can easily share the array of incentives and discounts they give to the dealers with the ultimate consumers. They must remember that their customers are not dealers but the ultimate buyer.
Car sales, somehow, have bucked this trend until the US electric car major Tesla fluttered the dovecot of the US auto industry, particularly its pampered dealers. Tesla sells strictly through direct bookings only, thereby giving to itself and its customers all the benefits of direct sales. Elimination of middlemen's commission results in consumers benefitting immensely. In the US many states have cocooned the car dealers with laws that prevent them from being fired. Tesla still has managed to circumvent these laws by doing the most sensible thing—not appointing them in the first place!
Car manufacturers joined the party during the festival season by coming down their high horses—by lowering the prices. There is considerable scope for doing this on a sustained basis if the direct online sale model was adopted. Of course, logistics issues have to be overcome. Dealers acquire large lands to stock the cars. They hire staff including salesmen and financing experts besides drivers to take the customers for a test drive. But there is no reason why all these cannot be done by the car manufacturer himself although it would be admittedly difficult for them to spread themselves thin across the country. It is one thing for a Bata to open its own shops across the country but quite another for a Suzuki to do so.
Nevertheless, a beginning can be made focusing on metropolitan cities first. Car dealers pamper their potential customers by visiting them any number of times including to show the various models and letting them test drive in the by lanes near their homes. There is no reason why car manufacturers cannot themselves do all these.
Incidentally, the pick-up in car sales during the festival season debunks to a large extent the Finance Minister Nirmala Sitharaman’s facile millennial theory. Even youngsters respond to price cuts with alacrity setting aside for the moment their environmental concerns.
(The author is a senior columnist and tweets @smurlidharan)
Updated Date: Nov 04, 2019 10:14:17 IST