Motorzone – An integrated service facility for M&HCV – trucks & buses, exclusive to each of the OEMs – First of its type in India

Courtesy – Motorindiaonline

“Motorzone is a unique customer service approach model, first of its type in India, where we have service centres for vehicle OEMs and component OEMs duly vetted by OEMs and located within a common boundary, yet operating from demarcated areas within it to cater to the customer needs. The business model has been the brainchild of Mr. Sadiq. A, Managing Director, Parveen Automobiles (P) Ltd. (PAPL), Chennai; Motorzone is the brand of PAPL and herein we offer integrated service facilities for trucks & buses exclusive to each OEM – the response to the same from the customers has been indeed overwhelming”, indicates Mr. M. Sriram, Head – Projects, Motorzone, and CEO, Race Innovations Pvt. Ltd., the consultancy company entrusted to build, operate, maintain and replicate the Motorzone model, pan-India.

Driving down the AF-45 Chennai-Kolkata highway along with Mr. Sriram to visit and understand Motorzone operations, approaching closer to the location, one can see signage of Motorzone safety messages and the diversion point from the highway to veer into the Pallavayal village. Travelling 6 km from the highway thro’ the dusty yet picturesque village and around 25 km from city proper, we reach the entrance gate of Motorzone. The first sight at the name board displaying the occupant’s list throws a pleasant surprise viz., service centres for Ashok Leyland, AMW, Wheels India, Parveen and others located within the premises in the integrated service initiative; and setting up the ground for a first time visitor to assimilate the various facets of a unique and interesting business model.

As you enter the Motorzone compound, the facilities layout and activities buzz attract attention reminiscing an organised and vibrant factory set-up. The varied facilities are located in a 4 acre area and houses authorised service centres for Ashok Leyland and AMW that have 7 and 2 bays respectively; Wheels India has 2 bays and 14 bays for Parveen Group fleet. Each OEM centre operates the facilities with comprehensive supporting services within demarcated/fenced area having service bays and at the same time utilising the common facilities located outside their boundary.

“How does the Motorzone model operate? Let us presume a typical customer say a fleet operator having 100 vehicles of various CV makes in the fleet sends his vehicles for service. If the vehicle is of Ashok Leyland Ltd. (ALL) / AMW / Volvo make, it is sent to respective service area. Proprietary engine / vehicle parts, warranty and specialised service are extended in the demarcated areas of the respective OEMs. The service centre functions as an independent profit centre. For common services concerning body repair, machining, electrical sub-assembly, suspension, transmission, engine (non-proprietary), brakes, wheel alignment, tyre retreading, water wash, fuel pump and painting, they are sent to the respective stations-the services are considered as outsourced for the service centre and accounting done accordingly. It’s like having the best of both the worlds, viz., having one’s own service centre with dedicated technicians attending to the various functions and at the same time utilising the specialised common facilities, sharing it with other inmates. The approach enables customers enjoy the benefit of advanced and best of technologies in service at competitive rates and not having to follow-up different service providers to attend to various makes of vehicles in the fleet”, details out Mr. Sriram. He adds that Motorzone project customers are the OEMs; and the customers of OEMs and Motorzone are the fleet operators; customer with one vehicle to customers having a fleet of 100 vehicles or more are their customers and Sical Logics, SRM Group, Sree Kaleswari, Parveen, VRL Logistics, German Express, Rathimeena, Kallada are some in their long list of prestigious customers.

He points out that the technicians and entire staff numbering about 250 are all Motorzone employees; those associated with a particular OEM centre stay within the same area and there is no switch over to other sections. There is overlap only with respect to admin functions and otherwise, each centre operates independently and gets the technical and price support of OEMs on par with their other Authorised Service Centres (ASC). The CV firms monitor the progress and performance on a continuous basis and often find the Motorzone performing better than most of the dedicated sales-service dealers. Motorzone has been the only ASC countrywide consistently ranked amongst the top 3 with a score of 97.5 points on all Ashok Leyland’s stringent evaluation norms based on various parameters linked to quality, infrastructure, revenue generation, customer satisfaction level, etc.

