Automobiles have evolved from being a luxury to a necessity today. With increased disposable incomes people are ready to spend on this necessity. This has led to the present high stature of the automobile industry. However many prospective automobile buyers are unable to fulfill the dream due to the high cost of brand new automobiles and sky scraping interest rates. Therefore, a pre-owned car can be more practical in such situations. Nevertheless due to the unorganised players in the industry, buying a pre-owned car or a scooter can prove to be a dicey decision. However, with the entry of organised players and the assurance given by them about the condition of the automobiles, buying a pre-owned automobile is no more a bad choice. Some of the organised brands in pre owned automobile market include Mahindra and Maruti. Considering the growing demand for pre-owned car players in the industry have opted for the franchise route. This has added yet another segment in the automobile franchise industry. Franchising is the best way forward to expand and make available this wonderful opportunity to every nook and corner of the nation. As Jagdish Khattar, Chairman and Managing Director, Carnation Auto says, “We propose to pursue the franchise model, as it will give wider spread to our network and help in building our brand.”This article discusses the franchise opportunity in this emerging industry and the various players of the sector.
Automobile franchise concept
The market for pre-owned cars in India is dominated by the unorganised players with only 20 per cent is contributed by the organised players. The size of the pre-owned car market is estimated to be the same as that of new cars, which are around two million vehicles per annum. The market is speculated to grow at a rate of 20 per cent per annum in the next five years. As per Yatin Chaddha, VP, Mahindra FirstChoice, “The current size of the industry is approximately 2.2 million vehicles per year, that is, the same as the new car market. Owing to the booming economy and rising incomes of people, the pre-owned car industry is expected to grow exponentially.”
With the entry of companies like Mahindra FirstChoice, Popular Car World, Maruti True Value, Carnation and many more, the sector is poised to grow aggressively. Few of these companies (Mahindra FirstChoice and Popular Car World) are successfully exercising the franchise model to expand their presence across the nation while the others (Maruti True Value and Carnation) are focusing on franchising their businesses to spread across the length and breadth of the nation in the near future. As Chaddha says, “Franchising is a good option to enter the booming business of pre-owned cars.”
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Entering the pre-owned cars market
Most of the organised players in this domain have ventured into the pre owned car retailing with the mission and vision of providing the consumers with a wide choice, to make it professionally organised by bringing in transparency, quality and trust. Supporting this, Chaddha says, “A customer looking for a pre-owned car was not given a choice of cars, could not be sure of the technical condition of car being shown to him, could not check the background or legality of the previous owner and did not have the benefit of dealing with an organised, national-level player. It was this need-gap which led to the inception of Mahindra FirstChoice.” Whereas Maruti True Value channelises its expertise to ensure the transparency and fairness on its transactions in pre owned cars, which helps in extending its relationship and emotional connect that it enjoys with the customers.
Opportunity
With endeavors of the various players, the sector offers immense growth potential not just for the franchisors but for the entrepreneurs as well who aspires to be a part of this emerging sector. As Chaddha says, “Owing to their knowledge of local conditions, franchisees can greatly help in areas like personal involvement, sales promotion, manpower planning and retention etc.” If you are also weighing your options to enter this promising industry, then franchising is the best option to get yourself started with your own business of pre owned cars. All you need to have is sound financial background in order to afford an investment that ranges from Rs 20 lakh to three crore depending upon the area of the outlet. Mahindra FirstChoice requires an area of 500- 1, 000 sq. ft along with a parking space of 15- 20 cars for its franchise store whereas for its superstores, the company requires an area of 25, 000 – 40, 000 sq.ft with an investment of Rs one to three crore. However, the eligibility criteria for selecting the automobile franchisees differ from company to company.
Franchise benefits
If you fulfill the eligibility criteria of joining hands with a well established brand, you qualify to enjoy a strong training culture and support which is required to run the franchise store as per company designed processes. Being a new automotive franchise in the network, you will be provided with:
• Store layout, interiors, furniture etc
• Management of the franchise outlet and the dealership staff
• Understanding demand/ supply situation in second hand cars
• Car evaluation and procurement process
• Payment process for cars being procured
• Car refurbishment process
• Payment collection for cars being sold
• Sale agreement with customer
• Transfer of car documentation and so on
To summarise, the industry for pre-owned cars is flourishing taking major steps in introducing warranty or certifications on second hand cars. Thus, bringing in credibility and transparency in the highly unorganised market of pre owned cars.