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ByIti Garg Shikha Panwar Priyank Kohli Siddharth Panchal Bhaskar Maheshwari
Introduction
Indias automotive industry is one of the key drivers of the countrys economy. At an estimated size of USD 38 billion, it accounts for close to 5 percent of Indias GDP. Production of a total of 1.69 million vehicles including passenger vehicles, commercial vehicles, three wheelers and two wheelers in August 2013 as against 1.56 million in August 2012, registering a growth of 8.18 percent over the same month last year. The governments Automotive Mission Plan 2016 envisages the industry to grow to a size of USD 145 billion by 2016, so as to contribute 10 percent of GDP.
With increase in the population of vehicles, the need for an efficient service network becomes important. The new vehicles sold add to the overall vehicle population that needs to be serviced and maintained, as scrapping of vehicles is low. Rapid improvement in vehicle technology and the number of new models being introduced each year, add to the challenges of providing efficient service. An effective service network is built on three key pillars: Service infrastructure adequate workshops at the right locations, with proper machinery, tools and other facilities Availability of spare parts Availability of skilled manpower.
Multi-brand dealers
Carz, Carnation Auto, Mahindra First Choice Services and TVS
46%
50%
4%
Figure 1
Value Chain
The value chain in India remains highly fragmented and there is a significant level of intermediation required for parts to reach end customers. The production of parts is split between Original Equipment Manufacturers (OEM) Tata, Honda, etc. Original Equipment Suppliers (OES)/Tier 1 Bosch Generic manufacturers. While OEMs sell through directly-owned or franchised dealers, the independent channel has grown in significance in recent times. OESs have the advantage of being able to both directly supply OEMs, as well as go through independent distributors.
34%
35%
31%
Figure 2
Changes in vehicle technology Proliferation of models and variants Need to penetrate new markets / geographies Need for improved customer service.
Key Drivers for change in automotive servicing
The lower cost of servicing at 3P multi-brand dealers is influenced by primarily three factors o ability to source generic parts at a lower cost than OE spares o ability to reach scale in smaller locations through servicing multiple brand vehicles o lower overhead cost structure compared to OEMs.
With OEMs more focused on vehicles in their warranty period. Multi-brand dealers must build a reputation.
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