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Old 3rd April 2024, 09:37   #16
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Re: Why are there no company-owned & company-operated service networks?

Do consider the fact that a manufacturer owned enterprise may not be hungry for your business. They are not motivated by return customers etc. A dealer is much more hungrier and of course, sometimes a little too hungry!
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Old 3rd April 2024, 09:47   #17
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Re: Why are there no company-owned & company-operated service networks?

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Originally Posted by Quicksilver85 View Post
I am curious to understand, why are there no company owned or company operated service network in India?


Similar to how public sector oil companies like Indian Oil, Bharat Petroleum who claim to operate the so called COCO (Company Owned & Company Operated) fuel stations which presumably deliver better "quality" and "quantity" of fuel to motorists. Why cannot there be say a COCO TATA motors service center or Skoda or Hyundai? Or maybe even premium players with low volume such as Audi, BMW?
1. Tata had Concorde. They shut it down.

2. To keep a dealership afloat, you need a lot of Jugadds. You cannot apply the processes of a corporation to work in a dealership. This is where the KPIs (in corporate language) start getting debated and so do the actions of the person running the show. for example, why did hire a technician who is experienced at a higher price than an MBA sales consultant? And these are not the people in service that question but people who audit systems processes and finances do it. All this is bypassed in a private limited company which is called a dealership.
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Old 3rd April 2024, 09:54   #18
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Re: Why are there no company-owned & company-operated service networks?

For the same reason why partners are essential to expand any business. Managing a service network is a time consuming and laborious task often with very specific regional idiosyncrasies. For a car manufacturer to do this directly it will require huge commitment in terms of effort, manpower and capital for very little ROI. Not to mention the fact any issues can potentially have a disproportionately negative effect on the brand. You can see how VW and German manufacturers suffer even with the separation.

An exception to this may be with the advent of full electric manufacturers like Tesla where most issues can be sorted by over the air updates and service visits are rarely needed. But even there there are areas like logistics etc where partners would help.

Drive on,
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Old 3rd April 2024, 10:45   #19
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Re: Why are there no company-owned & company-operated service networks?

As I understand there are some factors:
1. Additional incentive for the dealer to make more money by taking on the headache of service
2. Sales is comparatively the easier part, for Service there needs to be a life long commitment (of the product) , which OEMs shy away from
3. Its like this for many consumer products. Most manufacturers will have the service outsourced to a third party to keep their costs low.
4. The need is also to focus on core competencies of manufacturing where they have economies of scale.
5. This is also similar to call centers which are usually outsourced since this may not be the business' core competency. An outsourced entity will handle this as per defined SLAs and can be held accountable

I know of a large German Parts supplier which tried to get into the COCO model of multi brand car service. The economics were just not there for the capital investment, they realized franchisee was the way to go.
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Old 3rd April 2024, 10:55   #20
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Re: Why are there no company-owned & company-operated service networks?

Let me share the view from the inside.

In the 1980s TELCO, now Tata Motors ran two COCO model dealerships at Delhi and Bhuvaneshwar called Delhi Sales Establishment and Orrisa Sales Establishment. Frankly the kind of flexibility and nimbleness needed in sales of trucks and their after sales support was such that these company owned outfits run by my colleagues always struggled to keep pace. As an internal employee and branch manager I found dealing with both a pain in the neck. Interacting with the entrepreneur led dealerships was way easier and more effective.

Every part of the chain of supply has an optimum size and nature of organization. A 50,000 crore rupee OEM trying to run a 100 crore rupee sales and service outlet is a gross mismatch. Also at least in trucks {Tata's did not make cars then} the kind of employee you need i.e. a bit of a local toughie was the sort whom the dealer could identify and recruit, but Tata's could never.
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Old 3rd April 2024, 10:56   #21
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Re: Why are there no company-owned & company-operated service networks?

Imagine the logistics of a manufacturer providing their own worldwide garage network that has to provide a service within say 80k kms of the car owner.
The nearest you can ever expect is a franchised dealer service network. The profit margins on new vehicles are so small that "selling" dealers also provide service to boost their profit margins. The total package allows the franchised dealers to provide " cradle to grave" support for customers. This approach usually keeps a high percentage of loyal customers.
Labour charges are often nearly twice that of independent garages. Price conscious customers tend to use independent garages. In the UK good "independent" garages can carry out manufacturer warranty work and routine servicing. Some companies "own and operate" a chain of selling /servicing garages. Most off these chains offer what appears to be a genuine "manufacturer" owned experience. These garages are branded "Ford" etc in every detail, logo, colour, signage, professionalism but are all approved dealer franchises. The customers often believe the dealer is manufacturer"owned".
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Old 3rd April 2024, 11:34   #22
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Re: Why are there no company-owned & company-operated service networks?

