Carnations key differentiator is the fact that it is brand agnostic

Written by Alokananda Chakraborty | Malabika Sarkar | Malabika Sarkar | Updated: Aug 9 2009, 02:19am hrs
Jagdish Khattar
This week we will break tradition and not introduce our interviewee. The name, for the records, is Jagdish Khattar, and you know why we didnt bother. When Khattar announced his new venture, Carnation Auto, last year, there was a tremendous amount of curiosity among people associated with the industry as to how he would take his visionof developing the countrys largest independent multi-brand automobile sales and service networkforward. But Khattar was busy putting together the venture brick by brick and wasnt ready to lay down the details. As things stand, Carnation Auto has already received Rs 250 crore of investment, including Rs 108 crore by Premji Invest and ICICI Ventures. In addition, the company has joint venture partners in Uttar Pradesh, West Bengal, Karnataka, Andhra Pradesh and Maharashtra. He has flagged off nine outlets across the country and plans to scale up to 30 by the end of the year, and expects to touch Rs 300 crore in revenue. In this interview, Khattar tells FEs Alokananda Chakraborty and Malabika Sarkar what it took to get the venture off the ground and how he assesses the potential of the market.

Why would a customer come to Carnation or a third party service shop and not to a company-owned dealership or service centre

Our key differentiators lie in the fact that we are brand agnostic vis--vis a traditional dealership that deal in only a particular brand. This is the emerging need as for facilities with multiple cars, corporates, leasing companies etc. We are also working on developing stringent processes with the aim of providing customers the best possible service with standardised pricing in a transparent and efficient manner. In our effort to provide complete auto solutions to our customers, through our multi-brand auto solution hubs, a host of product and service differentiators like rapid repair and quick service bays, value-added services like windshield repairs, car detailing, tyre and battery zones etc are in the offing.

Our experience zones provide a range of accessories from grab and go to customised fitments for car enthusiasts. Additionally, the company has invested in world-class tools and equipment, like the crash repair systems and dent masters that will improve the quality of body repairs and also help reduce turnaround time and costs for all stake holders.

Moreover, technicians at Carnation are professionally trained to handle multiple brands of cars. The attempt is to provide convenience and peace of mind to the customer. To this end, Carnation provides a host of services like warranty on parts replaced and cashless settlement of insurance claims, pick up and drop off facility, near real-time appointments, regular status updates through SMS and cost-effective and attractive annual maintenance packages, which are customised to suit the needs of car owners, corporates and fleet operators.

Independent multi-brand service models are well established in developed countries, with about 30-35% of marketshare, and provide customers an alternative to the manufacturer-dealers and the neighborhood garages. We feel this concept will catch on in India since their current market share is negligible. Furthermore, acceptability with car owners will also accelerate with more companies entering the multi-brand space.

What were the teething troubles as they say in floating a concept like this

Carnation is here to augment the existing network and infrastructure and to provide car owners with another alternative. Our value proposition is extremely relevant for those who are outside of their warranty, the majority of which have already left the authorised dealership network. So I feel that there is no reason for original equipment (OE) dealers to oppose the concept of multi-brand service outlets as, at the end of the day, they will also benefit from such networks.

Every manufacturer wants to increase market share. I feel that those outside of the Big 3 and the new entrants will see tremendous value in leveraging our pan-India presence. Also, since these players do not have a large customer base, a dealership is not viable as amortisation of the investment is across a smaller user base. Since we are multi brand, we have the ability to aggregate the volumes of more than one brand and make the model viable, making it a win-win situation for all involved.

Carnation has only recently commenced operations at 10 hubs while our plans are to grow to approximately 100 locations pan-India over the next four to five years. Even then we would be a fraction of the total capacity in the service industry.

Being a new concept, what kind of margins do you see in this business

Carnation is developing various capabilitiesservice, body repair, accessories, certified pre-owned vehicles etc. Margins differ across each of these businesses and of course improve as we scale up and increase utilisation. While every company will make an effort to improve profitably and maximise the return on capital employed, we will never lose our vision to remain a customer centric service brand.

Many car dealers are faced with low volumes and high maintenance costs forcing them to rethink their plans. It has been reported that you are looking to buy out their facilities and expand. Do you think the time is right

In India the Big 3 dominate with more than 80% of the market and the rest of the players are vying for the remaining 20%. The majority of the costs that are included in setting up the dealership are the real estate and equipment costs. To justify these costs you need the volumes and throughput, which becomes a challenge if the car park of that particular brand is limited. Viability may be easier in the bigger cities, but not in smaller towns, which makes it difficult for them to increase their market share. A catch-22 situation.

Three of our facilities have come in through the inorganic route, as an asset acquisition of running facilities. We continue to look for such opportunities that would be attractive from a financial perspective and viable for those looking for a strategic exit.

You also plan to launch Carnations private label in spare parts. Can you elaborate on the plans and tell us the kind of you have you lined up for this

Our current focus is on scaling up and expanding our presence. We are working on a comprehensive private label strategy, but would wait for the volumes to be sufficient to justify the investments.