How declining service spends is raising concerns for automotive dealers in India

Automotive dealers in India are currently facing the heat because of declining sales due to the ongoing slowdown. Adding to their woes is the reduced spending on after-sales by customers over the last year.

By: | Published: September 30, 2019 6:05 PM
Image used for representation purpose only

The Indian automotive sector is currently going through one of its biggest slowdowns. Vehicle sales are observing a downward graph for the past one year. This has led to production cuts at various OEM factories along with job cuts in certain situation. Automotive dealers in India are also severely affected by this slowdown. Many dealerships have closed down in the past one year resulting in lakhs of jobs being lost. According to J.D. Power 2019 India Customer Service Index (Mass Market) Study, the woes of automotive dealers in India are not over yet. The study has found that in 2019, there was a 10 per cent drop in the average amount spent per service in comparison to 2018.

In the year 2018, a customer was spending, on an average, Rs 5,800 per visit. The amount has now been reduced to Rs 5,000 during the year 2019. The study further found out that the decline in spending was greater in customers who are 39 years or older, at 17 per cent year on year. For automotive dealers, 31 per cent of the profits come from after-sales in comparison to sales which add 21 per cent to the profits.

“Typically, dealers rely on service work to keep their businesses profitable especially during a downturn in new-vehicle sales,” said Kaustav Roy, Director and Country Head for India, J.D. Power. “A drop in average service spend bodes negatively for overall dealer profitability. More than ever, dealers need to focus on delivering an excellent service experience to retain customers and encourage loyalty and advocacy.”

The study also found out that customers are reluctant to switch to digital platforms when it comes to after-sales services. Also, in comparison to the year 2018, fewer customers stayed at the dealership during their visit to the service centre.

The study which included responses from 7,177 vehicle owners in India, who purchased a vehicle March 2016 and August 2019 and took place in-between March and August 2019, places Hyundai on-top in terms of overall service satisfaction, Tata on second with Mahindra on the third position.

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