Automobiles have evolved from a luxury to a necessity today. With increased disposable incomes, people are ready to spend on this necessity, which has led to the present high stature of the automobile industry. However, many prospective automobile buyers cannot fulfill their dreams 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 unorganized players in the industry, buying a pre-owned car or scooter can prove to be a dicey decision. However, with the entry of organized players and their assurances about the condition of automobiles, buying a pre-owned automobile is no longer a bad choice. Some organized brands in the pre-owned automobile market include Mahindra and Maruti. Considering the growing demand for a pre-owned car, players in the industry have opted for the franchise route.
This has added yet another segment to the automotive franchise industry. Franchising is the best way forward to expand and make this wonderful opportunity available to every nook and corner of the nation. As Jagdish Khattar, Chairman and Managing Director of Carnation Auto, says, “We propose to pursue the franchise model, as it will give a 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 in the sector.
Automobile franchise concept
The market for pre-owned cars in India is dominated by unorganized players, with only 20 percent of the market being contributed by organized players. The size of the pre-owned car market is estimated to be the same as that of new cars, around two million vehicles per annum. As per Yatin Chaddha, VP of Mahindra FirstChoice, the market is speculated to grow at 20 percent per annum in the next five years.
The industry’s current size is approximately 2.2 million vehicles per year, which is the new car market. However, owing to people’s booming economy and rising incomes, 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.
A few of these companies (Mahindra FirstChoice and Popular Car World) successfully exercised the franchise model to expand their presence across the nation, while the others (Maruti True Value and Carnation) are focusing on franchising businesses to spread across the nation shortly. Chaddha says, “Franchising is a good option for entering the booming business of pre-owned cars.
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Entering the pre-owned cars market
Most of the organized players in this domain have ventured into pre-owned car retailing with the mission and vision of providing consumers with a wide choice and making it professionally organized 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 and could not be sure of the technical condition of the car being shown to him.
They could not check the background or legality of the previous owner and did not benefit from dealing with an organized, national-level player. This need gap led to the inception of Mahindra FirstChoice.” At the same time, Maruti True Value channelizes its expertise to ensure transparency and fairness in its transactions in pre-owned cars, which helps extend its relationship and emotional connection with customers.
Opportunity
With the endeavors of the various players, the sector offers immense growth potential for franchisors and entrepreneurs who aspire to be part of this emerging sector. Chaddha says, “Owing to their knowledge of local conditions, franchisees can greatly help in areas like personal involvement, sales promotion, manpower planning, retention, etc.” Suppose you are also weighing your options to enter this promising industry.
Franchising is the best option for starting a pre-owned car business. All you need is a sound financial background to afford an investment that ranges from Rs 20 lakh to three crores, depending on the area of the outlet. For example, 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 automobile franchisees differ from company to company.
Franchise benefits
Suppose you fulfill the eligibility criteria of joining hands with a well-established brand. In that case, 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 the demand/ supply situation in secondhand cars
• Car evaluation and procurement process
• Payment process for cars being procured
• Car refurbishment process
• Payment collection for cars being sold
• Sale agreement with the customer
• Transfer of car documentation and so on
To summarise, the pre-owned car industry is flourishing. Major steps are being taken to introduce warranties or certifications on secondhand cars, thus bringing credibility and transparency to the highly unorganized market.
