It was reported in our previous edition that the size of the Indian automotive spareparts market is pegged at Rs. 28K crores in 2012 and is projected to reach Rs. 37K crores by the end of this year. With the two-wheeler segment accounting for a maximum chunk of the pie at nearly 50 per cent, we decided to delve deeper into this segment and witness firsthand how it is projected to boom. The two-wheeler segment is the largest one at an estimated Rs. 14,000 crores (49 per cent of the overall market), followed by the car segment at approximately Rs. 7,000 crores (26 per cent of the market). Commercial vehicles, which include multi-axle vehicles, light commercial vehicles (LCVs), buses and trailers, account for the remaining 25 per cent of the overall market. In terms of market size, two-wheelers account for 15 million units which, at a rough price of $1000 for an average commuter motorcycle, translates into a $14 billion industry.
In one of its market reports, ICRA expects the domestic 2W industry volumes to grow by around 8-9 per cent in 2014-15 as we expect 2W volumes in the short term to continue to draw support from replacement demand. Over the medium term, the industry is expected to report a compounded aggregate growth rate (CAGR) volume of about 9 per cent to reach 23 million units (domestic and exports) by 2016-17.
While strong demand for scooters has been the primary driving force behind the overall two-wheeler industry in the last three years, the motorcycle segment’s contribution too has gained force in 2014-15 by virtue of greater replacement demand and new model launches by various original equipment manufacturers (OEMs).
Considering the two-wheeler market growth, we visited the ‘Mecca’ of automotive parts store at Naiwala, Karol Bagh, to gain a broader insight of the aftermarket scenario in the capital city of India. Once you step into this street, with multiple auto parts marts and outlets around, it is evident what the market buzzes with. It is one of the oldest in north India with many shops specializing in repairing and modifying different types of motorcycles. ICRA said it believes that growth in the two-wheeler industry will be on account various structural positives. They include favourable demographic profile, moderate two-wheeler penetration levels in relation to several other emerging markets, under-developed public transport systems, growing urbanisation, strong replacement demand and moderate share of financed purchases, in addition to the large opportunity available in overseas markets, mainly Africa and Latin America.
So, that means tremendous opportunities for companies like Federal Mogul India which can reap rich harvest in the non-direct market. We began our journey by visiting RJ Enterprises, which is incidentally the biggest all-India distributor for Federal Mogul run by Mr. Rajesh Jain and Mr. Pawan Jain. They spoke on a positive note: “Business is good and market conditions are tough as far as Delhi is concerned. We got into this business in 1990 in Haryana and started selling the Goetze brand of components in Delhi in 2000. We are doing the maximum business in terms of volumes for the last 14 years and every year is a milestone. This is validated by the fact that we are clocking a growth in our turnover on a sustained basis. We are very satisfied with the growth and are quite confident that our volumes will go up handsomely in the future. We also foresee a lot of opportunities in the aftermarket as the two-wheeler industry is witnessing an unprecedented boom.”
RJ Enterprises’ outlet at Kashmiri Gate is dedicated to four-wheelers and six-wheelers, receiving a daily average footfall of 500 per day, while its Karol Bagh branch draws approximately 200 people every day.
Expressing his satisfaction over working with Federal Mogul, Mr. Rajesh Jain pointed out: “Federal Mogul has a basket of products with pistons, piston rings, liners, spark plus, brake linings, wipers, coolants, etc., with some more new products on the anvil. It cuts across all the segments comprising two-wheelers, three-wheelers, tractors, CVs, and four-wheelers. The broadest range of products they are having holds us in a good stead. Their quality is the best in this industry and their products are equipped with the latest technology. They are OE to most of the brands which gives a rub-off effect in the aftermarket. The mechanics are quite abreast of the latest product developments.”
A few yards ahead, MOTORINDIA caught up with another leading wholesaler Dewan Auto Store, a bi-wheeler specialist running one of the swankiest stores in that locality. The company, the biggest bi-wheeler specialist, is basically a Federal Mogul trader and distributor of two-wheeler and three-wheeler pistons, cylinders, shock absorbers and lubricants.
