one are the days when you could walk into the showroom and demand a discount. In fact, many dealers are happy to let go of your booking if you ask for self-insurance these days.
BHPian Mechb63 recently shared this with other enthusiasts.
Hello to everyone here. I have joined this forum recently and look forward to becoming an active member over here. Working as a DSA (direct selling agent), I have noticed this weird practice that has been going on in the new car business and thought of sharing it with you all.
The new car market, although with good numbers to showcase, is undergoing massive turmoil. The so-called semiconductor shortage has led to massive waiting periods for almost each and every car in the market, across various segments.
For example, for a Mercedes GLS 400d, you would be expected to wait for 8 months. As a matter of fact, from what I have heard is that there would be no GLS 450 coming to India for this year. At the lower end of the spectrum too, you have cars like the Mahindra Thar, Hyundai Creta, hell even the humble WagonR CNG which would have a waiting period of anywhere between 3 months to a whole year.
So obviously, there is a long waiting list of customers who are desperate to get their hands on a new car. If today, I were to spec a top of the line Rolls Royce Phantom, I would understand that the car is being made to my specification and yet, I just have to wait for around 6 months. Why would somebody wait for a year to get their hands on a regular run of the mill Ertiga CNG or the Mahindra Thar?
As a result, greed has crept into the mind of dealers all over the country. Gone are the days when you could walk into the showroom and demand a discount. In fact, many dealers are happy to let go of your booking if you ask for self-insurance these days.
However, in the world of business, it is fair enough for them to say no to discounts and sell cars at full price. Unfortunately, greed has now gone beyond full price. A demand for a ‘premium’ or as they say, ‘aap on bharo’ has become a normal thing to hear in the industry these days.
Now you may wonder, with the strict scrutiny of the parent company, how are dealers able to do this? How can they get away with such malpractice and hide it from their parent company? There are multiple ways that I have seen until now, listing a few:
Use the network of DSAs:
Almost every sales executive in any dealership in the country relies on a good number of DSAs to help them achieve their monthly targets. The dealership can have a mutual agreement with a particular DSA and accept this additional payment. Moreover, if in case things go south, the dealership can always shift the blame to the DSA and claim that we were not involved in the additional payment that was asked for. The DSA happily manages to make a quick buck in the middle while the dealership laughs straight to the bank with no risk involved.
Compulsory sale of add ons:
Many a time, this premium amount is disguised as a compulsory accessory package a customer is forced to take. Instead of accepting hard cash, the dealership makes the customer buy a number of accessories at highly marked-up prices. This way, the dealership can show a clean sale as well as mint a good sum of money on the sale of these overpriced products. The dealership will also not let the incentive for selling products like extended warranty and/or a service pack go out of their hands and would happily ask the customer to cancel if they do not agree to their demands.
Taking advantage of loopholes:
I can explain this particular case in a better manner with an example. A renowned premium brand recently took the responsibility for selling cars to its customers directly. The brand would take the ex-showroom and TCS amount of the car while the dealership would accept payments for registration, insurance and other add ons. By doing this, the brand has put a stop to the practice of dealerships selling out of their territory, attracting customers with over the top discounts. However, a loophole exists, where a dealership can sell in open territories. These open territories are generally union territories where people would register their cars to save tax on registration, for example, Daman, Pondicherry, HP and so on. So if in case a particular dealer has a car that is not freely available in the market, dealerships are able to find buyers outside of the state, with the help of DSAs of course, and charge a hefty premium and make a good amount.
However,the major concern of mine is not the unethical practice, the major concern I have is, why are cars being hidden from customers?
Why is there a market where people are actually paying over sticker price to get their car and even more surprisingly, are able to get their car immediately after making such payments and are made to wait if they do not do so?
I understand the customers’ POV here, considering the massive price hikes happening now and then and the fact that one must pay prices applicable at the time of delivery, they would not mind paying up more now and having a car in their garage right away. But if there are cars which become magically available by paying more, why is there a need to promote this no discount, pay over full price culture.
The Kia Seltos for example has been a car that has sold until now without a single rupee worth of discount all over the country until now since it was launched. From what I know, most Kia dealerships even deny paying commission to DSAs for bookings of cars like the Seltos, Sonet and Carens.
