Carnation aims to make a mark

Carnation Auto has commenced operations from July 1 with a network of nine workshops, which it calls Auto Solution Hubs spread across the country, with one each in Amritsar, Chennai Hyderabad and Kochi, two in Noida and three in Mumbai. The company plans to have 30 such workshops operational across India by March 2010.

The goal is to provide customers with a range of services including service and body repair for multiple vehicle brands and is the brainchild of the ex-CEO of Maruti Suzuki, Jagdish Khattar, who believes that Carnation will help to lower the cost of ownership of cars in India, while providing car owners with increased convenience and satisfaction. Among the range of services on offer are rapid repair bays, quick service bays, as well as value-added services like windshield repairs, car detailing, alternate kit fitment, tyre and battery zones. The company uses modern tools and equipment, like the Autorobot crash repair system and Magical Dent Master system, which it says will improve the quality of repairs and also help reduce turnaround time and costs.

In addition, Carnation workshops will also have experience zones that provide a range of accessories from ‘grab & go’ to customised fitments for car enthusiasts. In a bid to provide increase customer convenience, Carnation will also provides other services like warranty on parts replaced, cashless settlement of insurance claims, pick up and drop off facility, near-real-time appointments, regular status updates through SMS in addition to cost-effective Annual Maintenance Packages, which would be customised to the needs of multiple car owners, corporates and fleet operators.

According to Jagdish Khattar, chairman and managing director, Carnation Auto, “Our Auto Solution Hubs would provide everything a car owner would need to maximise his car ownership experience under one roof. We wish to create ‘experience destinations’ for them.”

The company has already raised its first round of funding of Rs 108 crore from investors like PremjiInvest and IFCI Ventures which is being used to build the business in the initial stage.

Carnation plans to use world-class technology, equipment and IT systems to ensure transparency and optimise its service quality and is aiming to set up a service and sales network of 100 outlets across India within five years. Its key partners include companies like Bridgestone, JK Tyre, Castrol, Liqui Moly and AkzoNobel, who will all provide their products and services at Carnation outlets.



Huge business potential

The company is very optimistic about its future prospects given that the service and parts markets is currently valued at Rs.15,000 crores and is growing quickly. Also post-warranty upto 60 percent of car owners move out of the manufacturer service network in order to lower their cost of ownership, which also provides a huge pool of customers for Carnation. Finally, new car sales are projected to touch three million units per annum by 2015 and the car parc would be a massive 19 million units by that time, resulting in a vast pool of cars waiting to be tapped by Carnation.

Discussing the need for multi-brand car repair stations, Khattar says: “The installed capacity of the passenger vehicle industry is set to rise from 1.7 million units per annum to about 3.8 million units by 2015 at an investment of Rs 25,000 crore. This expansion would require an additional investment of Rs 15,000 crores in sales and service networks to meet the needs of these new customers. Also, India is unique in that over 80 percent of the market is dominated by three brands. Independent multi-brand service companies are very well established in developed countries. In fact they have as much as 30 to 35 percent market share and provide customers an alternative to the manufacturer dealers and neighborhood garages. In India we feel this concept will catch on since the current market share is negligible. Hence, I think there is opportunity to grow from this small base. The acceptability with car owners would also accelerate with more companies entering the market.”

Talking about the investment required to set up Carnation, Khattar says, “We have already invested close to Rs 30 crore in the initial rollout and there are many more locations in the pipeline. We hope to have 30 locations by the end of this fiscal year and have investments planned in other areas as well including our operational joint ventures, certified pre-owned car business, eBusiness and customisation. We have already raised our first round of funding and are close to tying up loans that will provide us with our entire cash requirement for the next two years.”

Discussing the impact of independent workshops on manufacturer-dealer networks, Khattar says “Multi-brand service providers are still in the nascent stage of establishing themselves and are a fraction of the size of existing OE networks. If anything, they will augment the current network and manufacturers, especially those with limited market share and capacity constraints, who would now have the opportunity to access a more efficient ‘route to market’. This would also ensure efficiencies of scale and servicing support to their customers in areas where they don’t have a presence and also help those wanting to enter the market or expand their current footprint.”

Elaborating on the benefits to customers Khattar explains: “They will always view such developments positively since it will offer them added options while choosing a service provider. We have already worked with over 6000 customers across all our locations in the testing phase of the rollout and their reaction has been very positive. We are sure this model will find acceptance by car owners due to its convenience and the unique experience that is being delivered.”

Given Khattar's hugely successful stint at Maruti and his skills at innovative marketing, auto industry observers including recent entrants into the multi-brand servicing segment will be keenly watching Carnation Auto's progress.