Independents look to tap potential of after-sales market

At the beginning of last year, Sun Guohai started his own auto maintenance and repair business, believing that the market would grow at the expected annual rate of more than 20 percent over the next five years.

After less than two years, his company, Beijing Carparts E-Commerce Co Ltd, has opened four shops in Beijing and Tianjin. Sun said that 4S stores have lost 40 percent of their customers to independent vehicle maintenance and repair shops in the past four years.

"The vehicle maintenance and repair industry is at a turning point now," said the 38-year-old, who has 15 years of experience in China's auto business.

Sun said he believes that the need for maintenance and repair services will rise significantly in the near future as the average age of cars in the country is about to reach four years.

In mature auto markets such as the United States and Europe, people believe that vehicles need more maintenance and repair services after they have been used for four years.

From 2008 to 2013, Sun worked in purchasing for a global auto parts supplier so he was able to access inside information. He found a strange situation - while the wholesale price of auto parts is dropping worldwide, due to overcapacity and improvements in production efficiency, auto parts as well as after-sales services are "very expensive", Sun said.

"Excessive profits come from the control of channels," Sun said.

That is why he started his business getting auto parts directly from the producer, selling them to customers and cutting out all the middle links.

As car ownership has rocketed in the world's largest vehicle market in recent years, so too has the market for after-sale services.

However, owners have been critical of automakers and their authorized 4S stores, accusing them of a lack of transparency and the arbitrary imposition of fees.

The government has made several moves since last year to make the industry more transparent. Last week, the Ministry of Transport issued a guideline on auto maintenance and repair technology transparency, as a follow-up to its earlier regulation that requires automakers publish such information online from next year.

The regulation received much opposition from automakers and auto parts suppliers when it was issued as a draft in February to seek public opinions. That even led to a delay in releasing the final version.

Many vehicle manufacturers and parts suppliers debated the extent of the information to be disclosed, because auto parts contain many intellectual property and trade secrets. They believe both company and customer's interests will be damaged once the technology information is made public.

"Vehicle maintenance and repairs are a matter of safety. So it is very important for customers to get quality parts and reliable servicing offered by experienced technicians," said a senior manager from a large international auto company, who spoke on condition of anonymity.

It is expensive to train a qualified technician, she said, as it takes a long time and a lot of resources. This means that independent repair stores are not able to train their technicians as well as authorized 4S stores.

The manager said that her company is establishing several "fast maintenance and repair service centers" in big cities next year. Customers will get quality auto parts directly from the automaker at a lower price than 4S stores, and technicians there will be trained by the automaker.

However, Sun said he doesn't think that training is such a big issue. He said that most vehicle problems are diagnosed by machines nowadays, and many parts are easy to assemble, so the entry standard for technicians is not high.

Moreover, his target customers are those looking for routine auto maintenance and repair services. "It won't be very complex," he said.

Sun said he believes that the policy is good for the industry, as market competition will stimulate both 4S and independent stores to improve their services.

"In the past, vehicle owners worried about the quality of services and auto parts provided by independent stores," Sun said. "But with more transparency in maintenance and repair technology and the source of auto parts, independent stores will draw more customers because their locations are normally easier to approach and prices are more competitive."

Moreover, Sun said that the new policy will break the barriers facing 4S stores, which only allow them to offer after-sales services to vehicles of the brands they sell. "Maybe one 4S store can offer services to multiple brands in the future," Sun said.

This is already a reality.

Motorcare, a vehicle maintenance and repair service brand established at the beginning of this month, is targeting itself at this emerging market.

It is a joint venture between Federal-Mogul Motorparts, a US-based auto parts manufacturer and supplier, and China Auto CAIEC Ltd, an auto trade company that owns several 4S stores across the country, covering brands such as BMW, Nissan, Infiniti and Toyota.

"Through the network of company-owned stores and outlets that we develop together under the Motorcare name, service technicians will have significantly enhanced and convenient access to a broad array of premium-branded automotive products," said Daniel Ninivaggi, CEO of Federal-Mogul Motorparts.

Ninivaggi said that the rapidly growing and aging vehicle population in China is creating huge demand for repair technician servicing.

"The fast-growing and rapidly aging vehicle population in China means that there is a sizable market to pursue," Ninivaggi said. "As the average age of a car is now approximately four years, it means that the large vehicle population will have a greater need for servicing and repairs outside the original equipment manufacturers' warranty period."

Yin Jianhong, general manager of China Auto CAIEC Ltd, said that the anti-monopoly policy is favorable to the car repair market, as it will break the monopoly of parts sales channels and encourage expansion in the auto service chain, ultimately providing consumers with high-quality services at reasonable prices.

duxiaoying1@chinadaily.com.cn