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Originally Posted by Quicksilver85 View Post
I see "service quality" as one of aspects which could be a hit or miss with many car ownership experiences shared in this forum. Time and again, I see the same repeated even in Official reviews that sub-par service experience or ASS Horror stories with some OEMs. Also, there are so many threads about dealership frauds/mistreatment/poor service quality etc reported on this forum.
Great question. Others have covered the obvious reasons.

I would ask why would you assume that service quality will be better just because the manufacturer owns and operates the dealership network.
  • Good customer service at Maruti and Toyota dealerships are not only because the dealers are saints. It starts from how Maruti and Toyota set the expectations and scrutinize their dealers.
    • There's a thread pointing out the instance when Toyota made the erring dealer come to the car owner's home and apologize.
    • A friend got a Lexus recently and he pointed out that the Sales Representative spoke about service for a long time!
  • Bad customer service at Tata dealerships isn't always because of the dealers. The cause includes badly engineered products, poorly trained technicians and the lack of QA/QC processes at the plant+dealerships.
    • Tata owns and operates Air India. We can check the Air India thread to see the service quality (or the lack of) and the causes.
  • Ford started off with bad/poor experiences at their dealerships. It improved over a period of time. It is good even after Ford stopped selling their cars! This change was also because Ford actually improved the quality of the parts inside the cars.
IMHO the buck stops with the manufacturer/brand owner. They can endeavor to deliver good customer service irrespective of who owns the dealerships. Some manufacturers care enough and some don't.
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Old 3rd April 2024, 11:51   #23
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Re: Why are there no company-owned & company-operated service networks?

All OEMs have a few model workshops operating in COCO Mode.

These workshops are pioneer for any ideas which the OEM plans to launch. These workshops act as proof of concept for any new idea the OEM wants to try. The learnings from these are incorporated in the SOPs and processes for dealers going forward.

In my view, compliance is something which OEMs just dont want to get into at granular level. Imagine having a workshop 100% comply with safety norms at the fragmented scale of Honda or Hero. Its just too much hassle. Add to that the labour intensive nature of service stations!
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Old 3rd April 2024, 11:52   #24
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Re: Why are there no company-owned & company-operated service networks?

I am working with an Automotive OEM since 12 years and therefore can give you some idea on this :

1) Diversification of Risk :
To make you better understand this I will give one example. A Vehicle say a car is having "N" number of parts & components. An OEM cannot do investment to make every Part & component, therefore they do outsourcing and procure various components For Example : Outsourcing of Fuel Injection Systems, Wiring Harness, Lamps, Bulbs, Tyres etc. If they start making every component this will require a huge investment and during low business times it would be very difficult to run all the factories. So better they stay focussed on Vehicle manufacturing.
Similarly vehicle OEMs cannot invest on Service centre in every city or district. The investment will really be huge.
The idea is to diversify the Risk by making business partners as Sales & Service centres.

2) Human Resource Challenges
Service Centres require more such staff who can deal with the Local people easily be it in terms of Language/Culture etc. A foreign MNC cannot study the needs and requirements of all the regions where they see market potential.
Therefore, OEMs try to find local business partners who can handle the needs of locality and can hire the service staff accordingly.

Also, if OEMs start opening Service centres the liability towards their employees will increase Eg Remuneration/PF etc of Service centre employees which will be as par with other staff of the company and will be a huge cost for the company. During Low phase of the business if employees start doing strikes etc at every service centre of the company it will be very difficult to manage.

Therefore dealership business model is preferred in this industry.
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Old 3rd April 2024, 13:51   #25
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Re: Why are there no company-owned & company-operated service networks?

Quote:
Originally Posted by Quicksilver85 View Post
I am curious to understand, why are there no company owned or company operated service network in India?
It is a financial decision taken by the OEMs to not spend capital on setting up service / sales centers, purely on the basis on Return on capital employed (ROCE).
It'd cost them roughly $1-$1.5 million per location.
Tata and Hyundai would need to open 100 centers to cover pan India. Luxury Germans would need to open 30 centers.

For the kind of captial expenditure it requires, companies are better off expanding production / investing into R&D for a new model (or localisation) for a higher return on their capital.

