Automotive aftermarket garages in India is a huge industry and they play a crucial role in the entire auto industry ecosystem. The segment is majorly dominated by the unorganised third party operators, rather than the workshops enclosed with OEM authorised dealerships. How these aftermarket workshops are functioning? What are the challenges they are facing? What’s the future?
Some things never change, no matter how much you do. There’s still some hope though…
Having been actively involved in the evolving Indian auto industry for several years, if there is one thing I have come to conclude is that, in spite of all the changes in other service sectors, the automotive aftermarket still remains mired in traditional approaches to its business model and structure.
There is, and will remain, a significant gap in the automotive aftermarket supply chain, with most automotive Original Equipment (OE) and Original Supplies (OS) manufacturers relying exclusively on captive distribution, approaches for the supply of spares, resulting in limited accessibility to auto garages, and thereby consumers. The smaller and medium auto garages remain the most affected. Nothing significant has actually changed or happened in the space, apart from a few start-ups, who claim to be pioneers in “disrupting the space”.
Do believe the pressure to disrupt is now on, and it’s only a question of time, before somebody figures out how much potential the golden opportunity of automotive after-sales really offers, and as more and more investors begin to take notice. The challenge is to figure out, what is this business really all about?
Approximately 200 million ICE-powered two and four-wheeler vehicles in India are out of their warranty range and do not go back to authorised workshops.
It is shocking to know that while these small and medium workshop/garages are the largest demand generators for this industry, it is extremely difficult for them to get a steady supply of quality, if not original, spare parts. And that too at a time when servicing requests are continuously shooting up, with people relying more and more on their own vehicles for the short and long-distance commute.
Approximately 200 million internal combustion engine (ICE) powered two and four-wheeler vehicles in the country, that form the major chunk of the countries vehicle parc, are out of their warranty range and do not go back to authorised workshops. Customers are basically, and always have been, looking for economical, convenient, trusted and faster options.
So what’s holding back these workshops and garages from leaping into a better future?
There are almost always, legacy reasons for this:
- Garages remain offline, and disconnected, with no reliableaccess to any updated technology or steady supplies of the required range of reliable and quality parts.
- Automotive servicing and part remains a fragmented industry, lacking any credible, well capitalised and standardised player.
- Lack of training, upskilling and modern tooling or equipment, in spite of all the technological developments and updation of vehicles.
Will it ever get better? Can it?
There are multiple B2C companies shouting out that they are the ones truly addressing genuine vehicle owners issues, promising quality, hassle-free service. But, in my view, they actually have the entire problem statement wrong, and are just fortunate, that in spite of addressing these low value softer areas, they seem to be making a comfortable return.
Then there are these handfuls of new generational start-ups, looking to address the same issues, but from a B2B side. Some of them are working on workshop management software for these garages, in an effort to make them tech-enabled, while others are working on solving the problem of spare parts – to provide garages with the right spares, at the right time, by aggregating suppliers – but yet, still remain offline. While progressive OEMs have made an honest attempt to train garages in new technologies, their focus remains entirely on retaining traffic to their exclusive, authorised workshops.
There is a need to get too much more granular and look at the ground level realities- at the fundamental operational issues. What is needed is to go out there and work with the aftermarket garages, with sleeves rolled up. These are the guys that are 97% of the industry and need to be taken control of. If anyone is targeting the200M out of warranty vehicles waiting to be in service, what’s needed is to deliver an authorised workshop equivalent experience, with the relevant parts, at a reasonable price, through qualified technicians.
Online e-retailing, which is the new global trend, will eventually emerge in India, enabling, and empowering consumers to compare market prices and shop online.
E-retailing the silver bullet. Or is it…?
New business models will need to drive this sector at a time when connected devices and e-retailing are making their presence all over the country. We can expect OE vehicle manufacturers, as well as major international after-market servicing players, to explore entry into the business of multi-brand services, though organised multi-brand outlets, who can invest in modern, relevant garage equipment and diagnostic tools.
