Designer cars has always made great business sense. When you help people translate their dream wheels into reality, you sure have your cash registers ringing! Consider this. Only recently Mr. Dilip Chabbria, pioneer in the designer-cars field in this country, had shares of his Dilip Chhabria Designs valued at an astonishing price of Rs 15,000 each. Reason enough for the conservative Mahindra Group, market leaders in the utility vehicles and agricultural tractors segment, to enter this space.
The Mahindras' recently launched their latest venture "Designercars" to, as Mr. Anand Mahindra, managing director of flagship Mahindra & Mahindra says, leverage the strengths of the group and be able to provide innovative solutions to Indian automobile customers. The Group has set up a separate subsidiary for this purpose, the Mahindra Auto Specialties Limited (MASL).
According to Mr. Alan E Durante, chairman MASL, with technology opening up new opportunities, Designercars marks the first step of the company providing customers value through personalised customisation of their cars.
Designercars, according to Mr. Jaideep Devare, managing director MASL, promises to meet the changing expectation of consumers who are increasingly looking upon their vehicles as an extension of their distinct personality and style. The concept of providing such a service is also in keeping with the global trend of automobile companies increasing their involvement in the post-sales process.
The trigger for Designercars, was the tremendous response the Group received to a website they had put up, which allowed consumers to customise their vehicle. Mahindras' have invested Rs 5.25 crore in the equity of MASL and are confident of recovering the money in two years.
Led by a strong team of professionals comprising engineers, business management post-graduates and designers trained at international and national institutes, Designercars seeks to provide customised solutions to an increasingly savvy and well-informed audience. This gives buyers the choice to make their own unique car models, reflective of their own distinct individual style, preferences and requirements. Mahindras' have also leveraged their vast resources in areas like engineering, product development and information technology among others to give buyers a high quality product.
But several questions arise on this latest move by the Mahindras'. With market leader, Dilip Chabbria reducing dependance on customisation and trying to mass-produce designer accessories instead, has MASL entered the area at a wrong time?
Mr. Hormazd Sorabjee, editor Auto Car India told domain-B, that the market for designer cars is definitely there and is growing. According to him, the market size is difficult to guess since the industry is largely dominated by the unorganized sector, but a rough guesstimate would place it at around Rs. 100-150 crore. What is true, however, is that the margins in this business are very high and are upwards of 50 per cent.
Despite the doubts, Mr. Sorabjee feels that the MASL starts with the advantage of having a strong engineering background, an existing infrastructure and logistics support from the parent company. He however feels that MASL will have to work hard to get to Chhabria's standards.
Mr. Chhabria himself is not too upbeat about the margins though he is bullish on the business prospects. Speaking to domain-B he said, " If you can deliver then you will grow. The point is human psyche - to posses something unique. We have worked hard but have not been able to deliver."
Mr. Chhabria's basic grouse is the wage bill structure in India which, he says, is differently structured in Europe. He says the kind of man-hours that go into catering to one car/customer (12,000 to 15,000) makes the activity economically unviable in India. This from a man who has already invested about Rs 20 crore in a unit located at Silvassa and has about 500 people working for him!
He says,"We have built a track record to leverage our prospects in the European market. The whole growth or/and profits will come from Europe." However, Mr. Chhabria is not complaining about Mahindras' entering a domain which, till now, was solely his. "I will be able to raise my prices/rates after their entry," and adds that he doesn't know how big the existing market is but if the Mahindras help it to grow, then it is good for everybody.
On the other hand Mahindras' are very upbeat about their latest venture and have their strategy cut out clearly. Mr. Mahindra told domain-B," We want to be value-added manufacturers. Wherever consumer spends more, we go there."
Finally, Indian automobile manufacturers are giving Indian users what they want, but are the Indian roads good enough to carry such fancied vehicles? Its about time we also start thinking about this aspect.