The Indian automotive industry, forced to leapfrog from BS-IV to BS-VI by 2020, is in a cruise mode to develop new technologies for that. Rising expectations of the consumers fuel unforeseen technology innovations. These factors pose tough challenges to the Indian aftermarket which is unique in terms of geography, technology and product-mix. Lucas Indian Service (LIS), India’s most popular name in the automotive aftermarket industry, has translated these challenges into opportunities.It is ready to face the new trends emerging in the automotive service industry with multi-brand parts, and multi-channel services aided by the Apps of digitisation. LIS, established in 1930, manufactures automotive products and sells them along with the products of the TVS Group companies in 1,260 towns and cities in every district in the country through its regional offices and branches equipped with warehouses and a network of over 1500 dealers.LIS also deals with global brands like NSK, Gates and others as the company wants to offer wider choice to its consumers.
The geographical spread of various types of vehicles from the metros and big towns to far flung places in all the 640 districts in India, and their variety – two-and-three-wheelers, cars, trucks, buses, SUVs, which is one of the fastest growing segments, offshore vehicles and a little bit of marine – have been very rapid and on a very big scale. Do this mind-boggling variety of models and their increasing numbers unnerve the aftermarket players?
S Muralidharan, President, Lucas Indian Service Limited (LIS), told AutoParts Asia, that there is a real challenge as the number of spare parts needed for these increasing models is something no normal distributor can handle. The change in vehicle technology also is baffling.
“We have carburettor cars, multi-point fuel injection cars, large cars with common rail, and small cars with common rail. The industry is at the cusp of change where two or three generations of technologies co-exist,” he said.
This is a phenomenon seldom found in any other industry. There are old inline pumps still in diesel tractors, and rotary pumps in certain types of Mahindra vehicles and JCB earth movers. Also, there are very new common rail for the new range of cars and any range of trucks.
“This is going to be a challenge for the whole market. As we go up the value chain, we find that the traditional garages are the worst hit. The people there do not have the skill to cope with the variety of equipment nor the money to buy all the necessary tools and stock all the parts. Garages now need even diagnostic equipment to find out problems in a car as it has become an electronics entity on the move,” he said.
Coupled with this transformation are the changing and biting legislations. There was the clamour for BS-IV just a few months ago. Now there is the timeline for BS-VI. India is one of the few countries that will go directly to BS-VI skipping BS-V. Therefore, in 2020, there will be BS –I, II and III vehicles for service. BS-IV vehicles will also be needing service while BS-VI vehicles will be under warranty repairs. It is amazing for anyone to deal with such variety in mobility technology and products.
At the same time there will be increased safety consciousness across the industry and consumers. This will lead to new and better products like LED lights, preference for better quality materials, and use of safety gadgets like seat belts, ABS and ESP.
The next set of disruption is purely ‘adjacent technologies,’ Muralidharan said. Who would have thought Google would want to make a car, or Tesla to make a truck with brake pads that would last a lifetime? There is automatic intelligence in most kinds of vehicles; various Apps are available that tell the driver how many kilometres he can go before the fuel runs out, the distance to the nearest service station or how much life is left in the vehicle. The net result is all adjacent technologies can come into vehicles, giving rise to an incredibly informed customer who knows exactly when to go for the service and its cost; he cannot be taken for a ride.
This is a clear indication of market consolidation and elimination of the unorganised players. It will also, to a great extent, put an end to the business in spurious parts. It will be difficult for such businesses to work with the new forms of non-tax benefits and withstand the new technology onslaught and to survive in a very clean way that the new Goods and Services Tax (GST)regulations demand. They are bound to get squeezed. “It will be a big advantage for the organised industry as counterfeits will come down. But the transition to a GST-compliant business is extremely painful,” he said.
The automotive industry in this country is globally aligned. The technology gap between a car launched in Europe or Japan and new models available here is three to five years; sometimes only one year. Many brands of cars, and two and three-wheelers made in India are exported to ASEAN, Africa and Latin America.
About the global changes or disruptions that impact the Indian aftermarket, Muralidharan said that could be in three blocks: the global market and its consequences; the local market with local laws; and the influence of adjacent technologies. For LIS, the strength lies in being a very old company, one of the very few automotive companies that has been in the dividend list since inception, non-stop for a few decades. He is confident about the ability of LIS to stay afloat even among this technological torrent and move successfully to the next decade.