Online e-retailing, which is the new global trend, will eventually emerge in India, enabling, and empowering consumers to compare market prices and shop online. What’sholdingthem back on the adoption of e-retailing is the limited presence of major players, small product portfolios, and a low customer awareness, coupled with trust issues with buying parts online.
With no major OEM looking to offer their original parts online, the focus remains on accessories or car care items, which is seeing its own boom.
Hazarding a rough estimate, the online auto-aftermarket currently remains a mere 2 to 4% of the total aftermarket potential at a retail level. The major opportunity to be captured is in the B2B space, with the growth expected of organised and independent workshops, and customers being positively disposed towards them. The key challenge to auto-parts e-commerce is the widespread proliferation of fake parts. What also needs to be figured out is the logistics, and most organisations struggle to supply parts to different parts of the country, given the prohibitive costs and complexity of doing so.
With no major OEM looking to offer their original parts online, the focus remains on accessories or car care items, which is, by the way, seeing its own boom. Hopefully, we can expect to see this change going forward, with do-it-yourself products and kits being sold on the internet, much like it is done on more evolved markets.
Constantly evolving and improving vehicle technology
Change in-vehicle technology will offer additional opportunities for financially more viable and organised players who can, and will, invest in the latest diagnostic equipment, making most existing standalone garages obsolete, and irrelevant. This situation will continue to impact the aftermarket in the future.
The Near Future is Electric. Can these garages play a key role and be rewarded for their efforts?
The electric vehicle (EV) revolution is here, and it’s here to stay. But it can only go so far without the necessary infrastructure and technology to back up the changing customers’ requirements. Let’s look at the EV eco-system:
A myth: EVs don’t require service. Wrong!
The EV industry keeps talking about battery solutions, charging infrastructure and other technologies, e.g. like geospatial location mapping, IoT devices etc. No one talks about the EV service infrastructure and capacity. The EV industry currently is in a nascent stage, with the adoption being less than 0.5% in India as compared to ICE vehicles. EV customers can expect, and remain apprehensive, of having to face considerable challenges when it comes to servicing.
With rapid adoption from 3PL companies and fleets, these vehicles will need to be touched at least once a month to ensure they are in ‘drive’ condition. Manufacturers /dealerships are not willing to set up captive EV service hubs, owing to the cost of infrastructure and operations and low cost of service & maintenance, all made, even more, riskier with the lack of any harmonisation of charging and other operational standards.
The relationship between the service infrastructure and the manufacture of EVs is key, especially when considered in relation to consumers’ typical buying behaviours and patterns. A large influencer of the vehicle buying decision is related to the after-sales service network availability.
The Ever after
The increasing use of improved technologies and electronic components is driving demand for aftermarket service towards organised multi-brand outlets and garages, who are investing in advanced, quality and time-saving garage equipment, powered through e-channels of quality and original parts supply. These multi-brand outlets will need to also collaborate and explore tie-ups with original component manufacturers to derive scales and pricing.
Expect the emergence of start-ups looking to enter online supplies to these garage’s, offering competitive, pricing, on-time delivery, and freedom from having to block capital in inventories and losing money in obsolescence. The key remains scale and supply chain management. With these problems addressed, Customer satisfaction and quality are a sustained given.
Multi branded garages are here to stay. Whether EV is adopted sooner or later, next-generation connected garages are the future. Technology-enabled, trained garages, with access to parts on-demand, will be the future and good for the industry and the vehicle owner. It’s taking time, but it is surely on the way. Some start-ups will emerge, bound to disrupt this space. I can say with some confidence, and as positive reassurance, that I’ve seen a few who have it figured out, both from the tech as well as the operational and logistics side.
The secret recipe sauce remains, all this needs to be done collaboratively.
(Vinay Piparsania is an automotive industry veteran and former Executive Director of Ford India.)
(Disclaimer: The views expressed in the article above are those of the author’s and do not necessarily represent or reflect the views of Autofintechs.com. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.)