A snapshot of the car servicing industry in India
Indian automobile industry is the largest in the world and accounts for more than 7% of the country’s GDP
Several initiatives by the Govt of India and increasing presence of major automobile players in the Indian market, are expected to make Indian car market a world leader by 2020. Resultantly, the car servicing business is growing faster to meet the increasing demand from this large car population in the country. The market research data states that only one third of the cars go back to dealer workshops post warranty and rest opt for local multi brand garages, which can provide reliable and cost effective service with closer home advantage. To cater to this ever increasing demand, the Multi Brand car servicing stations, providing cost effective yet high quality repairs, is the future of car servicing industry in India.
The car servicing market can be classified into 3 categories - organized single brand segment-run by authorised car dealership network catering to a particular brand of cars, organized multi-brand workshops that deal with multiple brands and a vast network of unorganized multi brand (local garages). In terms of revenue, the larger chunk goes to the unorganized multi brand workshops, a whopping 53% while a lump sum of 46% is taken in by the organized single-brand segment. Although the organized-multi brand service providers hold much promise, they rake in the remaining 1% of the revenue, owing to their infancy of inception. Before these multi brand organized car service providers came into conception, the market was originated of organised authorised workshops and independent small garages. The post warranty vehicle (>4 years) service market was mainly captured by small independent garages and this was the sweet spot that organised multi brand car service providers targeted.
Owing to the warranty given by the car manufacturers, customers tend to visit the authorised dealer workshops, till the warranty period is over. Mandated workshops are expensive and have a major focus on replacement than repairs be it for mechanical or the accidental repairs. Hence, when the warranty period expires, customers tend to drift away from the authorised workshops especially for nominal updates like oil change/paid services and accidental repairs where insurance claims are not sought. It is noted that close to 65% of the consumers break their connection with authorised workshop post warranty. This is where the unorganised sector takes its share from. The affordability and flexibility of local garages are a humongous success amongst owners. Also the 24x7 availability of these small repair shops signify convenience. Over a steady period of time, the garage proprietor becomes an indispensible adviser to the vehicle owner and a trust for simple mechanical repairs emerges, as well. Their inexpensive rates guarantee that the engagement remains intact. However, there is no guarantee on the expertise of craftsmanship or even the parts used by such garages.
Insurance companies play an important role in the car servicing industry. Car owners look forward to the major accidental repairs covered under insurance claim. Since insurance companies have not extended the facility of cashless repairs to the local garages, the customer is left with no option but to visit an authorised service station for body repair. Since car manufacturers use their clout to fix high rates of paint job with insurance companies and major focus being on replacement, the cost of accidental repairs in an authorised dealer workshop is extremely high. As a result of this the Insurance companies pay extremely high claim amount to the dealer workshop thus increasing their claim ratios much beyond the tolerance limit. Even the customer pays higher depreciation cost on big fat unreasonable bill. In the present scenario, while the dealer makes whooping profits, it is not a healthy business proposition for the Insurance companies as also the car owners. This is where the organised multi brand car service station create a win-win situation for Insurance companies and the car owners by providing high quality repairs at low cost. For insurance companies to bring down their claim ratios, extending cashless facility to organised multi brand sector is a suitable option. According to market research analysts, car servicing business in India is expected is grow exponentially in the near future. In terms of revenue, car servicing industry is slated to be at 33000 cr. by 2020, up from present 20,000 cr. In this growth scenario, Multi brand car service market too is poised for a growth from present 1% to 8% by 2020, hence posing a huge opportunity with its kitty of challenges in terms of easy availability of spare parts, cashless tie ups with insurance companies and All in all, the future seems bright as these multi brand workshops venture into newer territories.
By Col. Y.S Katoch, Co-Founder, Carxpert