As passenger car sales soar and surpass pre-Covid levels, the after-sales service has proved to be a laggard.

It is here that the original equipment manufacturer (OEM) and the dealer principal come together to serve their joint customers, and the quality of such service often hinges on the relationship between them.

Paid service jobs from the workshops are a major source of earnings for the dealers that help them keep afloat.

But lately, many customers are finding it easy to get their cars serviced at unauthorised service centres.

Take the case of OSL Volkswagen, which according to the Volkswagen spokesperson, is no longer the dealer principal for the OEM.

“We are in the midst of transitioning from OSL Volkswagen to PPS Motors. All customers’ cars will henceforth be serviced at PPS Motors’ Topsia or Budge Budge facility,” he said.

However, a ground check revealed that the Topsia workshop is closed and the Budge Budge facility is small. OSL continues to service Volkswagen cars that are not under warranty.

Such dealer closures are not just an inconvenience to customers but also for dealer principals.

As new dealers come into play and old dealers try to expand their workshop facilities, there is a crunch for the land where such workshops can come up.

Typically, an auto workshop has polluting emissions such as crude oil and car wash oil that need to be treated. Dealers in Calcutta are demanding a designated area where such workshops can be put up.

An auto hub has been created at Rajarhat where most OEMs have their dealerships. But their workshops are typically at Taratala or Canal Side Road or Topsia.

Said Soham Mishra, the president of the Calcutta chapter of the Federation of Automobile Dealers’ Association (Fada), “The challenge for dealers is that we are not finding organised space for workshops. We have been asking the state government to allot land for automobile workshops. We cannot put up such workshops in residential areas. We need land where we are able to get pollution clearance.

“Automobile workshops have effluents like crude oil, oil in water which has to be recycled through authorised oil reprocessing units. Every workshop has to have an Effluents Treatment Plant (ETP) for recycling water, oil etc,” he said.

Besides the crunch in land availability for larger workshops, dealerships are grappling with spare part prices that have increased almost 15 to 20 per cent.

“We have to source our spare parts from OEMs, we cannot source them from the open market. And as commodity prices have soared, so have the prices of spare parts,” said Mishra.

Dealers also have to buy software from OEMs such as Dealer Management Systems (DMS) and pay an annual subscription for using it to OEMs.

“This system allows OEMs to control our businesses. Internationally, dealers can buy their DMS from the open market but here in India dealers are mandated to buy it from OEMs who have access to every vehicle that is purchased by the dealers, the colour of the models purchased, which vehicle is serviced and every data. After a dealer purchases a vehicle from OEM, it is the dealer’s responsibility. So why should OEMs have to track all this data,” asks Saharsh Damani, CEO of Fada.

“Through this software OEMs do a lot of things like pushing inventory onto the dealer, making him buy models that are slow-moving, and other tactics,” said Damani.

According to Fada, dealership contracts are “highly skewered towards OEM”.

“For instance, the tenure of the dealership in India is not standardised and terms of renewal are couched in uncertainty which increases the risk of dealers,” said Vinkesh Gulati, chairman, of Fada.

A case in point is the exits by a series of OEMs such as General Motors and Ford.

“In the case of the Ford exit, the next day was Ganesh Chaturthi and a number of deliveries had been scheduled. Customers were yelling and refusing to take deliveries as they came to know of Ford’s plan to exit the country,” said Damani.

To address these challenges, Fada commissioned an in-depth analysis of various dealership agreements.

“Among other things, we found OEMs in India exercise tighter control over the dealers’ businesses, despite the OEM-dealer contracts being principal-to-principal agreements.

The termination provisions in Indian agreements are also relatively one-sided.

Through the model dealer agreement, Fada has tried to address many of the issues.

Fada is in talks with OEMs regarding the model dealer agreement. “MG Motors is the first OEM to have agreed to adopt our model agreement in full, Honda has also informed us of their willingness. There are two or three others with whom we are in advanced talks,” said Damani.