Is there a possibility that scarcity has been created so that customers do not feel eligible for discounts? Have car companies knowingly or unknowingly united to recover from what has been a rough time for business? Well, there might be no substance in this conspiracy theory I have but what irks me is the fact that new cars have become way too expensive and have driven the cost of used cars up as a result. Additionally, if there is an actual shortage of cars in the market then these folks who are paying up to cut the queue are essentially robbing the next person in line off of their car, which would essentially encourage the next person in line to pay over the sticker and the chain goes on and on.
I sincerely hope the world comes to normalcy soon and people stop paying these ridiculous over sticker prices so others could stand a chance to get delivery of their cars and the used car market returns to regular prices as well.
Here’s what BHPian anjan_c2007 had to say on the matter:
History repeats always:
Seems like we are reenacting the 1960’s, 70’s and even 80’s decades’ scenario. The brands Vespa/Bajaj/Priya, Lambretta (not Lamby) , Fiat/Premier, Ambassador and later the Maruti 800 among the many had waiting lists stretching a few hundred meters to a few kms long if printed on a sheet. Unofficial premiums ruled the markets and depending on the season whether festival or marriage and so on, the premiums would vary. And cancellations would be rare and few. The lucky one with an allotment letter would immediately receive the unofficial premium offers from the desirous persons who would rush to contact him with the dealer in many cases helping both the seller and buyer for a cut.
But the rider here would be that all motor vehicles would not be transferable to a new name by any RTO in the country under law before the expiry of two years of ownership of the first owner of the brand new vehicle. This was purportedly and overtly to prevent malpractices. But with undated and signed transfer of ownership RTO documents by the existing owner, the new owner would be happy to take possession.
And regarding priority allotments and breaking the queue, there would be a central government servant, armed forces officials, press/media (allotted by the state Chief Minister at his discretion) and similar quotas. But the central govt servant and defence quotas would too have at least five year or more waiting lists that I have known in case of quite a few relatives and family friends. However, the press/media quotas would mature much sooner if the respective Chief Minister was pleased.
The same scenario has come back under a new guise now in 2021/22.
Here’s what BHPian buzzy_boy had to say on the matter:
The price of elastic goods (like cars) are determined primarily by the demand. R. C. Bhargava made a pretty reasonable note during an interview, which I’m paraphrasing here “if I’m able to sell all that i manufacturer, why should i offer discounts”.
The pandemic, and the government’s response to it, certainly seems to have changed the demand pattern. In my observation, more people want to buy bigger, more expensive and safer cars. Also, most of the market are not willing to keep their vehicles for more than 5 years.
So honestly, I don’t think it is fair to expect discounts from the manufacturers – they have a business to run. As long as they don’t form cabals to artificially modify the demand supply equation, and the prices, I don’t have a problem with them. I trust the state to ensure that this does not happen.
M&M have started a new, more cynical trend of ensuring faster deliveries for the XUV 700 if you subscribe through their leasing arm. Obviously this would yield more profits if they find takers.
The dealerships on the other-hand are blatantly unethical. I recently test drove the Altroz and the dealer lied to me about prescribed service intervals. They also want to milk the most out of the incomes they make through loans, insurance, and accessories. You can’t blame them for trying to maximize their profits, but it somehow does not feel right to deploy coercive tactics.
The situation seems to be far better than in the US. My friend had to pay 10% over the MSRP to buy a Ford Escape.
So in summary, I think the best thing we as buyers can do are the following:
- Keep our cars for longer.
- Prefer buying used cars.
- Don’t expect immediate delivery (i know this sounds harsh).
Here’s what BHPian dextor had to say on the matter:
I believe these malpractices by dealers are well known by all and even the car companies. Something which is very visible “Handling charges” although illegal but everyone takes it and even mentions it in price sheets.
Companies know about it and will also promote it (in the background). For them it is like if a dealer can earn money through other ways, it becomes easy for them to give lesser commission to dealer to sell the car. So company has more money and clean slate.
It is very easy if a company wants to restrict these malpractices. Now that everything is online (even when we book the car), the system can be made transparent. Company can disclose on daily/weekly basis how many booking have been fulfilled and based on booking number a buyer can know when his car is arriving.
Keyword: The curious case of priority car deliveries & long waiting periods