Insurance Cos tweak biz for auto aftermarket trade

The insurance sector growing at 15 to 16 per cent, has not plateaued and collision repairs touching about Rs 17,000 crore last year, reflect the opportunities to be tapped, noted RKT Krishnan, Country Head – Commercial Insurance, Royal Sundaram General Insurance Co.

Insurance firms have been forced to tweak their business models as motor insurance is now a service provider. They have started tying up with roadside assistance players to support the genuine needs of the auto aftermarket segment. Backing genuine parts were a way of averting risks post repair, he said, at a panel discussion on ‘Transformation challenges and opportunities in aftermarket,” a CII event held here recently.

S Muralidharan, President, Lucas Indian Service, said supply chain management will be a big game changer with customers expecting a ‘Gati’ logistical experience as they will not tolerate delivery of auto parts after 24 hours in cases of break-down or other technical snags. 

Mukund S Raghavan, President – Marketing and Bus Dev, India Motor Parts and Accessories, said distribution houses act as buffer zones between those seeking parts and the OEs (original equipment manufacturers). The stock keeping units have tripled in three decades but 20 to 30 pc of the old SKUs have gone obsolete. But this cost has not been factored. Though the game-changing reform GST has come into play, the burnout of the uniform tax regime is still being seen by those in the auto aftermarket trade. The 18 to 28 per cent GST on basic cost recovery from the retailer has had its impact. While there has been an attempt earlier to keep 50 pc off the books, the GST has made data capture easy. The fallout of it is liquidity crisis and working capital blockage. 

Huge stock pile of previous year, input tax, income tax for those who have not paid in 10 years have all hiked the cost of doing business. These must be factored in besides the costs of obsolescence and space, he said adding 70 pc of the business was done on unsecured credit. The distribution network is caught between manufacturers and retail.