Mahindra First Choice to add 30 outlets in FY13

In an industry which is pegged at Rs 20,000 crore annually, the organised service players’ share is less than one percent. “In a developed car market like the USA, the share is around 33 percent,” says YVS Vijay Kumar, CEO, Mahindra First Choice Services (MFCS).

Going by that estimate, and the projection that India will be a matured car market like the USA, there is more than enough opportunity to capture by the organised players. Size is the name of the game. “Scale matters the most in the multi-brand service business,” he adds.

That is the reasoning behind MFCS’ plans to add at least 30 outlets to its current network of only 10 during fiscal year 2012-13. The plan is to be a 50-outlet-strong network two years from now, and eventually set up over 500 service outlets all over the country.

Over the last three years of operations, MFCS has learnt the business better, perhaps making some errors too on the way. It says the growth strategy going forward also takes into account the “learnings” over the past few years. The scale is necessary to gain full benefits of the investment that the company makes in the business. More so, because a business like MFCS usually operates in lower margins than an authorised dealer-owned workshop. It also has to invest resources in attracting and retaining customers.

Organised players in the multi-brand servicing business are believed to be struggling financially as they are yet to gain the critical mass. “The market share of organised workshops is going to grow faster. Not all customers of OEM dealers are satisfied with their service. There’s a perception of being overcharged by the OE dealers in the market. Our core focus is to win customer confidence with efficient servicing and transparent deals,” says Kumar.

To build that customer confidence, MFSC has commissioned an independent agency to follow up with each of its customers a day after his/her vehicle is serviced at an MFCS outlet.

Opportunities and challenges

Apart from the investment in setting up new outlets and customer care, MFCS will also invest in business management software such as SAP to connect its servicing network soon. Investments are coupled with some strategic decisions. MFCS has decided to focus on only mechanical jobs and is not keen on major accident repair or engine overhauling jobs.

“Mechanical jobs comprise 85 to 90 percent of the workshop business,” says Kumar. MFCS’ strategy to build the business doesn’t include insurance assistance, which is involved with major repair jobs.

The strategy is in place, but it will take time to get the full results. According to an industry professional, the players in the multi-brand servicing business are struggling financially. Given the market opportunity and the strong equity of its promoter, MFCS has a lot of scope for growth, but with challenges too. One of them is sourcing spare parts. Since the workshop is a major revenue

generator for any authorised dealership, OEMs mostly ensure that spare parts are available only through that channel. For an independent set-up like MFCS, this becomes a challenge. Vijay Kumar hopes that like the USA, India will also reach a stage where it will be mandatory for OEMs to make available all spare parts of their models through independent channels too.

The other challenge is real estate availability. The rapid rise in rentals has compounded the challenge. These reasons are the major hurdles for MFCS to expand to an area like South Mumbai, for example. All the current MFCS outlets are company owned. It is now planning to bring in franchisees to expand nationwide. “We want to set certain benchmarks in the company-owned outlets for the franchisees to replicate,” concludes Kumar.

SUMANTRA BAROOAH