Quote:
Originally Posted by Quicksilver85 View Post
Similar to how public sector oil companies like Indian Oil, Bharat Petroleum who claim to operate the so called COCO (Company Owned & Company Operated) fuel stations which presumably deliver better "quality" and "quantity" of fuel to motorists. Why cannot there be say a COCO TATA motors service center or Skoda or Hyundai? Or maybe even premium players with low volume such as Audi, BMW?
These COCO stations are run by PSU OMCs. They do not operate with the level of financial controls which private companies operate with.
That being said, OMCs are not bullish on COCO stations. They do prefer to allot licenses to 3rd parties - which keeps the PSU and the government (bureaucrats, politicians) happy.
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Old 4th April 2024, 03:02   #26
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Re: Why are there no company-owned & company-operated service networks?

I don't know about you guys but I would rather just pay a bit more in labour charges for honest work rather than have to deal with shoddy work that requires me to return or extra items inflating the bill or even being charged for work that was never done. Ex: being charged for oil and then not changing the oil, fuel theft, parts being stolen and replaced with used ones etc.
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Old 4th April 2024, 17:43   #27
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Re: Why are there no company-owned & company-operated service networks?

The straight answer is called "Risk Avoidance & Risk Trasfer", handing over the headache to a third party. They don't want to be held responsible is the simple truth!

Why are there no company-owned & company-operated service networks?-screenshot_20240404_174544_duckduckgo.jpg

Last edited by Thyag : 4th April 2024 at 17:47.
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Old 4th April 2024, 20:36   #28
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Re: Why are there no company-owned & company-operated service networks?

Quote:
Originally Posted by Quicksilver85 View Post
I am curious to understand, why are there no company owned or company operated service network in India?
As someone with extensive experience in dealership networks, I find it intriguing how this particular topic remains largely untouched by OEMs. From firsthand experience, I've learned that it's often preferable to have a mediator between customers and manufacturer for instance, a dealership to handle criticism.

From a practical standpoint, the after-sales service segment proves to be the most profitable in the automotive industry, overshadowing car sales themselves. Dealerships can offer discounts to enhance customer satisfaction, a practice not typically prioritized by manufacturers.

TAMO with their own direct sale point "Concorde" showcased a promising business model, but the competitive nature of discounting ultimately led to its downfall.

In my opinion, having witnessed the automotive industry evolve over many years, it's evident that while various sectors have expanded significantly, the dealer service sector has lagged behind. This discrepancy has resulted in underpaid employees and skilled professionals seeking alternative opportunities outside of traditional dealership structures. Recently, I've assisted several Team-BHP community members in addressing their concerns, highlighting the importance of effective dealership service.
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Old 5th April 2024, 14:40   #29
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Re: Why are there no company-owned & company-operated service networks?

Hyundai has a showroom and couple of service centers in Chennai, one at Guindy and another at Alandur. I purchased my car from here and the car went to service here for 7 years.

In terms of buying experience, it is just as buying from somewhere else. The only benefit I saw was getting a much faster delivery especially for vehicles with larger wait times. When I bought my car, Creta was new in the market and a hot seller with wait times of ~ 6 months+. I was not looking for Creta, but when I made some enquiries, they promised to give an earlier delivery compared to other dealerships. In my case, my car was delivered weeks before the promised time and with in days after the vehicle arrived. Regular dealers tend to keep the vehicle in custody for ~ 7 to 10 days after receiving full payment(it is said that they do it to earn interest on their current account). Dealings were transparent and they were really scared of "Korean audit" as they called it.

Coming to the service center, everything was perfect until Covid when all hell broke loose. Most of the knowledgeable SAs left and they were left with a bunch of "freshers" who had no idea how to troubleshoot. They also started pushing unwanted things like the infamous AC disinfectant which was never recommended earlier. Once I went there to fix a loose contact in ambient temperature sensor, which was a regular occurrence in my car. The assigned SA blamed it on a faulty sensor and asked for a replacement and delivery after 2 days. I told him its not the faulty senor and the fix can be done in a matter of minutes, but he stood his ground. Made a scene there, pulled the senior folks in and the loose contact was fixed in a matter of minutes. Then came the feedback call which I promptly gave 1/10 . an avalanche of calls followed from each level of management reaching up to the top. Everyone blamed it on the inexperienced SA and promises were made not to repeat such instances again. The customer experience was degrading at every level so stopped going there altogether.
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