Auto dealers face headwinds as service spend declines 10%

Auto dealers have been one of the worst affected parties in the current auto slowdown. Not only they are facing lower footfall in showrooms but are also struggling due to decline in average after-sales spend.

Automotive dealers are witnessing the effects of a difficult year, according to J D Power 2019 India Customer Service Index (mass market) study.

The study found that there a 10 per cent drop in the average amount spent per service visit compared to 2018.

On average, customers spend Rs 5,000 per service visit, compared to Rs 5,600in 2018. The decline is greatest among after-sales customers, who are 39 years or older, whose spend declined 17 per cent year-on-year.

The decline in service revenue is significant for dealers as 31 per cent of their profits is generated from after-sales against 25 per cent from sales, it said.

“Typically, dealers rely on service work to keep their businesses profitable especially during a downturn in new-vehicle sales,” said Kaustav Roy, director and country head, J D Power.

“A drop in average service spend bodes negatively for overall dealer profitability. More than ever, dealers need to focus on delivering an excellent service experience to retain customers and encourage loyalty and advocacy,” he added.

The study said, after-sales customers rarely use digital channels to set appointments despite indicating higher satisfaction when used and only 21 per cent of customers stay at the service centre during their visit, a decline of 10 percentage points from 2018.

Hyundai ranks highest in the study in overall service satisfaction with a score of 903. Tata and Mahindra and ranked second and third with scores of 870 and 863 respectively.