The management believes the move will help the company retain dealers.
We have doubled our margins on a combination of both fixed and variable basis. If you just take the fixed margins then they're up by 50% now, Ankush Arora, senior vice-president, commercial passenger vehicle business unit, said.
We want to enhance the experience for our customers even as our dealers need to make money. We looked at the economics and realised the margins would not suffice for them to invest in facilities, infrastructure and people to start delivering the brand experience that we want them to. Our margin structure has evolved to become the best in the industry now, he said.
Tata Motors has 255 dealers, over 570 outlets and 860 sales and service centres. The company's dealership numbers have remained constant over the last one year, after numerous subtractions and subsequent additions.
Beginning October 2013 the fixed component of the dealer margin has been revised from 2.5% to 3.5% of
the purchased value, logistics charges have been raised from R4,000 to R6,000, and a targeted incentive of 3% of the total sales has been brought in.
Beginning August, the company has extended the credit
period from 10 days to 28 days
of interest-free now. If you combine all this the overall margins are now on the higher side of the industry,' said Mohan Himatsingka, a Tata Motors dealer.
Tata Motors' sales has been passing through a rough patch. The company's domestic passenger vehicles declined 37% during the April-December 2013 period to 155,571 vehicles on a year-on-year basis.