Increasing numbers of cars, and demand of organized service stations, post warranty is attracting big giants of USA & France to invest in India as an independent service station
Industry Trends & Drivers
4.1 Increasing Number of Passenger Cars on Road
The passenger car market in India is steering towards a strong double digit growth thanks to improving economic environment and a push towards favorable reforms for manufacturing by the government. The overall auto component industry expected to grow at a CAGR of 14% during 2014-2020, making it a US$ 100 Billion (INR 6200 Billion) industry by 2020. The current penetration of motor vehicles per 1000 population is currently 15 and is expected to grow at 15% to reach 72 by the end of 2025, backed by improving GDP and increasing per capita disposable income.
The Delhi region had 2.6 Million passenger cars in 2014, which grew at a CAGR of 7.4% during 2011-2014. As a region, it has more number of cars in comparison to the total number of cars in Maharashtra, Tamil Nadu, Gujarat and West Bengal. In fact, over 17% of the private cars in India run in the national capital region.
Besides this, around 6% of all the passenger cars in Delhi are 11 to 15 years old. Higher customer awareness about vehicle upkeep, periodic maintenance and demand for add-on services (for example 24*7 breakdown assistance, extended warranty covers, etc.,) is further enhancing a bright outlook for the aftermarket service industry. In addition to this, the reduction in excise duty on passenger vehicles in 2014 is expected to increase the sales of passenger vehicles in the coming years. This increase in demand of passenger vehicles will most likely to surge the spare parts market significantly.
4.2 Do-It-for-me (DIFM) Category Highest Contribution to Aftermarket
Do-it-for-me (DIFM) is a category which covers services where car-owners take professional assistance for the maintainance of their vehicles. This category constitutes of a majority of aftermarket parts due to increasing complexity of repair requirements and after-sales services such as greater use of electronic components in advanced vehicles. A number of authorized and independent service stations are currently using high-tech softwares to diagnose these problems.
Due to the requirement of skilled workforce backed by infrastructure, the proportion of services in unorganized workshops/garages is reducing in the Indian market. In 2012, the total number of garages were around 0.3 Million and are expected to plunge to around 0.25 Million by 2017, showing a negative growth of 17%. Many automobile manufacturers and auto component suppliers rely on dynamic technologies to make their product more cost efficient, due to which the share of DIFM category will grow further. As per our research we expect car-owners to opt for technical repairs and services in times to come.
Do-it-yourself (DIY) category also holds a small share in the aftermarket, lagging way behind developed market such as USA and Europe. The awareness level is high among Taxi and Cab drivers, who are more aware of replacing procedure compared to car-owners.
4.3 Growing Number of Organized Independent Service Station
Independent station such as First choice, Carnation, MyTVS and Bosch are the leading players in the organized servicing sector. Post warranty, a large section of customers, tend to move away from authorized service stations, and visit independent service station leading to the growth of this segment.
At present, many organized independent service stations are expanding their geographical presence. For instance, First Choice is planning to open 450 workshops by 2018. Similarly, Carnation is also planning to open 300 service stations by 2016. Further, these companies are offering value added services e.g., Carnation is providing home vehicles pick-ups and drops to enhance the overall customer experience.
In India, organized independent stations are less in numbers but are expected to reach 2200 by 2017. In Delhi NCR, there are over 25 organized independent service stations but these numbers are growing quickly in order to tap the addressable market in the region.
Foreign companies like Meineke Car Care Center, Midas Auto Service and Auto Zone of United States and Auto distribution International of France are expected to enter this segment in India in coming years. The Indian government has also indicated its intension to allow higher FDI and make regulations conducive for growth in the multi-brand retail space.