AUTO: Carnation Auto, promoted by former Maruti chief Jagdish Khattar, set to roll out soon.
Ever heard of a mobile car repair van attending to your car while it remains parked at your office? Or your car being taken by the servicing firm when it is parked for the night and returned by daytime? Or being able to choose a car, without the overriding concern being whether the maker has a cross-country service network or not? Well, change may be on the way.
There are two parts to the experience of owning a car: Buying it and then living with it. The first got modernised with new cars and well-equipped dealers coming in during the nineties. The second, in which service has till now been largely provided by the neighbourhood garage, is set to get corporatised and take a qualitative jump, with the advent of Carnation Auto, promoted by former Maruti Suzuki chief Jagdish Khattar.
He proposes to position his firm as an aggregator between the manufacturer and financing and insurance firms on one hand, and the car owner on the other. And over time, it will seek to have a role in not just the servicing and repair space but also the selling of both new and used cars.
In the current mood of gloom all round, Khattar exudes the sense that he could not have timed his venture better. “The current environment is helping us, as sanity is coming back into the market, both in terms of property prices and manpower costs,” he says.
He is getting feelers from dealers wanting to quit, as the bottom seems to have fallen out of the new car market, and offering their locations. This, when he has already tied up his own financing, by having arranged equity finding of over Rs 100 crore from PremjiInvest and IFCI Ventures. Khattar plans a gearing of 1:1 and an investment of Rs 1,000 crore by 2012.
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The first two auto centres will get off the ground by February, four by April — two in Noida and one each in Bangalore and Amritsar. The plan is to have 25-30 of them by the end of next year (2009-10) and a hundred in 65 cities by 2012. The centres will be either fully owned or be joint ventures (JVs) with local players, in which Carnation will have a majority stake. Two such JVs, in UP and Karnataka, are already on the way.
Most importantly, as this is a service operation, Khattar hopes the firm will stop losing cash after the first year. His confidence stems from the fact that this aggregator business model exists successfully in smaller countries globally, where volumes of individual makers are often too small to be able to support dedicated dealers. There is also a plan to have a realty firm to own the property in which the centres will be located.
Carnation will first start with setting up a multi-brand servicing network, in 6-12 months become authorised service providers for selected car makers, in 12-18 months get into multi-brand dealerships and in 24-36 months start selling pre-owned vehicles. The aim is to finally have auto solutions hubs, where you can buy a new or a pre-owned car or get your car serviced and repaired with a shop-in-shop for spares being right there.
Khattar’s aim is to fill a profitable space by coming to the aid of the 15-odd car manufacturers, who have only 20 per cent share in the Indian car market, leaving the top three with the rest. The lesser mortals do not have a cross-country network of dealers and service centres and thereby lose business that their product quality would have otherwise fetched them.
Then, take the insurance firms who are currently losing money. Irda has announced that in this year, insurance firms can design their own products, tailored to the needs of various customer segments. Carnation is talking to them and also car rental and taxi service firms like Hertz and Meru.
Finally, the fact that from third year 70 per cent of car servicing is done by local (non-manufacturer) garages. There will now be an option between the latter and the dealers’ garages. All these are the opportunities before Carnation.
