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Auto Tech Outlook | Wednesday, July 08, 2020
To maintain viability, many dealers have come up with different strategies which can help them manage their fixed cost and in cost reduction.
FREMONT, CA: Every passing month Indian auto sales are hitting a new low and dealer closure has become omnipresent, the retailers are under pressure to recover from the regular liquidity crunch.
Spike in working capital has increased post GST implementation is declining the situation for Indian automobile dealers who pay one of the highest capital cost compared to their global equivalents. Due to this situation, the sector is landed on a lack of money to fund the monthly expenses such as utility bills, rent, etc.
Some of the banks have also cut the limits by 50 percent for automobile dealers because of the increasing number of NPA and defaulters coming from the business segment. Many dealers are planning to implement different strategies to maintain viability in the near term. These strategies will help them to manage their fixed cost and help them in possible cost reduction
Dealers can take a significant step by focusing more on improving the efficiency of their workforce, and to control the situation, they can also freeze the hiring process for the coming months while if the situation becomes worst, some will resort to job cuts too. Services play a significant role in going forward and compensating for the losses in sales business because a higher amount of revenue is collected from services. Even if any single outlet is in loss, significant decisions should also be taken on the consolidation of outlets. In this manner, the balance sheet of the dealership will be improved.
According to reports, multi-brand outlets for a big dealership can save up to five to six crore in INR every year once the solar panel investments break-even. The dealership has also reduced some deals with wholesale retailers and switching telephone and internet connections for minor reductions monthly expenses. Dealers firmly believe that these steps for cost reduction can improve their liquidity situation, and this can help them enhance their profitability to an extent.
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