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At roughly $20-30 billion, as per various estimates, the opportunity at least in terms of market size is sorted. Thanks to close to 60,000 new vehicles registered daily in India. The rise in the number of vehicles on road is directly proportional to the size of the aftermarket. So, post warranty, which is about three-four years, most cars are taken to local garages for servicing. For a car owner, he could either opt between original equipment manufacturer (OEM) authorized service centres or multi-brand service centres like Mahindra First Choice, Bosch Car Service etc., and then we have roadside garages.
The Mid Way
Now, the white space for young car servicing start-ups gets created across all of them and it has two reasons. First, at authorized or multi-brand centres, there is always an uncertainty about the service charges and the actual repair work needed. Second, while local garages offer cheap service, the service itself is questionable. While former is beginning to use computer controls to diagnose errors but customers end up fretting about the money they have to shell out. This white space of using analytics and IoT at a significant price differential to authorized service centres and quality differential to local garages is what startups like Vehito, Pitstop and Koovers are filling up. “Due to cost issues, customers move to unauthorized garages which if provide service at par with authorized ones through technology and build proper supply chain, invoicing, mechanic training, doorstep service etc., at an affordable price, then they could disrupt authorized centres,” says Sajid Fazalbhoy, Principal, Blume Ventures. The fund backed car care brand Pitstop in September last year.
For instance, Koovers fits an on-board diagnostics tool in the car to track its health remotely and flag off any remote diagnostics required. Its call centre picks up the error and connects with customer for required repair work. This enables garages to check for required parts for the car even before it comes for service. On the customer end, he/she can book service, track the progress, check for online estimates and invoices through Koovers app. Launched in 2015 by Sandeep Begur, a veteran in automobile dealerships and spare parts network, and three other co-founders, Koovers runs franchised service centres.
The data analytics, sort of, helps customers stay aware about their car on real-time basis which otherwise seems lost once the warranty ends as mom-and-pop garages operate manually. Vehito offers software-as-a-service type solutions to multi-brand garages and service stations to source OEM spares and products along with online job card creation and builtin inventory management. The garage owner gets details related to purchase, registration, servicing, transfer etc., on a single dashboard screen which is also shared with customers. That’s beside the diagnostic IoT tool which it uses to diagnose end-to-end problem in the vehicle. On the consumer end, Vehito is perhaps India’s first car servicing start-up to use blockchain for storing documents digitally. It offers V-Locker for customers to store insurance, license, registration and pollution under control certificate.
“We want to digitize the car maintenance process and connect the end user with his/her car, which ends post warranty,” says Naveen Ravindran, Co-founder, Vehito. “It takes around three hours for a car service; the mechanic checks the car and takes a test drive to understand the problem. Whereas, our scanning tool within two minutes gives exact data where the problem lies. This brings great time efficiency for the garage and helps build trust between the garage and end user,” he adds. Currently more than 300 garages in Bengaluru use its solution and app. Each vehicle is assigned a QR code that offer details about the vehicle every time it goes for servicing and creates the job card.
The start-up also sells vehicle analytics to carmakers for improved manufacturing. “For instance, we will provide Hyundai, the data for let’s say 2009 model Santro cars for a particular problem they had in last 10 years and the parts which were changed frequently. This will help the company in rectifying that when the new model is launched,” says Sreenivas Paluvuri, Founder and Chief Executive Officer, Vehito.
There are typically three elements for car servicing start-ups to play on to bring down the cost factor – spares, labor and facilities for servicing a car. Here unlike e-retail, there is no middlemen as start-up procure spares directly from OEM vendors. However, there is a difference in the pricing of spares by vendors for carmaker and for the aftermarket of minimum 15-20 per cent. For example, the break-pads supplied to the carmaker will be let’s say Rs 100 but to the aftermarket it would be Rs 80. Labor, on the other hand, is factored on the rental which the service centre pay, facilities it offers to mechanics etc. So the corporate structure eats up significant costs. When it comes to facilities available at the service centre, it includes an AC room with TV, snacks etc. For Begur, who runs small QSR-modeled service centres with around 10 employees per centre, the labor and facility is not a cost factor.
“Dealerships get very little margin on selling a new car, they make money on service at their service centres. They factor the cost into their service model whereas in our model sale doesn’t happen. So the facility, labor and parts differentiation gives us great differential in pricing compared to dealerships along with the same warranty and trust that a dealership offers,” says Begur. The start-up, early this year, partnered with Hella – German automotive maker for lighting and electronic components to solve garages’ challenge for spare parts availability on real time basis.
Historically and so far, the biggest challenge for the industry has been related to supply, whether it is about garages or spare parts. The industry has worked as a close ecosystem where OEMs and dealerships, on one hand, have made bulk of money, and on the other hand, mechanics working at these dealerships’ service centres have so far been left behind. It is ironic that a guy who knows both – how to drive and fix a car still earns less than a guy who simply drives. This leads to mechanics setting their own garages which lack long term sustainability in the absence of technology. Hence, the real problem surrounds around the existence of technology enabled garages which aren’t aggregated by such start-ups.
The solution to enhance garage supply, according to Mihir Mohan, Founder and Chief Executive Officer at car care brand Pitstop, is mobile garage – doorstep vans for general service and maintenance. Part reason for this was lack of quality control. “You cannot have every vehicle checked by your mechanic and that’s where quality issues come into picture. We tried tracking them via images, camera and live streaming apart from random audits but there is only much it could help us. So the value wasn’t in garage aggregation,” says Mohan.
Doorstep service, however, allows for greater control on quality. “It is better because there is a common and consistent team to do that. Also we have set up our training programs and induction programs for standardizing processes.” Other reasons for its adoption include, first, convenience for customers and second, lower cost for set-up and scale. Moreover, the van, claims Mohan, achieves break-even in eight-nine months versus setting up a full-fledged garage with high real estate cost.
“While everybody has seen vans for laundry, ATM etc., we are planning to make them as mainstream supply for periodic maintenance and minor electrical and mechanical work, which can be fixed at customers’ place itself,” adds Mohan. Eventually he plans to have service advisors join him to disrupt the existing authorized centres supply chain. Pitstop too has been investing in automated diagnostics. The start-up is using tools from Bosch for real time diagnosis.
While carmakers like Maruti Suzuki have been doing doorstep vans since around 2007 but that has largely been for fixing break downs instead of a mainstream business, as it conflicts with their offsite dealership and service centres. “We are trying to reverse that for our customers,” adds Mohan.
The growth eventually might not completely come from organizing the vast automotive aftermarket, as the market shifts to electric vehicles gradually. “Setting up charging stations to service EVs will be critical yet an opportunity in itself. So the infrastructure needs to be built first,” adds Fazalbhoy. The task for car servicing start-ups at hand is to focus on the two markets simultaneously. While servicing electric vehicles will be easier due to less complex structure but to gain trust and change the mindset of customers owning electric vehicles would be the two areas to crack.