Vehicle owners trimming cost per service, says JD Power study

It’s not the slowdown in car sales alone that is taking a toll on automakers and dealers. 

Car owners have also been curtailing the average spend on servicing their vehicles, according to the latest study by JD Power, a Singapore-based consumer insights, advisory services and data and analytics firm. 

According to the study, there is a 10 per cent drop in the average amount spent per service visit in the first seven months of the current calendar year compared with the same period in 2018. On an average, customers spend Rs 5,000 per service visit, compared with Rs 5,600 in 2018. The decline in service revenue is significant for dealers as 31 per cent of their profits are generated from after-sales compared to 25 per cent from sales.

For customers who rate their experience in the top quartile of satisfaction (929 points and above on a 1,000-point scale), 89 per cent are more likely to return for post-warranty service work, said the report. Similarly, 90 per cent of customers in the top quartile will recommend the service centre to a friend or relative, it added.

Dealers agreed that there indeed has been a drop in their revenue per car. “Car owners are getting only those jobs done which is an absolute must and cannot be postponed. All the non-essential services are being postponed,” said Nikunj Sanghi, owner of Alwar-based JS Four Wheels. As a dealer, it also offers value-added services like car polishing and cleaning. Such functions have taken a hit, he added. Sanghi’s dealership has seen revenue from after sales and service take a 17 per cent year-on-year dip.

John K Paul, managing director at Cochin-based Popular Vehicles and Services agreed with Sanghi. “People are avoiding full services. They are only going for what is bare minimum,” said Paul, pointing out that revenue per car serviced has gone down by 7-10 per cent at his dealership.      

“Typically, dealers rely on service work to keep their businesses profitable, especially during a downturn in new-vehicle sales,” said Kaustav Roy, director and country head for India, JD Power. “A drop in average service spend bodes negatively for overall dealer profitability. More than ever, dealers need to focus on delivering excellent service experience to retain customers and encourage loyalty and advocacy.”

Passenger vehicles sales in India have been on a decline for over a year.

It dropped to the lowest in 22 years in August as buyers shelved purchase decision owing to weak sentiment and poor economic growth.