“LIS has been changing thoroughly in the last few years; some call it the submarine change as it is not obvious initially, some term it a complete metamorphosis. Whatever that be, the changes are now becoming visible and will continue. LIS motto is ‘Let’s build the future’, and the tagline ‘Aftermarket solutions provider’,” he said.
LIS parts are available in 1,260 towns in every district in the country. It also provides service which for it is not just repair. If a car breaks down, the problem could be with the switch, the starter, alternator, battery, cables or simply because the driver did not know how to use a clutch. LIS will solve the problem with parts and technical support; it is both parts and service, but the preparation for such an approach has been much deeper.
“LIS has systematically entered the world of digitisation. It is present in some e-commerce sites like Amazon and Flipkart, not because it gives business (it doesn’t actually) but the sheer presence helps. It has its own Facebook page, is in LinkedIn and is in touch with a set of professionals. Besides, it has its own YouTube page where a lot of training schemes can be entered; This is also used as a training tool. Training can be a marketing differentiator because in a market where nobody even likes to talk to the small electrician, it trains, on an average, 10 electricians daily on some product, often in local languages and most certainly in small towns. LIS training may not be in Delhi but in less known places like Jabalpur, may not be in Kolkata but Rourkela. The small-town reach is where LIS prepares itself and the market by offering a differentiator for the entire value chain,” he said.
Since the automotive industry is becoming global, LIS has to deal with many brands. It is not enough to have one mega brand; the Indian customer wants a choice even for repair or service. Hence the company is always multi-brand. Its portfolio has the LIS brands and the products of the group companies like Delphi-TVS, Lucas-TVS, Sundram Fasteners and others. The company also deals with global brands like NSK, Gates and others as it wants to offer wider choice to its consumers.
“When global companies come into India, they will see in LIS a valuable partner that has reach, knows the market and can provide service. Hence, an aftermarket tie-up would be distinctly possible. We give them an opportunity to reach the full market without any scare of spurious parts, false price, over-charging or any such unwelcome practices. For us one consistent advantage would be multi-brand, deep reach, multi-product, and multi-service. This combination with a strong digitisation drive would possibly see LIS through in the next several years,” he said.
The disruptions that could affect LIS, Muralidharan said, would be technology, transformation to BS-IV and BS-VI, alternate propulsion, whether it is electric vehicle or any other kind of fuel technology, and most important of all is digitisation and its impact on the vehicle owner through e-commerce, portals or Apps. When there are Apps in the car itself, it would be a huge disruptor and an incredible game changer. How the retail network, semi-wholesalers, dealers, etc adapt to it is the big question. If it takes effect, the number of layers in the distribution network would reduce.
“Consolidation would take place. I don’t think automated cars will come to this country; it’s too far off. The other disruptor in the near future would be the aggregators like the Ubers and Olas; they don’t own car but they are in the field. That is the greatest disruption to happen in this decade. Here we do not know whom to approach to service the car: the individual car owner or Uber,” he said.
Today the truckers and fleet owners are more informed than those of the previous generation. Muralidharan said, “We welcome this. It is very advantageous as we are going to give our salesmen Apps to make orders. He will tell the end-user or retailer the price of sale; everything will be clear. Earlier wholesalers, dealers and retailers came into the picture to make things foggy. Today, the customer or end-user will come to me knowing the price-point is right; that’s what we want him to do. The increasing awareness level suits us because we don’t want to be in a market where, earlier, ‘with or without bill’ was the rule. People did not know the repair cost of a vehicle. It suits us when customers get educated. That’s why our training programmes are directed towards the last level of electricians. The organised larger companies will prefer this. Increasing education for awareness from any quarter will help LIS because that’s the game we want to play.”
LIS is preparing to face the future, Muralidharan said. For the e-rickshaws, which run in a few towns and cities, especially in Uttar Pradesh, it has the battery, their cardinal part, and many other key parts. “We are creating common rail solutions for BS-VI. When a company wins an OE business, one thing that the customer expects is service. When preparing for BS-VI it is a distinct advantage. It is a sort of an ‘Intel Inside’ concept. If you have a LIS service inside, the vehicle manufacturer knows that he can manage,” he said.
Muralidharan said the support to OEMs will be multi-fold. “We have no problem in supplying to OEMs as we do not consider that the OE channel is contrary to LIS. We feel both the channels can co-exist to exterminate the spurious, reconditioned and other sorts of counterfeits. The LIS channel will be developed by service, joint campaigns and joint work with OEMs. Inside it may have a Lucas-TVS or Delphi-TVS part but the OEMs will be sure that the service from LIS will be complete; they need not run around for any product,” he said.
