Car Owners prefer an independent service station over authorized service stations, post warranty, which as a result growing the business for independent service stations.
Car Service Station
In India independent service stations are both organized and unorganized. At present, India passenger car service and after sales market is estimated to be US$ 2.5 Billion (INR 155 Billion), of which nearly less than a Billion is from organized independent network of service station. Over 70% of the 19 Million active users (across segments) look for alternate options for repairs post warranty period. Further, with increasing car per citizen, growing disposable income and positive growth of automobile industry, is creating a huge demand for independent service stations in the near future. Over the past five years many players have entered in this segment. Players such as CarZ and MyTVS hold a strong market share in the organized independent service station market in southern India, whereas, Mahindra First Choice Services (MFCS), Carnation and Bosch are concentrating in Northern India. All players are working on expanding their geographical presence in order to tap the growing addressable market.
In Delhi NCR, approximately 68% of car in terms of age profile fall in the 1-5 years bracket. Moreover, car owners prefer independent service stations over authorized service stations post warranty. As a result, independent service stations are witnessing demand from car which comes under the range of 40K-60K kilometers.
Figure 7-1: Proportion of Car Serviced in Independent Stations by Distance Covered (In Kilometer)
Regular service is the most frequent service observed at independent service stations such as Oil/lubricant change, which should be done every few thousand kilometers to keep the car in the best possible running condition. Similarly, brake pad repair due to wear and tear needs to be done more than once in life span of a vehicle. These two services are the most frequent services at the independent service stations across Delhi NCR.
Figure 7-2: Share of Car Services in Independent Service Stations by Type
Independent service stations the share of Non-OE spare parts are higher when compared to OEM parts due to availability, warranty on parts assured by non-OE companies and price compared to OEM parts.
Figure 7-3: Share of OEM and Non-OE Spare Parts used in Independent Stations
Note: Non–OE includes Generic parts
Most organized independent service station conduct promotional activities for creating awareness about their service stations to car owners. They mainly use paper pamphlets followed by newspaper and internet to promote their services. The reason for high usage of leaflets/pamphlets in these stations can be attributed to the majority of local customers in these stations and the cost effectiveness of this mode of promotion.
Figure 7-4: Preferred Promotional Channel used by Independent Stations (%)
Note: Others include Word of Mouth, Text Messages, Canopy & Kiosk
The share of services and parts of revenue per car varies from station to station depending on the level of infrastructure and skills of workforce used by the independent stations.
Most times services hold the least proportion approx 26% in the case of independent service stations and the balance revenue come from spare parts.
Figure 7-5: Share of Revenue for Service and Parts in Independent Service Stations
Note: Spare parts also includes lubricants
In Delhi NCR, Non-OE brands like KBX, Rane, Gabriel, Talbros, Purolator and Elofic are the preferred brand. The reasons for preferences in independent station are higher profit margins and easy availability of these brands.
Table 7-1: Preferred Brands in Non-OE in Independent Stations
Note: Spare parts also includes lubricants
Only organized independent service stations use software for inventory management, which accounts 16% of the total market. Unorganized stations generally use traditional mechanisms to manage inventory for the needed spare parts. Use of paper catalogues and Software saved on personal computer account for 4% each of the market. As per the research it was found that most stations do not have IT infrastructure to manage the inventories.
Figure 7-6: Software used for Inventory Management in Independent Stations (%)
Authorized service stations in India are operated or approved by automobile manufacturers, to carry service, repair, reconditioning or restoration of passenger cars. The routine servicing and maintenance at these service centers has been declining over the last three years. The proportion of car owners opting for authorized station declined from 91% in 2011 to 69% in 2013. Besides, there has also been a drop in the number of customers opting for extended warranty programs, which is essential for an authorized service station to build strong customer relationship in the post-warranty period. We could also observe a new trend of many OEMs expanding their authorized service station and enhancing smart after-sales service.
With the increase in number of passenger car, we expect the number of total authorized service stations to reach 23000 by 2017. It is estimated that the market share of OEM authorized network of service stations is growing at 25-30% year-on-year.
In the authorized service stations across Delhi NCR, proportion of car at entry level of 10K-30K kilometers contributes the maximum share, which gradually decreases with increase in kilometers travelled by car. The main reason behind this trend is many car owners stick to authorized service station till the warranty or up to three years after purchase and then move to independent service stations which are more economical than authorized ones. Customers of some of the OEMs such as Ford and Honda whose spare parts are not easily available in the aftermarket has to stick to the authorized service stations for repairs and part replacement.
Figure 7-7: Proportion of Car Serviced in Authorized Stations by
Distance Covered (In kilometers)
In authorized service stations more than 50% of cars fall between 10K-40K kilometers range, which includes regular services such as Oil/fluid change and brake services. Other services include, but not limited to electronic/electrical and suspension/amortization. These parts only get replaced either in the case of accidents or with aging of the vehicle.
Figure 7-8: Share of Car Services in Authorized Service Stations By Type
In authorized stations, proportion of services, which include labor cost and taxes account for 32% of share. The proportion of service in authorized station is higher than independent one due to the availability of IT infrastructure and skilled workforce in these stations.
Figure 7-9: Share of Revenue for Service and Parts in Authorized Service Stations (%)
Authorized service stations are more reliable and consistent in their services, but are facing increasing competition from OEM service stations. Cooperative staff, convenient location and reference play a vital role in deciding the service station. Moreover, to be more competitive many authorized service stations have started offering pick and drop facility to cars owners for their car service.
Figure 7-10: Factors for Competition among Authorized Service Stations
Independent organized service stations are at par with, authorized service stations when compared to infrastructure and trained professionals. However, the independent stations have an edge over the authorized one in some factors such as low servicing cost and turnaround time. Additionally, the independent stations also offer services for multiple brands, which is one of the major criteria for customers to opt for independent stations, post warranty.
Figure 7-11: Competition between Authorized and Independent Service Stations
Authorized service stations are well connected with internet based databases, to locate and order spare parts and manage their inventory. They are connected with OEM servers for any queries related to spare parts, which provide complete information on the number of warehouses and their availability of spare parts. However, they need to order at least a week in advance, as logistics need to be managed.