Days of One-Brand Car Dealerships Are Numbered, Says Pitstop Founder, Auto News, ET Auto

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Pitstop itself has had an uncertain journey with demonetization in 2016 followed by GST in 2017 and the three waves of the coronavirus pandemic over the past two years posing major challenges.

Auto service and repair start-up Pitstop is undertaking a major overhaul of its strategy, moving from simple multi-brand service garages to supplying parts through its Yantra digital platform. The strategy is based on the principle that in the post-pandemic world, more and more single-brand auto showrooms and service centers will become multi-brand, thereby increasing the demand for genuine parts.

Founded in 2015 by IIT Kanpur graduate Mihir Mohan, Pitstop aims big by targeting over 50x revenue growth from $25M today to $1.3B over the next 5 years . Most of this growth will come from Yantra, which accounts for 90% of its revenue, through which it aims to become profitable by the end of fiscal 2024.

“The entire automotive aftermarket is valued at $12 billion, of which 65-70% or $8 billion is for those leaving company-owned service centers and moving into garages. about 65% of that, or $5.2 billion, is parts, which is going to grow to almost $8.3-8.4 billion in the next 3-4 years,” Mohan says. This is where we see our business grow. We will create a very large network of nearly 30,000 garages, where parts needs will be met by more than 4,000 intelligent distribution centers. In our five-year plan, the projected revenue is around 1.3 USD. It is a B2B business with better demand predictability and lower cost of acquisition for consumers. So, along with that, we also expect to be profitable by March 2024.”

Auto dealers have borne the brunt of the distress that began with the economic downturn in 2019 and worsened in subsequent years due to the pandemic. Pitstop itself has had an uncertain journey with demonetization in 2016 followed by GST in 2017 and the three waves of the coronavirus pandemic over the past two years posing major challenges. The change in strategy is the result, as in the changed market scenario, Mohan believes that single-brand dealerships and garages will find the situation more difficult.

In the post-pandemic world, dealers are out of shape today and the fixed cost structure is giving way to multi-brand authorized dealersMihir Mohan, Founder, Pitstop

“In the post-pandemic world, dealerships are not in the right shape today and the fixed cost structure is giving way to multi-brand authorized dealerships,” he said. “Additionally, OES players (original equipment manufacturers or Tier 1 component players like Bosch and Continental) have become more dominant and open than ever because they feel this direct aftermarket is opening up to them. today, more than 60% of the parts needed are OES parts and 40% are OEM parts (original equipment manufacturers or car manufacturers like Maruti and Hyundai).” When it started, Pitstop looked to become a garage builder efficient and reliable offering an in-between option to the traditional company service centers which had best practices but were expensive and monopolistic or the much cheaper but unreliable roadside garages.

It wasn’t entirely a new concept and the late Jagdish Khattar got his hands dirty with his own company Carnation. Despite being an industry insider, Khattar struggled to break the hegemony of OEMs who sought to restrict parts supply only to their authorized service network. Although Carnation did not take off, Khattar’s slog led India’s Competition Commission, a fair play watchdog, to come down hard on automakers on numerous occasions, resulting in a progressive collapse of the monopoly.

“It is thanks to Mr. Jagdish Khattar of Carnation that we exist today. It is thanks to him that the aftermarket has opened up and businesses like ours have become viable,” admits Mohan. “There are over 6,500 authorized dealerships, over 1,000 stand-alone multi-brand outlets and around 300,000 roadside garages. If customers are given a choice, the majority will want to leave the authorized dealership network and that is the biggest opportunity we’re looking for. We’re garage builders.”

The company has identified three areas that are crippling roadside garages: lack of spare parts, technology and brand recall. Mohan devised a strategy to address these issues to make them more appealing to customers. If it works, and Pitstop-branded garages dot neighborhoods in cities and towns across the country, they will also provide an immediate source of business for Yantra.

“Spare parts represent 65-70% of a garage’s bill. With Yantra, we will deliver parts within 90 minutes. We believe this will change the whole dynamic of service and repair, as parts contribute largely to customer service delay,” he said. “To solve the technology problem, we’ve built a complete garage operating system that allows everyone involved to use one platform to provide good service while helping us maintain greater responsibility for service quality.”

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