Lucas Indian Service (LIS) established in 1930, is a specialist organisation in sales and service of Lucas-TVS auto electricals and Delphi-TVS diesel fuel injection equipment. LIS also manufactures automotive products and covers the country through its regional offices and branches equipped with warehousing facilities. The widespread distribution network of LIS reaches 1,250 towns and cities. LIS has 10,000 retailers and 15,000 garages/electricians as touch points. “For decades we were known for our specialist service but in the last couple of years we have redefined ourselves as a full-range service and aftermarket solutions provider; that is the definition of LIS today. A huge range has been added in the last 18 months for trucks, buses and two-wheelers. The difference between us and any other parts manufacturer is that we can give technical information, support and service – a complete solutions package. The LIS foundation of business is service, not just parts distribution, technology and multi-brands. Our three focus areas are multi-brand tractors and two-wheeler service, geographical expansion in SAARC, and in-depth Indian market distribution,” S Muralidharan, President, Lucas Indian Service Limited, told T Murrali of AutoParts Asia, in an exclusive interview. The excerpts:
Q: Your evaluation of the aftermarket globally and in India?
A: The aftermarket in India is going through a major structural change. It is worth about Rs.62,000 crore ($10 billion); it will grow at a rate of at least five to six percent, if not more. The feature of the market today is that two to three generations of vehicles and technology are concurrently present on Indian roads. You have two-wheeler scooters and motorbikes, at the same time you have cars, trucks and buses; about 25 percent of modern vehicles produced in India are SUVs. This means that there are older cars under BS-II and BS-III that need to be serviced as we prepare for BS-VI, with a large number of BS-IV vehicles already on the road.
In the powertrains specifically there is still an in-line pump running on the roads, may be in tractors and some kinds of trucks, but you also have a common rail in many of the modern cars. Similarly, you might have old carburettors in some two-wheelers and petrol cars while at the same time you have multi-point fuel injection systems for gasoline and diesel. You have old type filters as well as modern technology filters. This range of vehicles through technology change offers a challenge and an opportunity for the aftermarket. This is just on the product and service side.
Similarly, in terms of distribution, gone are the days when vehicles were sold only in the eight metros and 30 to 40 towns. Today there are 600 districts in India that have significant number of vehicles. So if you want to be present in the market you need both – reach and the ability to service that reach in almost every district. Depth of distribution along with servicing needs is a major change.
Now we have a well-informed and demanding customer who knows the price, availability and what is needed to service the vehicle. He expects the car to be picked up during a breakdown so he can book an appointment for the car to be serviced. The two-wheeler owners also expect this kind of service. So now it is sheer reach with service to meet increasing customer expectations and demands; that is how it has been evolving. This pace of change has been faster in the last two to three years, as compared to the earlier 10 years, led by emission and safety norms with digitisation.
Q: What is your outlook for the next five years?
A: The outlook for the automotives in India will not be very different from the developed markets, specifically for cars, trucks and buses. With environmental norms coming in, the powertrain and safety systems will be the same. As digitisation increases, the service expectations will not be very different from the rest of the world. Technology here will match with global standards, maybe just three to five years behind. Perhaps two-wheelers and tractors will be slightly behind, but not as an industry. Lucas Indian Service (LIS) is trying to capture this change. For decades we were known for our specialist service but in the last couple of years we have redefined ourselves as a full-range service and aftermarket solutions provider; that is the definition of LIS today. A huge range has been added in the last year-and-a-half, not only for trucks and buses but also for two-wheelers.
Q: Can you describe how it was five years ago and how it is now in all the segments LIS has been operating?
A: Five years ago we had practically no products in two-wheelers. Today we have starters, bulbs, flashers, switches, cables, batteries, lubricating oils and filters because we realised that when a vehicle stops the owner doesn’t care what part has gone; he wants a solution for his starting problem. The solution could be a battery, a starter, cable or switch; LIS wants to cover all that across vehicle models. The difference between us and any other parts manufacturer is that we can give technical information, support and service – a complete solutions package.
