Automobile dealers in India are facing low margins on electric vehicles (EVs), despite continued sales growth in the segment.

In October, EV penetration stood at 11.5%, as demand exceeded supply amid rising fuel prices, increased driving range and prices approaching those of internal combustion engine (ICE) vehicles, according to the Federation of Automobile Dealers Associations (FADA).

"India is one market wherein we get the lowest margins as far as electric vehicles are concerned," Sai Giridhar, President of FADA, told media sources.

The shift towards electric mobility is requiring dealerships to upgrade infrastructure, establish specialised workshops and invest in tools and trained technicians. These investments are increasing operating expenses, while EV workshops generate lower revenue than those servicing ICE vehicles, he said.

Dealers have also expanded into Tier 3 and Tier 4 markets, adding to short-term costs. These investments are aimed at establishing the dealership network and providing sales and after-sales support as EV adoption expands.

"Dealers should be adequately compensated," Giridhar said.

The industry body has called for dealer margins to align with global standards to account for the investments required for the transition.

Rising costs put pressure on dealer profitability

Dealerships also face higher workforce and operating expenses for infrastructure not specific to EVs. The cost of employing and retaining trained personnel has increased, while workshops require further investment to service vehicles with newer technologies.

Giridhar cautioned that sustained pressure on profitability could affect the customer experience, as rising costs may make it difficult for dealerships to maintain service standards.

Unlike original equipment manufacturers (OEMs), which can factor rising costs into vehicle prices, dealerships have limited flexibility to increase earnings. "For the dealership, we don't have that kind of luxury. We can't increase the price. We can't mark up," he said.

Digitalisation can improve dealership productivity

The industry body is considering digitalisation to improve productivity and workforce utilisation. Technology could help sales teams handle more customers without a proportional increase in staffing.

Giridhar called on OEMs and dealers to work together to address profitability concerns as the industry invests in new technologies and expands across markets.

"The OEMs and the dealer fraternity should sit together and solve this profitability puzzle," he said.

Despite the margin concerns, Giridhar said EV demand currently exceeds production in both the two-wheeler and passenger vehicle segments. He attributed this to higher fuel prices and uncertainty arising from the situation in the Middle East, which are also influencing consumer interest in EVs.

As EV adoption expands, Giridhar said the economics of dealership operations and after-sales support will also need to be addressed alongside vehicle production and availability.