India Multi Brand Car Service Market Report :2020- Ken Research

In India, trend have been witnessed that after the completion of warranty on a new car (generally after 4 years), around ~% of consumers migrate to local service workshops. These local service workshops provide economical car services, closer to home advantage and personalized services. However, some other critical factors such as service quality, original spare parts and technical skills of the mechanic are not ascertained. Hence, trust remains an important concern while getting car service done at a local car service workshop. The multi-brand service companies are targeting this uncertainty in the unorganized domain as their target area. Organized multi brand car service companies such as Carnation, MyTVS, Mahindra First Choice Services, Bosch Car Services and few others are targeting to improve the customer experience by offering them better services which can develop trust coupled with economical service packages.

The car after-sales market has witnessed a significant growth during the FY’2010-FY’2015. The market has been growing majorly due to increase in passenger car sales, inclining numbers of service centers and intensifying awareness of customers towards their vehicle. The car after-sales market has been valued at INR ~ billion during FY’2015 and the market has grown remarkably from INR ~ billion in 2010 at a CAGR of ~% during the review period FY’2010-FY’2015. The growth was also driven by the improving perception of the consumers towards the sustainability of the environment backed by the stricter CO2 emission regulations. This prompted the consumers to get their cars serviced at shorter time intervals. This along with the shift in the industry specifics with an increase in the average age of cars i.e. they are being used longer ages on the road which has increased the possibility of the need of bigger repairs despite the improvement in their overall quality.

The emergence of organized players in multi brand car service market came into the field owing to the attractiveness of huge potential in passenger car service market. The market size for organized multi brand car service centers, evaluated at INR ~ million in FY’2015. The market is currently dominated by organized authorized OEMs workshops and independent small garages and multi brand car service providers are placed between these two segments The age group of 30-40 years has been considered as the key target group by Multi Brand service centers in India. This age group consists of young married couples and educated professionals who are very well aware about the prevailing market scenarios. Moreover, in India the 30-40 years of age group people were observed to be very vigilant about their driving habits and concerned about their vehicle’s performance. Indian customers with the age group of 30-40 years have contributed almost ~% of total customer group of Multi Brand service centers in the FY’2015.

It has been observed that the out of the consumer group for the multi brand service centers, ~% of the consumers were in amongst the professional class while the business class consumers have contributed the remaining ~%. The professional class has been provided with various corporate discounts and offers which has led to higher proportion of professional class in the overall consumer group. The post-warranty cars have acquired a larger share of multi brand car service centers with ~% of the revenues; the cars under warranty have contributed only ~% of the total market revenues of multi brand service centers. It has been observed that as soon as the cars are out of warranty, the customers either move to an unorganized service shop or the organized multi brand car service providers.

It has been estimated that Southern region has largely contributed towards the overall revenue generated by the Multi Brand service centers. During the FY’2015, Southern region has contributed almost ~% of the total revenues. This enormous contribution by this specific region was backed by the increasing demand by the customers for passenger car service and also investors sought to capitalize the existing opportunity by associating with the big brands. Moreover, most of the multi brand service centers have started their operation from South India and some of them still operate in South India only. The escalating demand for car service was majorly due to the increase in number of road accidents in the region. Major states that have contributed to the increasing number of road accidents were Andhra Pradesh, Tamil Nadu, Karnataka and Kerala with a total of 191,763 road accidents as of 2014.

Finding investments is a critical issue for an incumbent, since operating into this sector requires massive investment. There has been no significant revenue generation from this market. While some companies like Carnation had been on a perpetual loss making spree, others are barely able to break even in the wake of rising inventory cost for spare parts and stiff competition from unorganized market. Given the situation, investors possess a negative outlook towards growth of this market. Capacity constraint and costly purchase of equipments remain another impediment that is a major pre-requisite for this market. As far as Government is concerned, there are as such no barriers apart from regular compliances that every company has to fulfill.

On the contrary, the Government is looking to promote these organized multi brand car service centers by promoting them to add more service workshops as it is anticipated to add value to the exchequer, since the revenues receipts for the government from unorganized workshops is minute. Managing high levels of manpower churn emerged as the single biggest challenge for the multi brand car service companies in India. It has been estimated that across major players, average manpower attrition rate has been estimated to be ~% across different levels. High manpower churn impacts players in different ways...

Multi brand car service have witnessed that majority of their customers pertains to smaller car segment that includes hatchback and Sedan. However, the customer having luxury cars still prefers to approach OEMs car dealers even in the post warranty period owing to their expertise… Procurement of original spare parts has been the major hindrance to the development of multi brand car service market in India. Majority of the OEMs supply their spare parts only to their OEM car network, with the major objective to constrain the growth of local and multi brand car service outlets… Quality of service is regarded as the major touch point for the car user. The primary objective of approaching to a multi brand car service company is the quality of service which can be trustworthy along with lower service charges relative to OEMs authorized dealers…

For the multi brand service centers to succeed, a proper business model, value added & cost effective service and a decent attitude of the service advisor along with the rising sales of used cars can surge the revenue in the coming years. Rising awareness amongst the masses towards genuine spare parts, proliferation of the passenger cars market in the tier 2 and 3 cities, leveraging of service from online aggregators and consumer avoidance of high services charges at the authorized stores have been regarded as the leading growth drivers for the market. In the forecasted period till FY’2018, the market is poised to grow with the number of multi brand service center likely to reach around ~ by FY’2018. In terms of revenues, the sector is likely to report revenues worth INR ~ million during FY’2018, with a CAGR growth of ~% in FY’2015-FY’2018. It is expected that a new vehicle owners will tend to go to OEM authorized workshops for most of the services except the least complex jobs such as wheel, accessories and car detailing.

• Combined with the factors driving growth of the industry revenues in FY’2015-FY’2018, there are other factors as well which would lead to the growth of industry. These factors can be pointed as –

• Increasing demand for fleet and company cars and thus inclining demand for corporate plans offered by the Multi Brand service centers

• Slower new car sales volume as compared to old cars leading to lesser customers loyal to OEM’s service centers due to their high cost.

• Stricter CO2 emission rules and regulations along with strengthened government machinery to keep a check of such rules.

• Improvement of relationships between Multi Brand service providers and car manufacturers and thus easier availability of genuine spare parts

• Improvement in infrastructure leading to lower congestion on roads• These reasons will provide an impetus to the growth of market revenues

in the longer term. The Multi Brand Car Service market is expected to reach the levels of INR ~ million by FY’2020.

Organized car service companies such as Carnation and MyTVS primarily have showcased failure in terms of their operations. These companies have altered their business model frequently to make their business profitable. For this, they integrated various services such as car insurance, car inspection, home assistance car services which are managed by their franchisees, as the average transaction charges are expected to decline in the coming years.

• Source: https://www.kenresearch.com/automotive-transportation-and-warehousing/automotive-and-automotive-components/india-multi-brand-car-servicing-report/10745-100.html

• Contact: Ken ResearchAnkur Gupta, Head Marketing & CommunicationsAnkur@kenresearch.com+91-9015378249

• Website : www.kenresearch.com

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