It is very clear now in tractors; five years ago almost nothing was there. Today, for the same tractor we provide starters, alternators, cables and batteries. In the powertrain we supply inline fuel injection pump, high pressure pipe, overflow valve, filter and filter assembly, lubes, braces, gear oils and pump-set oils, completing the whole spectrum. It is benchmarked against the third or fourth service that an OEM does. In addition to parts, what was observed was that tractors were an area where little or no service was done at the grassroots level – there is no multi-brand tractor service. LIS has recently launched LITS (Lucas India Tractor Service) at the Adalat block in Mirzapur near Varanasi. We will soon be expanding in the markets of UP, Haryana and Punjab, as that is the tractor belt. It will offer an alternative to the tractor owner from always going to the OE as we will be better than the roadside garage; it is an option (the Lucas brand) that he can choose. We have started in UP as it has real potential for us to provide this service, it is a State on the move. We will soon expand to 15 in a couple of months, in UP and Haryana. In three years we will cover pan-India starting from the North and East where the tractor belt is, to include Rajasthan, MP, Bihar, coastal AP (Nellore, Ongole, Vijayawada), and Tamil Nadu (the Thanjavur belt). It is a first attempt at multipoint and multi-brand tractor service; the start has been fairly positive. The resistance comes from farmers and garage owners who have not seen anything like this before but they do know that it carries the Lucas brand, which gives it credibility. Two-wheeler and tractors will definitely be the markets where we will provide parts and service.
Q: Does this work on the franchisee model?
A: Yes, for outside parties there will be terms and conditions; training will be ours. The value additions we give to them are genuine parts, fair price and technical support that involves on-the-spot coaching. The block market is such that in the same family one person has a retail counter, someone else deals with implements, etc – they don’t like to be associated with one brand. These are the dynamics at play in the villages, which work quite well.
Q: Will this be replicated for passenger cars?
A: For passenger cars the market already has a few multi-brand franchisees but there is clearly a gap. In passenger cars vehicle diagnostics become the need of the hour; unless you have very strong diagnostic tools it is going to be very difficult for multi-brand service of cars. We need to have a strong diagnostic partner, not just a parts supplier, to succeed. With Euro-6 coming in, if we look at a five-year time frame, the car will first have to go back to the OE points for major work; the minor work will be pure price competition.
Q: Will this be a key driver for LIS to get into car service?
A: That will be a factor to influence LIS entering car service. As of now there are no plans.
Q: In that case will CVs be the next in your plans?
A: For HCV we have a national advantage in having Delphi-TVS as a partner as it has a range of common rail equipment. We are already in the market for common rail and have invested in service dealers. As the market share keeps growing, our natural growth will go deeper.
Along with starter, alternator we add on products like batteries, lube oils, filters (we not only manufacture but are one of the biggest players in the Indian market for filters). Lucas has a manufacturing plant and its own manufacturing site for heavy duty filters; Delphi-TVS has one for common rail. For HCV there are a lot of specialist products that will keep it moving for quite a while; they all need specialised service.
The LIS foundation of business will be service, not just parts distribution. The other leg to stand on will be technology and the third one will be multi-brand. The days of a single brand are gone in this market; people want multi-brands, as brand is choice. When a customer walks in we want to say, ‘Yes, we have it.’ We offer a range of brands for similar specs. That is what will define LIS for the next few years – as an aftermarket solutions provider.
Q: What about multi-brand service for the Heavy Duty CVs from LIS?
A: May start, may not start; I can’t comment now but I can certainly say that two-wheelers will start sooner than later. We have started multi-brand service for tractors; this is in addition to the unit repair service we already have. Multi-brand products are what give the customer choice.
Q: What about off-road vehicles?
A: Off-road vehicles, we do touch JCB; we are fairly strong in such vehicles; but we are not strong in every kind of such vehicles, yet.
Q: What parts do you supply to construction and off-road vehicles?
A: Filters, lubes, diesel pumps, certain kinds of starter-alternators. Today it’s a small niche but we are present.
Q: Do you see potential to start multi-brand service for this segment?
A: At the moment, no. Presently we will focus on tractors and two-wheelers; HCVs are very much in the pipeline but not very sure.
Q: The OEs presence in the aftermarket is also increasing – Comment?
A: Yes, it’s a good thing because customers get the choice of a genuine part from a reliable source. That’s the single biggest way you can squeeze out spurious and reconditioned products. Why should I see them as competitors? I see them as collaborators. It’s as simple as that. It ensures that the reach significantly increases, the quality message goes faster, and training goes deeper. So why should anyone think of buying a spurious or reconditioned part except the bottom level that will only choose for price reasons.
Q: There is a school of thought that feels spurious parts prevail because of non-availability of originals from OEMs. It might also happen to an independent aftermarket player like you – your own brand can be copied and sold in the market. How will you tackle such issues?
A: Since we are only an aftermarket company – reach, reach, reach is our mantra. If I supply to both OEMs and the aftermarket, the setting of priorities might happen. That is why reach is so important; we are actually present in over 1,230 towns in the country in almost all the 600 districts, from Kargil to the Andamans and Agartala to Bhuj; we are geographically dispersed. Our expectation is that this will lead to a quantum jump in turnover in the next five years.
