Switching to the Own and Operate model

With soaring land rentals, automotive dealers are running out of options for expansion in almost all urban and semi-urban regions across the country. OEMs, on the other hand, increasingly expect entrepreneurs that own and operate their outlets. One of the options is to expand into the massive rural outback for an opportunity that is so promising. In fact, that buoyed several brands in the downturn. Another perspective supports venturing cautiously into a leased environment to begin with and target a phased consolidation to an own-and-operate model.

Sandeep Bafna of Fort Point has evolved in the automotive retail business and today the group retails Hero Honda, Maruti Suzuki India and VE Commercial Vehicles products. He started his journey with Hindustan Motors and Fiat and has a wide presence in the southern and sub-urban region of Mumbai and Thane. In an exclusive interaction with Auto Monitor, Bafna revealed that his key strategic objective for 2010 is to convert to a self-sufficing own-and-operate model.

How was 2009 for brand Fort Point?

In simple terms, it was a year of consolidation, and in some ways getting back to the growth trajectory. We saw a healthy high double-digit growth. Notably with HHML, there was a focused product launch strategy that reached out to the urban audience as much as rural. We scored over 70 percent of growth over the bikes sold last year. Again, we are talking figures over and above the opportunities that we lost as a function of the labour disputes in Gurgaon.

How was the MSIL and VECV side of  the business?

With MSIL, we have been in the business for just two and a half years, and are learning different aspects of the mass market. One of the key drivers in this business is creation of a new market, previously not possible. We managed to connect well with the cab-drivers segment and undertook an exercise to engage them actively. Today we sell more than 450 units a month as cabs. I don’t think any other MSIL dealer has managed this feat. As far as VECV is concerned, the brand will see much more action post Auto Expo 2010, as the JV plans to re-launch some of the M&HCVs at the lower end of the price bracket.

Has the downturn impacted margins of dealers substantially, and is that a long-term issue?

Well, yes and no. Yes in the sense that some players were troubled with the inventory situation in the last quarter of the last year. But on a medium to long term basis, OEMs aren’t doing anything differently that could impact margins as such. It’s a different story that very few people are making money by selling cars. It’s all about the comprehensive package, servicing, insurance etc, that counts.

How has the business changed over the last decade in general?

One of the things that have changed for good is the way customers expect dealers to position their services. Today even a cab driver walks with a swagger; he knows his requirement. Customers in general are much focussed across the board. So, innovation with and upgrading skills of our teams is a must. As international brands come in, they set new standards in value addition. Finding a solution to a requirement and selling a product for a price that the customer is willing to pay for that requirement is essential.
For instance, a segment of forward-looking cab drivers wish to go for a Swift Dzire, instead of an Omni, but for Dzire, there is a waiting period. So, we started looking at the problem in a different way.