Says Mr. Sadiq: “We are an equipped outfit willing to consider integration of more OEMs in our fold and in turn would look to getting equipped further. Motorzone is willing to step in where business viability of a service set-up (authorised service dealer) is suspect or not there. Service is the most important aspect in a transport industry and especially when the new OEMs enter the scene, service set-up for them vis-à-vis profitability becomes a daunting task; investment levels are high for the dealer to meet the OEM specs and the service volumes are not there to sustain the operations, viz., dealer does not have returns month after month to service their high level of investments, leading to the outfit eventually becoming sick. These result in service dealership changing hands and this is where Motorzone model could really prove useful to the OEMs. Motorzone does not compete with OEMs’ existing ASCs, in fact it complements their efforts and the situation is a win-win situation for all parties involved. In the prevalent scenario, the unorganised sector takes away as high as 80% market share. Motorzone aims to address this unorganised market and channel the service revenue to the OEMs by extending service reach – in the absence of this type of an effort, the business is simply not available to OEM”.

“OEMs have understood the need to have more service outlets and even undertake training the small time service workshops along the highway for a short period and nominating them to undertake their vehicle repair work. This is unlikely to be effective for with the increase in sophistication in terms of electronics and other advanced features innate in current generation vehicles, the small-timers with lack of diagnostic/service equipments and skilled/trained technicians may not meet the service needs of stranded customers. We in Motorzone are going two or three steps forward, refining the above service model and helping OEMs in their endeavour to strengthen the service network. Challenges today are different; in the past the fewer OEMs were releasing limited no. of models in the market but with many new entrants, we see a deluge of models getting routinely launched in the market. Small-timers can not keep up with the pace of developments and herein where Motorzone model will come in handy. Even OEMs are finding it difficult to support their ASCs for increasing complexities in vehicle engineering and in such a scenario, it is imperative they should support firms engaged in extending service facilities to meet the ever increasing customer demands”, suggests Mr. Sadiq.

“Motorzone model is unique and different from those ASCs (catering to 2S needs) or a Multiband service centre. ASC model is a high investment route for the investor to meet the norms of the demanding OEM. ASCs wedded to the OEM brand are often expected invest upward of Rs. 6 crores in service/diagnostic equipment to address the camper and electronics gadgetry/controls of the contemporary vehicles range. This is in addition to the other fixed investments and trained man-power and the model has the significant drawback from profitability angle – more so if the ASC has been for one of those new entrants to the market. This is of course apart from the 3S dealers, fewer in no. compared to ASCs and who invariably have more resources at their disposal to match the OEM requirements. From profitability aspects, the solution lies in a Multi-Brand Service Centre but this has been a non-starter in the M&HCV segment in India. Unlike the ASCs, the Multi-brand route firms do not get the OEM support in terms of pricing of parts/service level, training and diagnostics. Hence these become a task for them to offer a competitive service in turn to customers. Herein the Motorzone model comes as solution to alleviate the problems faced in either of the above 2 models; they get the price and other support services as that of an ASC to stay competitive, meet the delivery levels expected of an OEM authorised centre yet offer best of technology to customers and meet varied stringent norms and OEMs’ expectations”, briefs Mr. Sriram.

The genesis of the Motorzone model dates back to 2009. After running the service centre initially for the group fleet servicing, in line with Mr. Sadiq’s proposal to rope in OEMs, they approached Ashok Leyland with the idea. They liked the business model and after taking confirmations on all aspects like exclusivity, independent demarcated work place, dedicated technicians and staff and close monitoring by its service team gave their approval. ALL centre started functioning from 2010 and next to join was AMW during 2011; followed by Volvo – approval from Volvo for the facility is awaited. Component OEM companies like Wheels India, DuPont have already put up their facilities at their own costs seeing the cluster of vehicle OEMs in one place and the opportunities thereof ; and more like Wabco, Bosch, MRF/CEAT/Apollo and TEL with whom the working agreements are in place, waiting to enter Motorzone. Motorzone has an annual turnover Rs. 20 crores, 30 bay 3 OEM centric service operations, servicing 1500 vehicles per month; and adequate parking space for incoming/outgoing vehicles. Mr. Sriram is confident of a turnover Rs. 40 crores with couple of OEMs joining the model and expanding the operational area in the existing location to 50 bays. In this regard Motorzone is in talks with Mercedes, Scania and Volvo to firm up the agreements.

Mr. S.V. Jaikumar, General Manager, a CV fleet maintenance veteran who manages the various operations, explains: “In today’s context, to establish a dedicated service centre in line with the specs of the manufacturer is an expensive proposition, investment running into crores. OEMs are strict about facilities and quality levels and dealers hence are always under pressure to cut costs. OE suppliers of fuel pumps, wheel assemblies, starters, alternators and miscellaneous fitments that go into the CVs are invariably supplied by the same brand leaders and to service their sub-assemblies, it would be prudent and economical for all the CV service companies to utilise the common facilities and Motorzone precisely addresses this aspect”.