This is the service even the multinational aftermarket companies claim to do. They supply to OEMs and sell in the aftermarket.Where or what is the value-addition by LIS? Muralidharan’s answer is “We do not claim to be the only people serving OEMs, but the difference is while a particular supplier caters only to the OEM he supplies to, we are focused on all manufacturers. We are multi-brand, and multi-vehicle. We do not limit our reach to Ashok Leyland,Tata or Mahindra. It is in this that we have a clear competitive edge. We are brand-neutral when it comes to an OEM; the vehicle manufacturer is immaterial for us. Servicing an OEM is an advantage for both channels; I don’t see any conflict.”
The other advantage in service is concentrating on different channels. “We had for decades a channel on trucks and buses, once the backbone of this country. We are entering tractor service; Lucas India Tractor Service has started in UP. We will shortly start Lucas India Bike Service because these are sectors having an OEM,and a roadside garage that needs technology. We can serve the mechanic with genuine parts and train him how to service. Going to different channels through service would be one of our USPs in the long-run,” he said. LIS plans to introduce service for two-wheelers in the next few months. Similarly, it will soon offer service for multi-brand cars and expand the service offered to tractors. “We will be present across all channels with multi-brand service. We are into trucks and buses.But those garages need drastic overhaul. I expect large fleet operators will have their own garages for routine maintenance; some have started,” he said. The company will approach its field operators, may be later, to ‘’ensure that we offer more services directly in our workshops and encourage our service dealers also to offer more services because that will be under the overall banner of an aftermarket solutions provider,” Muralidharan said.
For trucks and buses LIS has been servicing fuel injection systems, starters, alternators, batteries, electrical systems, wipers, motors and the entire range of filters and lube systems. It is not into transmissions or engines and may not enter that area as the conventional internal combustion engine is in a very transitory phase with talks of alternate fuels and electric vehicles. Some customers have a mindset of only looking at parts and services from multi-national companies. To this he said, LIS does not have any problem servicing multinational products. “We are not a product brand, we are a corporate brand; that’s the difference. Earlier it was Lucas products and Lispart, today we are not. We have many brands, but our company is LIS. We want to be a trail blazer and a consolidator in the Indian market.” he said.
On the possibility of LIS entering the remanufacturing segment, he said, “Reman (remanufactured) in the traditional European way will take quite a while because the labour rates are different. But Reman as a solution that saves time, be it float units or whatever, is distinctly possible. We will probably have a repair solution, a float solution (changing the part with a new or refurbished one), and then a Reman solution. We have to take it step-by-step. I think the market will ensure it happens when we get into things like common rail. I doubt if we will have an option of going in for full-fledged repair of a common rail system. There is no doubt that Reman solutions help the environment. At the same time, not many Indian customers change a part until it is completely worn out. There will be a tipping point of labour rates and time consciousness where the customer would prefer a Reman to a full unit; something better than a repair. For example, for batteries and fuel injectors it would happen much earlier, but I’m not too sure if it will happen for all kinds of parts.”
Would lack of reverse logistics affect the prospects of Reman? Muralidharan said there should be reverse logistics but that does not mean the parts need to be taken to places thousands of kilometres away for remanufacturing operations. These can be taken up at regional centres; LIS’s own workshops can become the centres, which will be a distinct advantage, he said.
The global integration is bound to have a spill-over in India. One such spill-over would be the increasing replacement of repaired products with Reman ones. It might not happen overnight, maybe only for a few products it will happen because the time to repair is also becoming a factor. No vehicle owner, fleet operator or car driver likes higher turnaround time; everybody talks in hours. People generally prefer six to eight hours; they would like to leave their vehicle in the morning and collect it back in the evening. If the service centres want that sort of speed, some critical products would certainly go in the direction of reman and recon, he said.
Consolidating his plans, Muralidharan said the company will expand service dealerships. “There will hardly be a district in this country where we will not have multiple service points. All put together, including fuel injection and auto electrical, we will touch a thousand service points from about 600 now. The number of electricians in our fold will reach 30,000 from the present 25,000. We will increase the touch points – that’s a constant exercise – and retailers.
For two-wheelers we have started a retail engagement programme called ‘Mera dukan, mera LIS’ because we had found that the two-wheeler retailers were not really touched. In western India we have nearly 2,000 retailers who are in this programme. We will extend this to other regions; we will follow the vehicle path; that’s it,” Muralidharan concluded.