TSM STANDS TALL IN USED CARS TRADE SAYS THE HINDU “BUSINESS LINE”
TSM Cars – pioneers in used cars sales in Chennai has been featured today in The Hindu Business Line newspaper.
Read the article online here.
Customer commitment and brand obsession keep this Chennai-based firm going strong
Named after the founder who kicked off operations in 1935, it is now being run by the third generation: N Balasubhramanian, his cousins K Mahalingam and K Ravishankar.
While Mahalingam and his younger brother Ravishankar operate out of the corporate office in Royapettah â€“ a stoneâ€™s throw from where their grandfather first started dealing in used cars from under a tree â€“ Balasubhramanian works at the Velacheri outlet.
What has kept them going is the trust and loyalty of their customers who too span generations. It is common to hear the TSM trio use phrases like â€œnot letting our customers downâ€ and â€œkeeping everything above boardâ€. It is these mantras that have not only retained their name but also helped them grow in a largely disorganised market.
Mahalingam says there are a few issues germane to the industry which are both a threat and an opportunity. â€œWe are one of the few tax-complying used cars dealers. This business comprises nearly 80 per cent individual traders. We do not deal with cash and walk away from cash deals even if there is a lot of money to be made,â€ he says.
According to Mahalingam, customers baulk at the idea of having to pay one per cent tax collected at source for transactions above â‚¹10 lakh. â€œWe have to take it from the buyer and pay on his behalf into his account. Most customers view it as a cash rather than tax payment.â€ They would prefer TSM to give them a net price and pay tax on their behalf instead. â€œOur margins get eroded,â€ says Mahalingam. TSM works on a 5-6 per cent margin.
The partners are also not sure how GST will unfold. Many customers from villages do not have permanent account numbers. There have been instances when financiers did not endorse the loan sanctioned to the customer which the latter did not disclose when they sold their cars to TSM.
Likewise, the Internet is a double edged sword. Todayâ€™s generation checks out a vehicleâ€™s price online as well as TSMâ€™s Google rating. The company has a portal where it displays cars for sale and also buys leads from other portals. Ravishankar feels the conversions are not at the level they would like it to be.
What changes have they seen in their business? Plenty, says Mahalingam, since the time he came on board in 1988 and the landscape only had Maruti, Hindustan Motors and Premier Automobiles. The 1990s saw a proliferation of international brands and an increase in the number of used cars.
Earlier, TSM acted as brokers in bringing the buyer and seller together and collecting a commission. Now, it does trading where it offers a spot price to sellers who can walk out with a cheque in half an hour flat. This change was driven by customers who did not have the time to wait for a buyer.
Even in the digital age, Mahalingam and Ravishankar believe that the role of an intermediary like TSM will only grow. Checking the authenticity of documents and ensuring their proper transfer needs a lot of running around and maintaining records. â€œWe have appeared before various agencies to answer tax-related queries on behalf of our clients,â€ says Mahalingam.
TSM deals in 220-250 used cars a month and can do more but for its obsession with providing quality service and ensuring that brand value is not compromised. For TSM to grow, Mahalingam says it needs to train and develop more managers. â€œWe have had enquiries to set up franchisees but are afraid to dilute our brand,â€ he adds.
In the days when used cars were still bought and sold through classified advertisements in newspapers, it was TSM which pioneered the publication of a grid that gave the approximate price of a car.
How is the value of a car decided? â€œOut of 10 cars, if I am able to sell one that has done around 40,000 km and is three years old for around â‚¹3.50 lakh, then that number becomes the median. Based on the repairs and refurbishments required, the price may go up or down,â€ says Ravishankar. Mahalingam adds that it is a function of the forward sellable price minus estimated expenses and margin.
There is no trick, assures Balasubhramanian. â€œFirst, we have to find todayâ€™s price of a new car with nearly eight variants in the price band of â‚¹5-8 lakh,â€ he says. Depreciation calculation comes next, followed by evaluating market response and the waitlist.
According to Ravishankar, cars in the â‚¹2-4 lakh band such as i10, Santro, i20, WagonR and Swift are in demand followed by sedans in the â‚¹4-7 lakh range, led by Honda City. There is good demand for well-maintained luxury cars in the â‚¹15-35 lakh range that have not clocked too many kilometres.
Despite requests from carmakers, TSM has shied away from setting up new dealerships. â€œWe took a decision that our return on capital would be better in this business. I am not saying we will not do a dealership but will figure it out if the right opportunity comes,â€ says Mahalingam.
What is the mandate given for his US-educated son Anirudh, who has joined the business? None, says Balasubhramanian. There are a few mantras though that he has passed on â€“ do not lie; truth is just truth, however bitter it is. Two, do not touch something that is not yours. Three, under no circumstances, should you compromise on ethics. These are the mantras passed down over the years.