Mr. Sadiq says that Motorzone concept becomes effective if the facilities are established at say every 250 km so that customers can avail the benefits at any location. To cater to southern region, Motorzone locations near Kerala and Bangalore have been already identified and many more such locations can come-up to cover pan India requirements. But Motorzone concept has to be fully established and the message has to reach both customers and OEMs. “We need more OEMs to participate say typically 4 or 5 to make the model viable and effective. We do not want to be in a hurry despite the success of our maiden effort. Component OEM service centres like fuel injection pump or tyre retreading are independent business verticals and to bring them under one roof is not possible by an ASC; but we can do it and in fact component OEMs are ready to join us in providing services – we thus want to fill in the gaps in the service industry”, opines Mr. Sadiq.

Motorzone conducts service camps as part of their routine exercise to reach out to customers. Typically 3 camps are conducted per month in and around 30 km radius of the current location and are either OEM specific or Motorzone centric. Driver training is another initiative and the Motorzone campus has a full-fledged Govt. approved school with separate class rooms and labs offering various level structured courses including field driving sessions. Motorzone has always realised the importance and influence of drivers in the service related activities and spares recommendations and tries to reach out to them by this value added service.

Also the unit houses distribution and sale of spares. PAPL is one of the 2 distributors of AMW spares for Tamil Nadu and the spares are routed to customers thro’ their nominated retailers. This activity is complemented by another initiative of supplying spares for high end trucks and buses. The spares for varied makes like Mercedes, Volvo, Isuzu, King Long and MAN are essentially sourced from outside India from reliable after market suppliers and sold to their fleet customers always on the lookout for procuring quality spares at competitive rates. The two divisions, viz., AMW spares together with imported spares are expected to have sales of around Rs. 4 crores during fiscal 2013 and contribute significantly to Motorzone’s revenue.

The approach of Motorzone in meting the service needs has been indeed unique and refreshing. “Typical Motorzone would be located in 5 acre area with 50 bays, having 5 OEMs and servicing 2500 vehicles per month of 50 or more customers; revenue from service and parts sale could be Rs. 40 crores, investment excluding land about 15 crore and margin of about 10%. The breakeven should be possible in 4 years. The location shall be every 250 km to ensure efficient service – 50 km range for regular/active service and 125 km radius for break-down service and beyond which the next Motorzone unit would take over”, says Mr. Sriram with firm conviction. The business model can be definitely used as a template by other companies to meet the increasing service needs; and Mr. Sadiq points out that if the same happens, it would be good for the industry, customers and an endorsement of the pioneering efforts by Motorzone. “We are passionate about the business model and want to take it all India but would exercise caution in the endeavour. We need OEMs to embrace the model so that the replication can be effected with confidence”, summarises Mr. Sadiq.

Here is an open invitation for the OEMs to examine the successful maiden model and give their vetting for expansion. Motorzone is an effort to support the OEMs in their pursuit to reach out to all of their customers with timely, competitive and quality service. Hence it is only a matter of time before all OEMs under pressure to increase their market share, business top and bottom lines decide to benchmark the model for replication pan India. Going by the feedback received from customers and the efficient service packaging ensconced in the model, acceptance of it and spread to all parts of India should happen sooner than later; and we could witness the model as harbinger of growth for the service segment in the years to come.

MOTORZONE MODEL SNAPSHOT

Status:

Integrated Service Facility for Trucks & Buses and Exclusive to Each of the OEMs.

OEMs approved service centre having price support for parts, tech support for training and diagnostics on par with Authorised Service Centre of OEM

Features:

* 5 acres area; 50 bays; 5 OEMs; 2500 vehicles service turnaround/month;

* 50 or more customers; Component OEMs – Open to including as many

* Investment: Rs. 15 crores; Margin about 10%

* Revenue: Rs. 40 crores per annum; Breakeven – 4 years

Service reach:

One Motorzone per 250 km; 50 km reach for active service and 125 km radius to attend to breakdown maintenance

USPs:

+ Integrated service facilities for varied makes of CVs in the customer’s fleet, advanced technology and diagnostics, OEM trained technicians, quality, reliability and timely service at competitive rates.

+ Viable and self-sustaining model to meet the needs of existing/new market entrants and multitude product launches.

+ Professionally run unit with flexibilities to add facilities to meet nos.; offers also driver training as a value added service.

+ Has the advantages of ASC and Multi-brand and eliminates the negativities faced in the models.

+ Unique business revenue model that can be benchmarked for pan-India operations.