Shaman Cars moves up the value chain

How was the Ford segment of the business doing before you decided to exit?

Of about 400 units a month sold in Mumbai, we sustained a marketshare of over 40 percent. Fiesta was the best seller, while Endeavour clocked a distant second. It was primarily a move up the value chain for Shaman from the earlier retail associations with Fiat and Tata. As we enter the market with Volkswagen, we take with us key learnings from our former association.

In terms of margins, how has the recession affected the automotive dealership business?

The market is extremely competitive, so margins are always squeezed. Then again, outright sales constitute just a part of the margin pie, other components being financing, insurance, servicing and a host of accessories. What probably shook the retail business is that there was too much standing inventory with some players. So one of the significant lessons was in the area of inventory management. Typically on Ford, on a cumulative basis, we were losing money on every car sold. So it made sense to look for a better alternative. I understand that the Figo would be retailed soon as a small car, so some would like to think it was a bad time to severe ties with Ford. But my homework tells me that the new car will be priced at the higher end of the price band where the cross-segmentation is eating into volumes.

You have worked with OEMs from various geo-cultural backgrounds. How has your experience been so far?
That’s one of our expertises we have managed fairly well: to assimilate the best practices of several brands and insulate the retail business from pitfalls, if any. Volkswagen was looking for a partner in Mumbai as Presidential Cars had relinquished their dealership, creating a vacuum in the Mumbai region. We now sell Honda, under the Arya

Honda brand, Volkswagen under the Downtown badge and are gearing up to inaugurate a Mercedes-Benz India (MBIL) facility in central Mumbai soon. So from Japanese, American to German, it is quite a diverse portfolio.

What is the kind of initial investment in the VW and MBIL facilities and how many cars, do you think, is possible to retail on a monthly basis?

We could end up selling a combined figure of 60-70 Passats and Jettas in the Mumbai region, as we are likely to be their singular dealer in Mumbai for a while. Of course other ventures would come up soon, as VW is aggressive in its customer reach programme.

For Mercedes-Benz, we cannot give a volume break-up at this point. The average investment per dealership is roughly to the tune of Rs 2 crore. Again, we are fortunate to have operated out of completely owned premises or else we would have been out of the business as land rentals are a significant component of the cost structure.

Increasingly, OEMs are scrutinising prospective dealers for a sound resource backup. What has been your experience?

VW would not have considered us if we were to operate out of leased premises. Besides sound knowledge of the business, most international players demand ownership of land, a strong cash chest, willingness to embrace a modern IT backup and train sales staff to international standards. We have close to 15 sales personnel in this 2,000 sq ft space, all trained by VW to their interaction, product training standards. Another emerging requirement of premium carmakers is integrated ‘sales, service, systems and spares’ or the 4S approach.