Maruti Suzuki focuses on car service to tackle slowdown

In a new slowdown strategy for its distribution network, car market leader Maruti Suzuki has been advising dealers to focus on service to ride out the slump in new car sales. With the service business expected to grow 20% over the next three years — in sharp contrast to the new car sales industry which is in de-growth mode — the company is looking to bank more on service rather than sales to keep its channel partners solvent and profitable through the downturn.

In fiscal 2012-13, Maruti Suzuki's service network serviced over 17 million cars, including accidental repairs. This was an increase of 5% over the previous year. The service business is expected to increase by 8% this fiscal and almost 20% over the next three years, with Maruti's service load expected to hit 20 million vehicles by 2015-16.

"It would not be an exaggeration to say that car service in a way is recession proof and for car manufacturers, with robust after sales service network, it is the biggest weaponry to combat slowdown conditions," said a senior analyst with a Delhi-based MNC consultancy. Top executives say while the company's network is fighting tooth and nail for every new car sale, it is the service network that is slowly taking centre stage in keeping the channel profitable despite the slide in demand.

In a recent meeting with dealers, Maruti Suzuki COO (marketing and sales) Mayank Pareek referred to new car sales as "income from the stock market" while service income was like "fixed deposit in a bank". Car sales may go up or down as the economy yo-yos, but "income from car service is assured" , he had said.

With over 3,000 workshops in more than 1,400 cities, Maruti has the largest sales and service network in the country's car industry. Maruti's dealerships and workshops service 50,000 cars every day and around 17 million vehicles a year. Maruti service employs around 90,000 people.

But most importantly, this 'constant income' has been on the growth path — unlike new car sales. Maruti's focus on service is understandable given the size of its car pool in the market. "While customers may postpone new car sales, they may not forego car service," said Pareek. "Increase in service business enhances profitability of the dealer partner."

Repairing Business

In FY13, Maruti Suzuki serviced over 17m cars — 5% more than FY12 even as car sales slowed The service biz is projected to grow 8% this fiscal and nearly 20% over next three years With more than 3k workshops in over 1,400 cities, the car maker's workshops service 50k cars daily with 90k employed.