Seeking Advice For Investing in Auto Garage

[DavidDenton]

Dear Forum members - please let me know if this is posted in a wrong section as I could not find anything directly related. I have been asked by a friend to invest in a service garage (multi-brand) with a technology-driven, social-media-supported marketing strategy. He and I believe that we can create a lot of buzz in the neighborhood to generate leads and customers. What I want to know from this esteemed group is some experience based insights about pricing for services and expected margins. Can someone please provide general insights into the following questions:

1. Can we purchase original and aftermarket parts at the same price as the authorised dealers? What kind of typical discount can we expect on MRP?

2. Any guidance on how to bill for service such that our costs are significantly more attractive than authorised dealers but still profitable? In other words, how do successful garages do pricing for labor. I understand that this can vary depending on the overall work load and opportunity cost, but some general guidance will be great. Mainly I want to be able to compare how our offer prices can be compared with those of authorised service agents.

3. Any guidance on how the pricing of chains like Carnation, MahindraFirstChoice etc. are compared to those of authorised dealers? I am concerned if it will be possible for people like us to compete with these chains. Any insights will be greatly helpful.

Thanks
David - Bangalore

 

[goencho]

Hey David, Before giving advice We'd like to know will you be just an "investor" having a part only in returns or will you be an actual partner in business where you will be taking part in day-to-day decisions.
Also the second question that comes to my mind is-Do you have a technical background and a sound knowledge of how auto repair work. This is specially important as it will be the main deciding factor whether you should go forward with the investment option or not.

 

[DavidDenton]

Thanks for the message. I'm a purely financial investor but my friend is technically very good

I am trying to get an assessment of the profitability and viability before we both invest tine and money.
Any help will be greatly appreciated

 

[konkantrip]

Hi David

I think you should have some basic knowledge about the automobile servicing industry before entering into this buisness. to be very frank garage is something which completely depends on good mechanic (s) and also the type of service you provide, you can use social media as a platform for brand building but you will need consistency in quality to keep it running. A basic rule of any buisness is it should be able to sustain for 1000 days so initially dont expect any profit and try to make brand name also labour mangement is a big concern in this buisness so please plan on this.

 

[goencho]

A couple of points for to remember:

1) In a service related industry your "brand name " is not the reason why people will come to you,You should have a proper technical team to give on-time,reasonably priced service. If you give that,even if you have carnation next door to your place,people will come to you! Ofcourse social media and other promotion will help later on to increase customer stepping in but that's step 3. Pure referrals should be your first target.

2) Since you are a pure investor, do not expect grand returns for the first two years. You and your business partners should sit down and calculate every single cost to the last screw and nut and that amount should be available for at least two years till you build your customer base.

3) As per your query, regarding parts. Stocking on all parts for N brands is not possible so you will have to stock couple of fast moving parts like filters /belts/ and any other common yearly servicing related components. Here I can advise that you can tie-up with your nearest "bosch" parts supplier cause they have parts for the most common vehicles that come for servicing. For all other parts you will have to approach suppliers and not dealers. There are parts warehouses for all companies who supply parts to garages on a dealer-rates. The commission you can get on parts is 15%.

4) About how to charge your customer, dealerships basically charge a bomb as labor charges. I remember,once I had to replace a part on my safari. The part costed Rs. 750, labor-Rs.500! That is plain looting customers. You will have to find a reasonable way to charge customers. For starters you can make a package for hatches/sedans/SUV's where a service related to oil change/filter change/air filter/electric checks/greasing and be packaged into a flat rate. I can give you a couple more ideas on this topic a bit later.

5) I am a member of another popular forum and as much as I know the "branded" multicar service centers are completely ruining their images with pathetic service. As I commented earlier,sound technical knowledge,fast turn around time,and smart costing will raise your service center to the top. As you said your friend has good technical knowledge is a very big boon cause I'd like to tell you, everyday you will get a car with a problem which has symptoms pointing to a particular problem but the solution is completely unexpected. Your team should be able to solve this. I've known top service center "managers,AGM's, CRM's" go for a toss when I ask them a couple of twisted questions. All they give me back is a fool's smile which is not what a customer expects.

 

[DavidDenton]

Dear all, specially Goencho - you guys are really awesome! To come out and help others like this - hats off to this community.

On the specifics you mentioned, I will surely work out a deal with Bosch - we want to make sure we can provide an assurance to customers that we only use genuine parts (unless of course, specifically requested by customer otherwise). Does Bosch only deal with aftermarket parts or also most of the originals for at least the top 3 brands in India?

I like your suggestion on creating a price list for basic/predictable tasks (like a menu). Any guidance you can give me on that, including if there are some common estimates people have created for labor effort for different types of services, so that we can price it based on our labor cost and availability.

The main thing I want to understand is if we can offer decent discounts while not compromising on quality. Some websites I searched said that there is sometimes a 35% to 40% price difference - is that true? Our business will work better if all the branded dealers offer the kind of prices that you had mentioned in your story. However it is very difficult for me to find out how individual garages are pricing for their services. Any guidance will be great.

Thanks again in advance

David

 

[goencho]

Bosch has oil filters/air filters/fuel filters/spark plugs/wiper blades and other stuff for all brands like Maruti ,Honda,Hyundai and Tata-atleast that much I know cause I use them. Bosch may not be the OEM supplier for all the companies but their parts are equivalent or sometimes even better. For companies like Tata and Maruti sourcing common OEM service parts is very easy. You might have to do a little homework for other brands.

With regards to services you can offer:
-Car servicing
-Car Repairs
-Tyre change/wheel balancing
-Car Dent and Paint service
-Auto Insurance Renewal Service
-Car Grooming Services
-Used Car evaluation service-where you help people with buying used cars by checking them.
-Car PUC

Regarding how much dealers charge,I can vouch that Tata and Hyundai labor charges are really high. The best people who will tell you about other brands are fellow TAI-gers itself. Make a study-Ask fellow members who own different brands: "what was your last service bill?" you will get your answer.

 

[DavidDenton]

Thanks again Goencho - many good ideas here again. I will conduct a broader survey.