Even as the Competition Commission of India (CCI) has shot off show cause notices to 17 leading automobile manufacturers on an alleged anti-competitive practice of selling spare parts at higher prices to consumers, sources indicated foreign car makers are more susceptible to being held accountable on the said charges than homegrown auto majors.
A senior industry executive in know of the development said, “Homegrown companies such as Maruti Suzuki, Tata Motors and Mahindra & Mahindra sell spares in open market except for a few models. Hyundai too has started making parts available in retail. It is mostly the foreign companies who have been insisting that their customers go to authorized dealers for repairs which lead to an increase in service and maintenance costs of vehicles.”
The CCI has scheduled hearings next month to seek explanations regarding the practice being followed by certain section of automobile manufacturers operating in India. “Nearly 50% of car owners move away from authorized dealerships due to higher servicing costs. Servicing expenses are higher by around 30% at company-operated service outlets than in independent and unorganized workshops. As margins get squeezed due to discounts in sales of new vehicles, dealers resort to increasing servicing costs to make up”, alleged the executive who attended the meeting in which 200 people were called to provide evidence by the Commission.
At present, independent service chains have around one% share in the Rs 25,000 crore after-market service and spares industry. The aftermarket service industry includes over Rs 6,000 crore of body shop and Rs 15,000 crore service and spares work. It is growing at a compound annual growth rate of over 20%.
Independent workshops account for a third of the servicing market In UK, France and Germany. The European Commission has passed a regulation ‘Right to Repair’ making it mandatory for all OEMs to make spares available in the open market, which has brought down servicing costs for consumers.
The Competition Commission of India (CCI) would take a final decision on the alleged anti-competitive practice after taking into account the explanations of the carmakers as well as the report of the Director General of the Commission. The DG acts as investigating arms of the fair-trade regulator.
The Commission is pursuing the case under Section 4 of the Competition Act that relates to abuse of dominant position by enterprises. The probe was conducted after a complaint was filed with the CCI last year against certain carmakers for allegedly abusing their dominant market position by selling spare auto parts to customers at high prices.
As per the complaint, the carmakers were accused of abusing their dominant position by making available spare parts only through their authorised dealers, who in turn sell them on high rates.
CCI has the mandate to eliminate practices that have adverse impact on competition and protect the interests of consumers. Generally, CCI refers the complaints related to anti-competitive practices for further investigation by its DG, before taking any action.
