Amid slowdown in the automobile market, dealers are demanding higher margins from car makers saying higher rental for showrooms, declining sales, increased interest rates and high labour cost are putting pressure on their business.
The Federation of Automobile Dealers Associations (FADA) has said it wants average margin on sales of vehicles to go up to 5 per cent from 2.5 per cent at present.
"The average margin now is pretty bad considering the market situation. Manufacturers should think about increasing it up to five per cent. The dissatisfaction among the members has increased a lot," FADA President Mohan Himatsingka said.
This scenario was even reflected in a recent survey by JD Power, where it was found that around 56 per cent auto dealers were making loss and 10 per cent planning to quit the business, he said.
"In other parts of the globe, the profit margin hovers around 15 to 20 per cent, but this is very low in India if compared to that figure," said Himatsingka.
Expressing similar views, Prem Bagga of Bagga Links said automakers should hike margins for the dealers to make it a sustainable, profitable and viable business.
"Our costs are increasing. Dealers in big cities are having huge pressure of increased rentals of showrooms, and the labour cost is also on the higher side," he added.
Only Tata Motors recently increased the margin up to 4 per cent and that too only on cars, Himatsingka said.
He further said that dealers in urban areas are also not very optimistic of jump in sales during the coming festival season due to the economic environment.
However, Ford India President Joginder Singh said that even the manufacturers are feeling pressure and it was a difficult situation for them as well, under the current circumstances.
FADA Vice President K V S Prakash Rao said that it was a tough time for the auto dealers and they should be prepared to overcome the current phase.