Dealer-distributor ties

This means that we all must help each other in order to survive, and this rings true even in the business world, for example in the case of the distributor and the dealer. 

Smaller automobile manufacturers that have entered the Thai market in recent years usually have not had many conditions when scouting for a dealership or sales area for each province. They feared that local investors would not join up since there was no promise on how much sales or profits they would get in return. 

Meanwhile, the larger distributors who have been in the country for a long time and enjoy high sales may act differently. If an existing dealer that has been doing business for a long time fails to expand its facilities, or is unable to accept a higher sales target ordered by the distributor, they must accept if a new dealer is appointed to share their sales area. 

However, the situation in the Thai auto industry has changed significantly during the past year. The mega flood last year had caused disruptions in production, leading to a historic number of back orders, and the government’s First Car Buyer Programme has made the situation worse, with more orders being placed. This has also led to smaller auto companies with vehicles in stock enjoying dramatic growth, especially those that are not among the top three brands. 

The swift growth in auto sales has somewhat led to a deterioration in the relationship between the distributor and some of its dealers. Distributors who see dealers enjoying high sales figures want them to use the profits to invest in facility upgrades and stock more parts. Some even want dealers to raise sales projections to the same level as this year. 

But dealers in certain areas think that in the past the distributor had never asked them to do such things, and that sales in 2012 does not truly reflect the real demand for the brand, but due to the fact that customers cannot wait for the long delivery period of the model they really want. 

So if they use the profits to invest in new showrooms and service centres, what would happen if sales start to return to the normal level in 2013 as the major brands are back in business? Would the distributor take any responsibility or offer support? 

The difference in opinion has caused distributors to appoint new dealers for the same sales area as the old ones, creating doubts between the old dealers and the distributor. It is believed that during the second half of 2013, certain dealers could decide to sign out and sell other brands instead. 

At the same time, some distributors are trying to protect their own interest by sending direct and indirect messages to their dealers – those who do business with other brands may be stripped of their rights. 

The lack of trust between the distributor and the dealers could inevitably cause damage to that particular brand – there have been examples in the past and both parties were hit by damage. 

If this happens, the major brands would enjoy the situation. Apart from being able to recover from the production crisis, the strong dealer network and the bonds between the dealers and the distributor will enable them to achieve the growth they aim for. 

The conflict between the distributor and the dealers would depend upon how much trust exists between them. If each is concerned only about short-term benefits, there is a risk of damage to both sides. 

But if the parties treat each other with honesty, it would benefit both of them.