Venu Donepudi and Vijay Gummadi are passionate about automobiles and it shows in the venture they established together. The duo co-founded Hyderabad-based multi-brand car repair and service company, Carz in 2008 with a specific aim to provide quality service to the ever increasing number of car users in India. At present, the company is planning to expand its network of service locations across India and for this purpose, it raised US $ 5 million from Bengaluru-based IndoUS Venture Partners in a Series A funding.
“When there were only Ambassador and Fiat models available, the roadside mechanic was adequate. Now that high-end cars are entering the market, the service is woefully insufficient.”
With close to 14 years of experience in the automotive industry, the founders, who spent a considerable amount of time working in the U.S., chose to come to India and commence their entrepreneurial journey. “I worked on the plant floor of leading companies like Ford, Chrysler and General Motors, while Vijay has experience with Tier-I suppliers for auto industries in the U.S. We both wanted to return and since automobiles were our passion, it was natural to look for a venture in this segment,” says Donepudi.
Since 2000, there has been a significant development in the four-wheeler segment and the duo realised that while the number of cars was growing astronomically – 18 million on Indian roads, the service side was wallowing behind and only one-third of car owners went back to dealers for service. “We had experienced the service quality abroad, including the transparency of operations and found that the same was lacking in India,” explains Donepudi.
One of the first things the two noticed was that while there were 19 original equipment manufacturers in the car segment, there were only four – Suzuki Motors, Tata, Hyundai and Mahindra – who had service centres. The car dealers also provided service and there were a few ‘mom and pop’ kind of service centres. “When there were only Ambassador and Fiat models available, the roadside mechanic was adequate. Now that high-end cars are entering the market, the service is woefully insufficient,” says Donepudi. Technical knowhow to understand mechanical failure, diagnostic equipment and genuine parts were the need of the hour. In most cases, with dealers offering service, there is no transparency about the progress when cars are sent to them till it is time to pick it up.
Co-Founders: Venu Donepudi and Vijay Gummadi
Year: October 2009
Industry: Car maintenance and service
For three years, the founders researched the market, visiting India every year for this very purpose. They also outsourced market research to a firm called Market Pulse in New Delhi. Their own findings coupled with the research firm’s reports indicated that the Indian market was more than ready for Carz. Initially, they planned to tie-up with existing service providers in the U.S. and Europe, but decided to go solo after realising that the differences in the markets would make these service providers raw for Indian conditions.
Donepudi and Gummadi opted for Hyderabad to set up shop since it was their hometown and also a good test market. The year following Carz’s inception was spent recruiting talent and establishing the first centre. Their highest investment of up to 70 per cent was on the multi-brand diagnostic equipment sourced from Germany. The scanner is plugged into the car and it reads out error codes pointing out where there is a failure. It helps in quick diagnosis and minimises the chances of human error.
On the go
In October 2009, Carz commenced operations by setting in motion a mobile diagnostic van with the brand name displayed prominently across it. This exercise served to create awareness while it offered doorstep service. Even before the centre was started, there were customers waiting to bring their cars in for service, recalls Donepudi. As a result, Carz broke even in the second month of operations as work began from day one. The company primarily has grande facilities – where everything needed for cars is done at one location; and one express facility – where all work except bodyshop (tinkering and painting) is done.
The unique selling proposition of Carz’s service centres over a service at a dealership is that a customer can walk in at any time and see the progress on his /her car. The staff has been trained to handle customers in addition to having technical skills. Though experienced technicians who have worked with at least three dealers are recruited, training is intensive, says Gummadi. “The scanner we have is very expensive. Normally, only one senior technician is allowed to handle it in dealerships,” he elaborates. At Carz, all technicians handle the scanner and it also serves as a point of retention as they are able to upgrade their skills.
Having gained experience in running four centres in Hyderabad, the company is ready to go pan-India. By 2012, 11 centres will be established – two in Bengaluru, two in Chennai and the rest in Andhra Pradesh. Each will be set up with an investment of Rs. 1 crore and will have a staff of 25 people. All the centres it plans to open this year are grande facilities, and express facilities will be set up depending on the availability of space in future.
By 2016, the company expects to open 300 outlets. Of this, 30 per cent is expected to be co-owned, the rest will be franchisees. Currently, the company is experimenting with the franchisee model at Nizamabad – which is close to Hyderabad. “We want to see how it works, make it a test case before going this route,” says Donepudi.
“All our centres will be small format and will be in residential localities and not away from the cities. This is to make it convenient for the customers to access them easily,” says Gummadi. He also assures that the service offered will be competitively priced. “Genuine parts are the first concern for all customers,” he points out. Therefore, Carz will source all parts from after-market – that is, all players outsource manufacturing of parts to local manufacturers. The same parts are also available in the open market, and this is called after-market. Hence, they are genuine but priced lower.
Also, Carz will offer lower labour rates since the overheads that a dealership has to run a centre that sells as well as maintains cars is non-existent for Carz. Most importantly, while dealers typically always change defective parts, Carz will first attempt to repair it as long as the safety of the customer is not compromised, assures Gummadi. “A problematic air-conditioner will be replaced at a dealership and can cost up to Rs. 45,000. But if we can repair it, then the cost is only Rs. 8,000 – 9,000,” he says.
Partnering for success
Today, car body art is also becoming popular as well as interior cleaning. While Carz offers interior cleaning and Teflon coating, it will be tying up with specialists to offer other services such as body art. “We want to focus on service and repair. But we will be partnering with local service providers for other features of car maintenance,” explains Gummadi. Partnering with local businesses will also make it a win-win situation for both as he believes it will integrate strengths and enhance the customer base.
Carz will be promoting its services mostly through direct marketing, which it has found effective in the past. Door-to-door campaigning, corporate tie-ups for employees, service camps and newspaper inserts are some of the other promotional activities on the anvil.
Gummadi and Donepudi are optimistic that with Carz’s focus on service and its small format centres, it will be able to capture the market that offers a huge potential.
Concept in brief
Though there are several original equipment manufacturers of cars and 18 million cars on the road, there are not enough service centres. Carz aims to differentiate by creating an extensive network, close to residential localities, making it easy for customers to pick up and drop cars for service. These will be small format operations where space could be a constraint. Therefore, it will also open larger format centres, where possible, that will support the smaller centres when needed.