Nearly all Tata Motors vehicle dealers turn profitable after a decade

Tata Motors' diversification into multiple electrified models, which are priced on average Rs 3-3.5 lakh higher than traditional internal combustion engine models, has increased profit margins

Almost 99 per cent of Tata Motors passenger vehicle (PV) dealers have turned a profit for the first time in nearly a decade, according to a report in The Economic Times.

Only 43 per cent of the company’s dealers were profitable in the financial year 2019-20 (FY20), Tata Motors said in a presentation last week. Tata Motors had around 1410 outlets at the end of FY23.

A company dealer said it is the first time since 2012 that Tata dealers have seen such a good balance sheet. A consistent rise in sales volumes based on a year-on-year basis has led to a rise in profits for its deals.  From 2012-13 to 2022-23, car and sales volumes have risen by more than 2.3 times. From 229,325 units in FY13, PV sales at Tata Motors have risen to 538,640 units in FY23.

 

Along with volume increase, the firm’s focus on the profitability of its retail partners and higher contribution of models to the overall sales mix has assisted dealers in increasing their profit margins, said the dealers.  

The company's improved margins, target-driven incentives, focus on retail, and initiatives to improve sales manpower productivity also contributed to its success.

Tata Motors' diversification into multiple electrified models, which are priced on average Rs 3-3.5 lakh higher than traditional internal combustion engine models, has increased the profit margins of its dealer partners.

Typically, dealers are required to contribute to the cost of consumer schemes launched by the company. Tata Motors has reduced the amount that dealers are required to contribute to such schemes to a very small amount, around a quarter of a per cent. This is helping dealers to maintain their profit margins, the report said.

The share of service in a Tata dealer's income is only 25 per cent, because most of the company's models are new and within warranty. This is much lower than the share of service in the income of dealers of Maruti and other manufacturers, who have many decade-old models in their portfolios.

Tata Motors has been more generous than its peers in its annual bonus payouts. It pays an average of Rs 2,000 to Rs 2,200 per car, compared to the industry norm of Rs 500 to Rs 1,000. Dealer confidence is also high, as they expect the car market to continue its growth momentum from previous years in the current financial year.