Mr. Ashish Kalra, Owner, Dewan Auto Store, shared: “We are there with Federal Mogul since inception and had our first experience with the company in 1973 before being formally roped in as a distributor in 1985. I am the second generation entrepreneur who joined this business post my graduation in business management. So it has been more than three decades. We are among the oldest and our key strength lies in the bi-wheeler segment.”
Talking about the genesis of the company, he said: “My father, the late K.L. Dewan, got associated with the company. Earlier it was primitively commercial vehicles, cars and LCV segments. In 1992, we discerned that bi-wheeler is an emerging segment. Thereafter, we started focussing on this segment which has grown the fastest among all segments. And the growth momentum will be sustained in the years ahead.” Nearly 250 semi-wholesalers and retailers have tied up with Dewan and Company.
Talking about the robust association that lies ahead, Mr. Dewan noted: “I think the way things have shaped up and the manner in which things have progressed, Federal Mogul is the leading brand in the engine segment. For spark plugs too, we are the leading players even though we came in much later. Federal Mogul usually gets associated with the brand leaders of the country to build it up and shape it further. I think it is a nice platform to make a good presence to provide quality products in the market.”
When asked about the thread is that is binding them together, he maintained: “There is a similar thought process between the company and us. I think any association can develop better when you have fixed partners who share a good rapport. We are like a channel partner to the company. We are there to provide them the market feedback and it is a part of their strategy to react to this feedback. We have collaborated with TP Japan to bring to the Indian market the ‘GTP rings’ which is the market leader since inception. It is just like extended arms. They make you feel a part of the decision-making process.”
Talking about the current market conditions, he observed: “The market conditions are fluid and never static. Sometimes the economy is booming and sometimes it is reeling under recession. Definitely, technology has improved. Whatever changes are required, the company is ready to embrace it. Federal Mogul made massive investments to upgrade their technological capabilities. Technically, the company is getting more broad-based. Since they are serving the OE partners, they have to be technically sound in these aspects also. I look forward to 15 per cent increase in my customer base every year. We are hopeful of posting a double-digit growth rate.”
Another big service product distributor, Auto and Machinery House, sounded cautiously optimistic, and said: “The growth has been pretty moderate. We are associated with Federal Mogul since 1997. We only deal in spark plugs for two-wheeler and three-wheeler segments. We have been very satisfied with the association as their products’ quality is above par and their marketing activities are also pretty sound. Moreover, their product range also reaches even small-time retailers and mechanics. Even after severe competition, we have continued our alliance with FMI. With active support from FM, we are sure that the contribution will go up from the current level.”
MOTORINDIA wrapped up its visit by meeting another leading distributor called Grover Automobiles, which functions like a global multinational firm. Floated by an ex-armyman, the company works like an extended arm of Federal Mogul India.
Mr. Ratan Grover shared: “I was in defence services until 1986 and started the business thereafter. We started our association with Federal Mogul roughly 10-11 years back. I had direct contacts with senior officials of the company who encouraged me to distribute Federal Mogul products. He entrusted me this job as he believed I can deliver it smartly and intelligently. I acceded to his request without giving a second thought. Initially, I did the groundwork and then walked up to him to give my confirmation. I preferred to be with Federal Mogul as my passion is to work with the most reputed companies.”
Talking about his firm’s formidable relationship with Federal Mogul, Mr. Grover affirmed: “The company has been very supportive to its distributors. We started at the ground level. This month I have received 75,000 plugs from the company. On a monthly basis, we are selling 30,000/40,000 units per month.”
Mr. Rohit Grover, second generation entrepreneur and the son of Mr. Rattan Grover shared: “The vehicle sales are growing, but the aftermarket sales are not growing. Other companies are also approaching us for a tie-up, but we are refusing it. Our long-term strategies would be going beyond Delhi. We are planning to go online and are targeting the market segment-wise. We will be adding a new range of products rather than allying with other companies. What is really appreciable about Federal Mogul is their product quality, backed by good packaging and an efficient sales team.”
With many ambitious distributors gearing up to expand presence and scale up operations, the Delhi aftermarket, already one of the largest in the country when it comes to annual share of business done especially in the two- and four-wheeler segments, is all set to grow further and set new standards in terms of quality parts and aftersales support for customers.