Q: What kind of growth do you see in future?
A: Strongly in double digits, for the next three years at least. We will gain market share and grow stronger.
Q: Do you find new opportunities in areas you have not ventured into so far?
A: Yes, definitely. We are constantly looking at more areas, like safety systems (brakes), transmission and suspensions, starting systems and powertrains; wherever there is an aftermarket. We won’t get into tyres since we have a group company manufacturing it; also I don’t think we will ever touch things like chassis parts. We have always believed in technology upgrade. From incandescent bulbs we have gone on to halogens and then LEDs; inline pump to common rail pump; no more dynamos but alternators. Non-stop upgrading of a product will keep us one step ahead and that’s what will give the service value-add.
Q: Would you get into making those parts or will you outsource?
A: We keep all options open, keeping in mind what our group companies make. We don’t have to necessarily trade only; we are not in that league, we have so many partners within and outside the group.
Q: What about exports?
A: We will be geographically present in SAARC by 2017, with service, and then systematically move outside. It will be the first overseas venture for LIS; it will be an opportunity. Also, if any component manufacturer anywhere in the world wants to enter the Indian market, we could become a partner. If I consider the next two to three years that is an option. We can also trade multi-brand parts for similar items abroad; for example, two-wheeler items in the Indonesian market. Basically we would cover the MENA region but that is more visionary. The immediate need is to have multi-brand tractor and two-wheeler service, geographical expansion in SAARC and in-depth Indian market distribution; these are the three focus areas.
Q: Digitalisation is happening across supplier’s supplier to customer’s customer. What is your take on this?
A: It’s all pervasive, covering every aspect of the organisation. LIS is very strongly into the internet and digital world. We have developed an App that goes right up to the salesman; we also have an HR portal and App for our own people; digital India is a reality. Whether it will affect in the form of e-commerce is too early to say, we don’t know. We have our own portals, people do order, and there is traffic. We are also present in some of the e-commerce sites but traffic there is very little.
Q: Would you get into online sales? For example, DIY market is very nascent in India, but it’s picking up. Would LIS encourage that?
A: These are the emerging channels of distribution so we are certainly present there. We are expanding our product range in some of the e-commerce sites; we also have our own site where dealers can use the portal to place orders. Regarding IoT I’m not sure how quickly it will become relevant in the Indian Automotive Industry – the many concepts that include driverless cars and artificial intelligence (AI).
Q: It may not go to that extent but ADAS to some degree will come, as also connected vehicles, not fully autonomous but up to level-3.
A: With Smart Cars, yes; Smart Cars that give the driver all kinds of data about preventive maintenance and vehicle efficiency, maybe from level-2-to-4. But fully autonomous vehicles with finger touch controls, recognition opening systems, Artificial Intelligence, etc may not come in the next three years. Smart solutions are just an extension of digitalisation, that’s how I see it.
Q: How are these emerging technologies enabling LIS in enhancing the supply chain to reduce inventory?
A: This is all permissive; it permeates across an organisation covering HR, finance, payment terms, order quantity etc. It’s a question of how quickly we can adapt to new technologies. For example, with WhatsApp I am personally in touch with over 200 employees, which two years ago would have been unthinkable. So sitting here, across the length and breadth of the country I am connected; I can check in wherever I am. It’s like big brother keeping tab on all employees. It’s a remarkable, powerful tool if you are going to be a CEO. You can actually loop into select customers and mechanics; complaints come to you immediately as also good news. The combination of Apps, social media and LinkedIn really help in the changes you are managing, which is what makes the leadership of any organisation. In that context in IoT , I think we will be one step behind; it will take a few more years to mature.
Q: Lastly, your thoughts on remanufacturing?
A: Remanufacturing (reman) in India is happening at the sites as labour rates are very low. The repair has become reman. As long as labour rates are low, reman in itself cannot happen. Or the environment norms should be so tough that even for an old vehicle a reman part is a must; we are nowhere near that.
Q: With BS-VI coming in about three years, do you see possibilities for reman (re-manufacturing) to happen?
A: With higher technology coming in, things will move towards reman but it will only be about five to ten percent of the car. It should be a good start. Replacing of products will happen, like batteries and wiper blades, but remanufacturing of the same remains a question mark. For example, a reman common rail injector does exist but it’s less than 20 percent of the business, though it is a highly specialised part.
Q: Your short-term and long-term plans?
A: I think we are in for exciting times. LIS is in the midst of a major change, in line with the change in the market, as we see it.