It’s been six years since Hover Automotive India and Nissan Motor Co. Ltd. entered a master franchisee to sell Nissan branded cars in India. Nissan had earlier declared on February 14, 2014 that they are taking full responsibility of sales, marketing and distribution of all Nissan branded vehicles and parts with immediate effect.
When Nissan first started its operations in India they formed a collaboration with Hover Automotive India as they believed that they had no prior experience in the country and need a partner to grow. Hover was formed as a partnership between Moez Mangalji, an NRI based in the US with interests in the hospitality business, and G.M. Singh, a Mumbai-based entrepreneur and former Honda cars dealer.
Problems first emerged when dealers refused to take deliveries of the Nissan Evalia in December 2012. They were not happy that Hover was eating up their margin on sales which was anyway so low. Somehow an understanding was reached but the milk had already started turning sour. Another blow came eleven months later when Nissan announced that it would market and distribute cars with the Datsun label on its own (Report here).
Master franchisees are a difficult concept to work out as a single brand dealership as they end up adding another stratum eating up the profit or the margin. The dealers, who had invested heavily, were not happy with the low profits.
The concept of master franchisee is rather new and unknown in India as manufacturers right from Maruti Suzuki to those as new as Volkswagen have appointed their dealers on their own.
After the announcement by Nissan in February, Hover immediately declared it invalid and threatened to take Nissan to the court (Report here). They had filed an interim and emergency relief against Nissan at the Singapore International Arbitration Centre. In the proceedings that followed, Hover lost the challenge in March according to Livemint.com. This was a signal for Hover that it is now indeed time for them to start bringing down their shutters.
Hover has apparently asked its 180 people strong workforce to start looking for jobs. It has been reported that the employees have also been told that they will be kept on roll for three months but without any salary. They have not even been paid last month’s salaries.
