Multi-brand car servicing biz set to grow

Multi-brand car servicing stations seem to be growing, slowly and steadily. Today, only one-third of the cars that are sold by the dealerships go back to the dealerships, post-warranty. The rest is an opportunity for the after-market services networks.

This is the opportunity that multi-brand car servicing station chains like Carnation Auto, promoted by Jagdish Khattar, the former chairman and managing director of Mauti Suzuki, and Carz, a Hyderabad-based start-up, hope to tap into. Both have made slow strides in this direction.

“Entry of more players will give this model more acceptability amongst the customers and also a message to other stakeholders in the industry for its acceptance,” said Jagdish Khattar, when speaking of the model.

According to industry analysts, bulk of the customers tend to move away from dealerships. That’s when the independent multi-brand outlets will be an option for them. These outlets have as a unique proposition — “multi-brand and a one-stop-shop for many of the auto needs of the customers”.

The opportunity has encouraged Carnation to chart out plans for setting up 200 centres across the country by the end of 2012. Meanwhile, Carz, which joined the fray about an year ago, is not holding back.

It’s planning to establish 300 multi-brand car repair and servicing stations across the country by 2016.

“Presently, with two full-fledged centres and two franchisee-run outlets in Hyderabad, we are looking at opening nine stations — two each in Tamil Nadu and Karnataka and one each in Hyderabad, Vijayawada and Visakhapatnam — this financial year. Our idea is to have 70 per cent of the planned outlets to be in franchise mode,” said Carz’s co-founder and chief executive officer Vijay Gummadi. Carz had opened its first service station at Madhapur in Hyderabad in 2010, and recently raised $5 million (Rs 22.5 crore) in a Series-A funding from IndoUS Venture partners.

Each of the 1,000-sq yard outlets requires an investment of between Rs 25 lakh and Rs 1 crore for Carz. According to an independent survey conducted by Carz and Market Pulse, a New Delhi-based market research firm started by IIM graduates, the Indian car population had been growing tremendously since 2001 with an addition of 1.2 million cars a year.

“From 2010, 2 million cars are being added each year, with more and more people are graduating from two-wheelers to four. Today, there are over 18 million cars on the Indian streets. Globally, car service is not owned by the manufacturer, but by privately-held multi-car service network,” said co-founder and managing director Venu Donepudi.

Carz was floated by Gummadi who has co-founded two technology start-ups and Donepudi, who had earlier worked with Ford, Chrysler and General Motors in the US as a research engineer.