Automobile dealers to record fastest revenue growth in three fiscals: Report

Automobile dealers are set to record their fastest revenue growth in the coming three fiscals as they see their sales growing 20-25% year-on-year on the back of 12-14% volume growth, as per a report by Crisil Ratings. The growth is aided by increasing preference for personal mobility, higher economic activity, easing supply-side constraints, shift in product mix towards higher priced vehicles as well as price hikes of 5-7 per cent.

The income growth is also aided by higher vehicle sales and greater contribution of the more-profitable ancillary revenue to 10-12 per cent of total income in the current fiscal from 8-9 per cent last fiscal will help stabilise operating margin at 3-5 per cent as compared to 4 per cent in fiscal 2022, as per a study conducted for 113 automobile dealers rated by Crisil Ratings.

Ancillary revenue includes revenue from service, spare parts and insurance. Retail auto registrations had dropped in FY21 and revived partially in fiscal of 2022, which continued to recover in the first five months of this fiscal with recovery in retail demand and easing of semi-conductor shortages. However, revenue recovery will not be common across all segments.

The Crisil report noted that while passenger vehicle (PV) dealers will continue to witness robust recovery, commercial vehicle (CV) and two-wheeler (2W) dealers will grow on a lower base due to subdued sales over the last two-three fiscals.

Dealers in the passenger vehicles segment will see strong volume growth of 17-19 per cent in the current fiscal in line with improved OEM (Original Equipment Manufacturers) growth outlook as well as increasing average realisation per vehicle. This is because of higher proportion of higher priced utility vehicle sales, leading to overall revenue growth of 24-26 per cent.

(with inputs fro0m PTI)