While the biennial AutoServe 2012 exhibition in Chennai last fortnight was reflective of the subdued market sentiment, there were many product launches.
The general mood at the recently concluded Auto Serve 2012 in Chennai was that of trepidation. On one hand, a McKinsey & Company report that was launched by industry stalwarts during the inauguration of the event suggested that the size of the parts aftermarket is expected to grow at a CAGR of 15 percent to reach Rs 37,000 crore by 2015 while on the other hand, R Dinesh, chairman, Auto Serve 2012, said that the current scenario is that of uncertainty, adding that this year will see the aftermarket sector experience no growth or even slight negative growth.
The event per se saw participation from 101 companies, 15,000 visitors and generated business enquiries worth Rs 125 crore, according to a release from the Confederation of Indian Industry (CII) which organised the event. The expo also saw the CII hire up to 20 percent more space compared to the 2010 edition. While a day-long conference addressed how various segments of the automotive aftermarket can sustain themselves to look ahead for profits, there was a general buzz in the separately earmarked product launch areas.
Stalls saw a tepid response with most participants echoing the general sentiment that the previous edition of AutoServe was much more active. Rishikesh Sahay, CEO of Rai Automotive Systems, said that he had opted to downsize his company’s stall at the last minute. Conspicuous by their absence compared to the 2010 event were regional bigwigs like Vanjax Sales and ATS-Elgi.
Market cycles
Prior to the event’s inauguration, Dinesh had mentioned that typically, the automotive aftermarket is countercyclical to the new car market. “That is, when new vehicle sales do not increase, the aftermarket will grow. We see the same happening even now. However, due to significantly lower usage of vehicles, a lean supply chain and large competitive pressures leading to expectation of future price reduction may result in a short-term lack of growth in the aftermarket,” he had said.
Addressing an audience comprising those keen on the aftermarket sector during the inauguration on November 16, Dinesh said, “There is a problem of scale. Vehicle dealers face a problem of high real estate costs, returns and the model of retailing itself. Spare parts retailers/distributors face a problem of margins while the service sector faces an issue with market reach.” The ideal solution, Dinesh mentioned, is to adapt foreign solutions along with Indian best practices.
Anant Narayan, a partner at McKinsey & Company, summarised the report named ‘Scaling the Indian automotive aftermarket: Path to profitable growth’ in four key points. He said that the Indian aftermarket is large and is expected to grow robustly, projecting that the market size will increase from the current Rs 28,000 crore to around Rs 37,000 crore. Narayan added, “Margins have been declining and are likely to be under pressure going forward,” and continued to say that consolidation will be the key factor in driving up the margins. “Hence,” he said, “players need to make smart ‘where to play’ and ‘how to compete’ choices to sustain a profitable growth.”
Providing an OEM perspective to the debate, Marc Nassif, managing director, Renault India, said that the sustainability of a dealership business lies in the second half of a car – in its service. “We have learnt from trial and error in many countries across the world that if we are not successful in that part, we cannot be sustainable,” Nassif said.
Product launches aplenty at AutoServe
The three-day event also saw a flurry of product launches that mainly included wheel aligners, wheel balancers and tyre changer machines. An interesting undercurrent saw various companies launching wheel aligners that adopted either one of the two typical wheel-alignment philosophies – chassis centre line alignment and thrust line alignment. While Manatec launched a wheel aligner, Jumbo 9000, that aligns according to thrust line measurements, Radial Trading Company launched German manufacturer Haweka’s wheel aligner that accounts for chassis centre line measurements. Interestingly, the Gurgaon-based ARO Equipments revealed its wheel aligner, REMO, from Corghi, Italy, that considers both these measurements before presenting an accurate picture for the diagnostician.
While AutoServe 2010 saw Bosch India’s aftermarket division stress on training, this year the component major displayed its service wing with its recently launched Express Bike Service centre seeing representation. Ashok Leyland’s components sourcing division, Leyparts showcased its frequently used parts while LeyDirect, a 24x7 service division, showcased a modified Dost SCV that it uses to ferry spares and other parts to customers. Brakes India displayed its electromagnetic retarder unit – an autonomous braking unit driven by the driveline of a truck – caliper assembly units, oil immersed brakes, hot lined shoes, and booster TMC assembly.
When AutoServe 2012 ended, most exhibitors were left with a bit more optimism than they had when the three-day event opened. Visitors responded enthusiastically to a host of new product launches and technology demonstrations while competitors eyed each other’s products with caution.
Two years ago, AutoServe 2010 edition had benefitted from the stupendous growth for the aftermarket sector. This year's show saw the participants hold their breath in anticipation of how the industry will perform, given the overall slowdown. One can only hope that the 2014 event sees the sector overcome its present troubles.