Carnation plans to service India’s burgeoning car market

Carnation plans to service India’s burgeoning car market
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First Published: Fri, Oct 30 2009. 01 15 AM IST

Building base: Jagdish Khattar in his office compound in Greater Noida. Khattar says that he is focusing on individual customers, as opposed to chasing corporate deals, because they ‘are our long-term
Building base: Jagdish Khattar in his office compound in Greater Noida. Khattar says that he is focusing on individual customers, as opposed to chasing corporate deals, because they ‘are our long-term
Updated: Sun, Nov 01 2009. 08 18 PM IST
New Delhi: Until about two years ago, Jagdish Khattar presided over the country’s biggest car company, Maruti Suzuki India Ltd. Khattar ensured during his decade and a half at Maruti that the company consolidated its lead with a fleet of unexciting but dependable models against competition from foreign and local car makers such as Toyota Motor Corp. and Tata Motors Ltd.
So what does the man who arguably knows the Indian car market better than anyone else do after retiring from Maruti? He turns entrepreneur.
Building base: Jagdish Khattar in his office compound in Greater Noida. Khattar says that he is focusing on individual customers, as opposed to chasing corporate deals, because they ‘are our long-term partners’. Ramesh Pathania / Mint
Two days after leaving Maruti, Khattar began working on the idea that took shape as Carnation Auto India Pvt. Ltd, a chain of car-servicing hubs across the country that has just opened its 12th station.
Entrepreneurship may have been a surprising departure, given Khattar’s background as a bureaucrat—he belons to the 1976 batch of the Indian Administrative Service—but it is part of the family culture. The Khattars used to run a power utility in Dera Ismail Khan in what is now Pakistan before moving to India at the time of Partition.
A year after the start of his company, Khattar is in a relaxed frame of mind at his office in Greater Noida, Uttar Pradesh.
“I was certain the only problems that would crop up would be in execution,” he says. “It was an idea whose time had come.”
Khattar was keenly aware that one of the concerns of car owners across the country was the unsatisfactory job that company dealers were prone to performing. Car buyers, loath to entrust their costly vehicles to roadside service shops, rarely had much choice, however.
The potential market was valued at around Rs15,000 crore, according to a survey that Khattar conducted. A slice of this would be enough to run a viable business.
PremjiInvest and IFCI Venture Capital Funds Ltd bought into Khattar’s dream with an infusion of Rs108 crore last year.
More believers are lined up, according to Khattar, who says Carnation will close an additional Rs170 crore of funding soon, without naming any of the investors.
Carnation’s network now covers seven cities across the country, and the company plans to extend coverage to 15 service hubs by the end of the year.
Khattar is also using the outlets to enter the high-margin accessories business.
In Mumbai, Carnation also sells second-hand cars, while his tie-up with designer and rebuild specialist Dilip Chhabria gives customers a chance to customize their cars to any extent.
Globally, independent third-party service centres have carved out a niche for themselves. In Europe, chains such as Kwik-Fit in the UK and Auto Teile Unger in Germany have around one-third of car buyers coming to them. In the US, the number is even higher—40% of car owners.
It’s an idea that has started gaining traction in India. In the last three years, companies such as Bosch, TVS Motor Co. and Reliance Industries Ltd have moved in to set up servicing outlets, which also serve as accessories shops.
India’s top three car makers—Maruti, Hyundai Motor India Ltd and Tata Motors—account for around 80% of the cars sold in the country. Some 18 other manufacturers slug it out for the remaining 15%. For the time being, the number of cars they sell is hardly enough to justify a large national service network.
That’s where Khattar steps in. Carnation offers to service any car that retails for below Rs9 lakh. That takes care of nine out of every 10 cars sold in the country.
“I’ll do a better job than the company dealers at a price that’s 10-15% below theirs,” he says.
But the big three are not planning to roll over for Carnation. They’ve refused to supply Carnation with spare parts. Dealerships make most of their money on servicing and painting and denting jobs, with margins upwards of 30% compared with 2-3% on new car sales.
Khattar has sidestepped the problem by lining up imports from Thailand and Taiwan to keep the business going.
“At some point, this is bound to change,” he says, pointing to legislation in the West that prohibits manufacturers from blocking third-party service outlets. (In the US, the Right to Repair Act is the law that allows this.)
Khattar is planning a few tweaks to help him stand out from the crowd. One of these will be mobile service workshops— vans sent out to office blocks that will service cars while people are at work. Still in its trial stages, the idea has received an overwhelming response in Mumbai, Hyderabad and Noida.
He has also hired a team of 20 business development executives who visit homes and sell the concept to people, with a free car wash thrown in as an incentive to get customers to visit the outlets.
Khattar has chosen to eschew the big corporate deals that are the bread and butter of third-party outlets in the West. The companies will just push for discounts and freebies, according to him.
“Individual customers are our long-term partners and right now my focus is to build that base,” he says.
It’s going to be a tough task. On a recent afternoon, Carnation’s largest outlet, a 72-bay hub in Gurgaon, Haryana, had only half its service bays occupied. But Khattar says it will take about two years for the hubs to be fully utilized.
Some customers are less than bowled over by the quality of service, which is supposed to be Khattar’s key differentiator.
“They generally have a slight discount on all their offerings but the reliability could be better,” says Saptarshi Biswas who drives a Maruti WagonR. “I took my car there once, and while they did a competent job, I was expecting a bit more reliability.”
Khattar will need to convince sceptical customers such as Biswas to ensure that more of Carnation’s empty service bays get used.
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First Published: Fri, Oct 30 2009. 01 15 AM IST