Will a Retail Format work...?

According to Economic Times report, World's largest auto retail stores are planning to enter the second fastest growing automobile market, India. Autonation from US, Inchcape from Europe, Oman's Saud Bahwan, UAEs Al Futtaim Motors are all in talks with leading car makers to set up retail stores in India. But will this work here?

I think its a big NO. Why?

The automobile market in India, though expected to grow at 15% to 20% annually, is not a matured market like US or Europe. For Indian consumers buying a car, falls in the high involvement purchase relatively more than the consumers of the developed world. So a typical Indian consumer would always want it from a authorized company showroom than from a multi branded  retail outlet. Its always the company showrooms that will be perceived to be better and hassle free. This will be evident from the after sales service pattern in India. Other than the Indian brands Tata and Maruti, there will be hardly any other brand getting serviced out of the authorized showroom. Indian consumers never wanted to take a chance.

Indian market does not have many brands like Ford, Toyota or GM has in US and UK. The company with the largest  product portfolio is Maruti Suzuki. Also in India its only the small car market which is growing at a fast rate unlike other countries where sedans and SUVs also have a good share. Having said all these, the profitability of these stores will be at stake with price competition and high operating costs.

So, for any company in India, its ideal, not to go for retail stores format. Instead companies can invest in setting up more dealerships and expand their service networks.