Japan’s largest multi-brand auto servicing chain, Gulliver International Co., and Altius Autoworld, a company started by Indian auto industry veteran B.V.R. Subbu, plan to invest Rs1,000 crore over the next five years to replicate Gulliver’s business in the country.
The partners said they would open 300 outlets to service luxury cars, heavy commercial and vehicles and automotive machines used in the construction industry in India, Asia’s third-largest automobile market. Gulliver and Altius will hold equity in the ratio 51:49.
“Lots of dealers (in the luxury car business) are new and don’t understand the intricacies of this business,” said Subbu, a former president of Hyundai Motor Co.‘s Indian unit. “Our efforts will be in bringing in better technologies and utilising our resources efficiently.”
The venture will likely face competition from other companies with similar plans to take advantage of expanding automobile sales and the lack of an adequate servicing network in the country.
Mahindra and Mahindra Ltd, India’s largest utility vehicle maker, Reliance Industries Ltd, India’s largest company, as part of its retail business, and Jagdish Khattar, former managing director of Maruti Suzuki India Ltd, all plan to enter the automobile servicing business. But unlike Gulliver-Altius, almost all of them intend to focus exclusively on cars.
“With new investments coming in and the (auto) market expanding, the (service) network is unlikely to grow accordingly,” said Khattar. “There will be a huge gap,” he added, but refused to reveal details such as planned investment and number of outlets.
Although inflation is at a 13- year high and automobile finance is getting more expensive, India’s passenger car market is expected to nearly triple to three million units by 2015, as new vehicles and economic growth boost demand, says Global Insight Inc.
The consultancy estimates that domestic sales of medium and heavy commercial vehicles would increase to 386,000 units by 2012 from around 290,000 last year as robust economic expansion and higher fuel prices make truckers replace their ageing fleets with newer and more fuel-efficient vehicles.
With manufacturers such as Nissan Motor Co. and Daimler AG entering the market in both passenger cars and commercial vehicles, the industry estimates that around Rs12,000 crore is needed over the next five years to expand the distribution and service network.
Multi-brand service outlets are a “fairly well-established norm around the world,” says Mohit Arora, a senior director at J.D. Power and Associates who tracks the local market.
“Demand for service is growing faster than authorized service outlets. Customers want quick service and also don’t want to travel 10 kms to the next service outlet,” he says.
Although neighbourhood garages that service vehicles of any make or model abound in the country, customers are increasingly preferring authorized outlets, Arora adds.