Auto / Maruti Suzuki looks to set up small-format Nexa showrooms

Livemint : May 28, 2019, 11:06 AM

Maruti Suzuki India Ltd, the country’s largest vehicle manufacturer by volume, aims to set up small-format and mobile showrooms for its Nexa chain of premium dealerships. The move could improve the profitability for the dealers and reduce the overall investment burden.

The new small-format dealerships will improve the reach of Maruti’s premium products in small towns and rural areas, said two people aware of the development, requesting anonymity.

“We have been continuously getting requests from customers seeking the Nexa experience in the cities where we were not present. To serve these customers, we plan to establish smaller Nexa showrooms. These will have a 2-car display facility and will offer the same Nexa experience offered by our current Nexa outlets across the country. These showrooms will help us come closer to customers seeking the Nexa experience and enhance customer convenience," a spokesperson of Maruti Suzuki said on Monday in response to an email.

“Nexa is the most successful premium retail network in the country. In less than four years, it has established itself as the country’s fastest-growing retail channel and contributes more than 20% of Maruti Suzuki’s total sales. Nexa is present in over 200 cities with more than 360 outlets. It has more than 9 lakh happy customers," said the spokesperson.

The Nexa chain of dealerships is restricted to top cities, as the products typically cater to the well-to-do urban buyers. Return on investment has also been declining as the cost of setting up a Nexa showroom in metros and tier-I cities are substantial because of increased competition, high real estate prices, employee costs and other operational expenses, return on investment has been declining for dealers. Maruti aims to expand its reach to smaller towns and cities through premium dealerships, given that sales volumes in urban centres have been declining because of the emergence of ride-hailing services such as Ola and Uber.

The decision is part of Maruti’s cost-cutting initiative, which also looks to help all stakeholders, including dealers, to increase profits, according to one of the persons mentioned above.

“The small-format outlet will require lower investments and will provide some relief to dealer partners. Also, apart from Nexa, the Arena channel can also be included in the small-format model. Maruti is trying to reduce dealer costs at different levels and some of this will also reflect in workshops," the person said.

Maintaining financial viability of dealer partners have been high on the agenda of most vehicle manufacturers, given that dealers have been working with stressed balance sheets.

Maruti had launched the Nexa chain of premium dealerships in 2015 to sell its products priced at more than 6 lakh.According to the second person, Maruti treats its dealer partners as part of the company and not a third-party. “This move will limit the amount of money that needs to be invested and will be a welcome development for the dealers at a time when banks are reluctant to lend to automobile dealers. The company has also told its dealers not to spend money on setting up separate service centres for Nexa vehicles. They can set up separate lines and counters for Nexa customers in their existing workshops," he said.