How to start car service business in India?
You can very well witness the growth of auto companies in India. The car sales have increased dramatically in recent years, owing the increase in disposable income and rise in the status of living of middle class people of India. Rise in car sales also means that there will be more cars for servicing as well. I know many of you will think that this is not a high margin or price sensitive business, but in my opinion this market has evolved a lot and you can see many reputed companies working in this industry. Further, more and more people are now willing to buy a luxury car instead of basic car. These people would be more interested in car service quality rather than the cheap service. As per the Ken Research, the Indian multi brand car service market is expected to reach about INR 73,162 Cr in Revenue by Y2025. Excited to learn more about this opportunity? lets see how can you start the car service business in India!!
Pros and Cons of starting car service business
1. Rising demand and regular revenue:
As I mentioned before, car sales will keep on increasing and car service business will benefit out of it. The demand will be consistently high for maintenance and repair services. This results in a reliable stream of recurring revenue as vehicle owners require regular upkeep of their dear cars.
2. Low investment required:
You don’t need a huge sum to start car service business. You may just need to some space, few equipment and manpower to start this business. I will talk more about this in going forward.
3. High margin and brand loyalty:
The profit margin in this business is fairly high as you can earn from your specialized services as well as on spare parts. Spare parts you can buy at lower rates from wholesale market and sell it at MRP to customers. Further, specialized services and premium offerings, such as high-end repairs and customizations, can even yield high-profit margins. You must ensure that you are providing exceptional customer service and quality work which will foster brand loyalty, leading to long-term customer relationships and referrals in future.
4. Specialized service for EV cars:
As you know the EV car sales is also on rise but unfortunately it is not picking up so fast. So many people are not thinking of servicing EV cars because of new technology there are limited number of mechanics who can service it. In my opinion, you should have a specialized service for EV cars customers for which you can also charge a premium price for the same.
1. High competition:
Due to high demand and ease of starting this business, it is quite competitive with many established players. There are also many independent mechanics having their shops with good customer base. You need to stand out and gain some competitive advantage.
2. Shortage of skilled labor:
India has a vast pool of employees but the challenge is in finding skilled mechanics and technicians. Further, retaining these skilled mechanics could also be a problem.
3. Technological changes:
You can see that the car companies are continuously adding new features to the new models and there are multitude of models in the market these days. To keep up with this new technology is quite a challenge as well. It also means that technicians must continually keep update their skills and knowledge which can also be time-consuming and costly process.
Investment required for starting car service business
The total money required to start the car service business would be around INR 690,000 (including the working capital of 3 months). Further, the profit margin in this business would be between 30% to 40% which is quite high.
|Expense Category||Estimated Cost (in INR)|
|– Hydraulic car lifter||100,000|
|– Other equipment and tool kits||120,000|
|Chemicals (shampoo, cleaners, polishers, etc)||20,000|
|Other costs (like water tank, signage, racks, etc.)||60,000|
|Total initial investment required||300,000|
|Working Capital (for 3 months)|
|– Rental expense (30,000 / month)||90,000|
|– Employee Expenses (3 staff at 20,000/month)||180,000|
|– Other utilities and operating costs||60,000|
|– Marketing and Advertising||60,000|
|Total working capital required||390,000|
|Total money required||690,000|
Steps for starting a car service business
1. Research and Planning:
The first step for this business is to do a thorough research about the market, service offerings, quality of service, target audience, competition, etc. Thereafter, define your business goals, mission, values and create a detailed business plan that outlines your business model, services to be offered, pricing, and marketing strategy. Below is the sample list of services you can offer to your customers.
- Periodic maintenance
- Oil change
- Body repairs, denting, painting
- Wheel balancing
- Tire service
- Automatic car wash
- Pick up and drop service
2. Decide the place of business:
Secondly, you need to find a place where you can start with this business. You may need a space of around 2000 to 5000 sq ft. depending on your size and expansion plans for future. In my opinion, you should aim to find a place which is quite close to residential area and also the rentals are low.
3. Obtain required licenses:
Next, you need to register your business and obtain any necessary licenses or permits as below
- Udyam registration http://udyamregistration.gov.in/
- GST (Goods and Service Tax) registration https://reg.gst.gov.in/registration/
- Company registration like private limited company, partnership or proprietorship firm. I would recommend starting with a proprietorship firm first, then when your business grows you may get into a private limited company.
- PAN card (if it’s a private limited company or partnership, not required if you are starting as a proprietor).
Also open a separate current bank account if it’s a private limited company or partnership, not required if you are starting as a proprietor
You can obtain these licenses directly if you have required knowledge. However, I would recommend taking help from a CA or lawyer.
4. Create a brand name and a website:
Develop a brand identity, including a logo, color scheme, and brand name. Brand name should be catchy & simple. Then you should also create your logo and tagline. You can easily create a logo for free using various websites for example, www.canva.com. Further, you should also create a basic website for better branding.
5. Buy required equipment and tools:
Next step would be buy the equipment and tool kits required for starting this business. And then find the mechanics who can use these tools and help you with the services you offer to customers.
6. Hire skilled manpower:
Its actually hard to believe but this is actually one of the most important part of this business. Hiring skilled and efficient mechanics can make or break your business because this is a service business and customer satisfaction is the most important thing. If customer is not satisfied, they would not come again to your service center. Once you find skilled people, try to retain them by paying them regular salary and probably bonus for each car serviced.
7. Marketing on social media:
In order to increase the footfalls to your service center, you need to market your business and brand. So obviously, you need to create page on all social media websites like Instagram, Facebook, Twitter, etc. You may also consider to run Ad campaigns on these platforms for better reach.
Further, you should also register your business on Google business with the exact location. This will build trust with your customer.
Summing up, this is all you need to start your own car service station. It is a growing business and here to stay for long period of time. Further, it is also one of the most profitable business with minimum risk and investment. However, I would still say it is not going to be easy and you need to work very hard at least in the initial phase.
I hope you enjoyed this post and have learnt something out of it that would help you in starting the car service business in India. If you think I missed out any point and you have any confusion, feel free to share your comments.