Increasing investment and operation costs for the auto dealers has compelled the automobile manufacturers in India to increase the commission paid to the car dealers. The first to make a move in the direction is the largest passenger car manufacturer in India, Maruti Suzuki which has decided to implement the increase from January 16, 2012.
According to a Maruti Suzuki India source, there will be a 20-25 basis points increase in the dealers’ commission and the reason for the same are the low volumes being handled by the dealers in an industry with slow sales growth and the skyrocketing operating costs for the dealers with high rentals and expensive dealership management.
According to industry research experts, the other automobile OEM companies are expected to do the same taking the cue from Maruti Suzuki India. Mr. Gulshan Ahuja, Secretary General, Federation of Automobile Dealers Associations states that the operating costs for the dealers have been rising at a greater rate than the dealership margins. A suggestion by the body has been put across the auto industry to review the dealership model and make the requisite changes.
It is also being expected that the increase in the dealer commissions will result in the transfer of additional costs by the automobile manufacturers to the customers, thus making car models costlier to purchase.
