Question

Why did the automotive distributors face increasing competition from the local traders and service workshops?

Answer 1

Automotive distributors earn their licenses to store the products of the automotive manufacturer by paying a license fee and spend good amount of capital investment to equip the stores and operating expenses to maintain the stores. As the distributors are only dependent on the sale of the vehicles and parts for their revenues, they need to be wary of the competitive distributors.

But the competition also comes in the form of local traders who purchase the parts from wholesalers and sell it without any license fee to be paid to the firm. They can sell at relatively lower rates due to low investment on stores and lesser operating expenses.

Service workshops create loyal customer base by offering quality customer service based on which they can stock and provide automotive parts to the customer at relatively lower prices.