In the last few years, the Varroc Group has attained great heights in the country’s auto component industry, carving a niche for itself with its aggressive growth strategy, global expansion and technology focus. The company has laid a solid foundation on which it continues to grow steadily. Having established itself as a leading player in the OEM segment, the next natural step for Varroc was to sharpen its focus on the highly potential aftermarket business, as it did six years back. We find out from Mr. Tarun Tyagi, Associate Vice President, Marketing, about the Varroc Group thrust on the aftermarket business and how it plans to make it big in the segment.
Excerpts:
Give us a brief outline of Varroc’s presence in the aftermarket space. What are the segments you cater to and how many products do you have?
Varroc’s India business is largely catering to the two-wheeler segment, and traditionally the focus had been on OE supplies. The After Market Division was identified as a strategic business unit in 2009. Since then we have extended our offerings to 30 platforms with more than 700 products, wherein we cater majorly to the two-wheeler and three-wheeler segments.
How many distributor and dealer partners does Varroc have in India? Which are the regions outside India you cater to? How strong is your network and presence in the aftermarket space overseas?
Today, we have more than 350 channel partners across India. In addition, we have our presence in Central and Latin America, Africa, SAARC countries and South-East Asia. Traditionally we had concentrated in supporting export markets of Bajaj. However, now we have diversified our offerings and keep expanding our network in the developing markets.
What are your strategies to enhance your market share in the aftermarket space for the medium- to long-term?
Our OE contracts with our customers place a limitation on the scope of our aftermarket business in terms of products. Therefore, in the short term, we look forward to enhancing our market share by expanding the distribution network and strengthening the sales team. However, going ahead we expect the Government policies to favour aftermarket business and are adding new items to the existing product portfolio and by aggressive promotional activities. Our quality has been well accepted in the market, and we depend on this for further expansion.
With vehicles becoming more advanced in terms of components and technologies, do you think the aftermarket in India is fully geared up to support such advanced products? What role does Varroc expect to play in raising the bar in terms of quality in the aftermarket space?
The Varroc Group, as a leading global supplier of automotive components, is already supplying high end component and technologies in India and overseas. As products become more integrated and intelligent, the reliability built into the systems ensure a longer product life. This means aftermarket business has to focus on improving product awareness and integrate service channels. India, being a price sensitive market, has been the target for the unorganized sector and counterfeit products, much of which are imported. We spend a significant amount of efforts in creating awareness amongst our partners and also ensuring a minimum product quality and life with the help of our supply chain and engineering departments.
The aftermarket segment is usually linked to low cost and sub-standard quality when compared to the components and parts supplied directly to the OEMs. Do we see this trend changing? What steps is Varroc taking to build its brand strength and recall which are important factors for aftermarket success?
The shift in trend to supply best quality products to the market is visible for a couple of years, especially in the case of critical products which are key for vehicle performance. With performance and safety also being the priority areas for customers, major business players in the aftermarket have no option but to provide the best-in-class products. We have relied on quality products to build our brand in the market despite the threat of cheap imports and counterfeits. We believe that such quality and service-based brand building combined with staying connected and responsive to our customers will sustain the pressure of cheap competition in the long run.
How important is the aftermarket space for Varroc? How much of sales comes from this segment and how much growth do you expect in the coming years?
Varroc’s aftermarket division is an important and growing business unit. It is currently about four per cent of our India business. Our strategy is to increase the content of performance products in our OE portfolio. Together with the expected change to a favourable aftermarket policy, we are hopeful of a significant jump in our revenues in the coming years. We also expect a larger contribution from the electrical and electronics business.
The sluggish growth in the automotive market in recent years will reduce the relative vehicle park in the country, which is a cause for concern. However, the same trend will tend to benefit quality product suppliers like Varroc as the need for spares grow. Our target is to grow aftermarket to five per cent of our total revenues by 2020.