Dealer profitability will be a key priority for the Federation of Automobile Dealers Associations (FADA) as the auto market enters a period of broad-based growth, with the industry body planning to pitch dedicated automobile retail zones across major metros to the government.
Sai Giridhar, president, FADA, said higher volumes are helping dealer margins, but profitability remains uneven across brands. “Without a profitable dealer, I don’t think anything would work,” he said, adding that FADA will work with OEMs to improve dealer profitability across segments.
Proposed Auto Retail Clusters
Giridhar said FADA plans to work with OEMs and state and central governments to develop dedicated automobile retail zones, primarily on government land on the outskirts of major cities. The proposed clusters would bring together showrooms, workshops, training academies and ancillary units, with facilities such as solar power and water harvesting.
The proposal will be submitted to the government and could also help address the industry’s growing manpower and skill requirements through training and upskilling programmes, he said.
The transition to electric vehicles, meanwhile, will require an adjustment in dealership economics, particularly as after-sales revenue from EVs is lower than that from internal-combustion engine vehicles.
“Margins will be set in a way where the dealerships can be sustained with profits. There are service opportunities there but the revenue is far less when compared to ICE, so all this will have to be adjusted accordingly,” Giridhar said.
Dealer sentiment remains positive, with around 87% of dealers anticipating growth, according to Giridhar. He attributed broad-based demand to higher disposable incomes, easier availability of finance and greater access to rural buyers through expanding sales and service networks.
Demand is expected to remain resilient despite vehicle price increases and cost pressures, he said, adding that two-wheeler demand is also broad-based and should continue growing.
The commercial vehicle market is seeing higher freight movement and fleet expansion, particularly in rural areas, which should support further growth, Giridhar said.
He also expects electric mobility to gain momentum. Delhi’s EV policy, scheduled to take effect in 2028, could make EV purchase prices more comparable and boost electric two-wheeler demand. However, OEMs will need to ensure timely vehicle supplies to meet any increase in demand.
The “chaos” around ethanol and E20 fuel is also easing, Giridhar said, with OEM standard operating procedures helping dealers address customer concerns and buyers increasingly recognising that there are no major issues with E20.
FADA will push for better implementation of existing rules governing trade certificates and vehicle registrations, with Giridhar calling for processes to become faceless and paperless.
Over the next 12-18 months, Giridhar sees substantial growth potential in passenger vehicles, given India’s relatively low car ownership compared with other markets. However, he identified skilled manpower as a key threat, with the industry needing more workers and clearer career paths.
He also expects dealership consolidation to continue as more brands enter the market, with dealers merging as the industry evolves.
