I have a confession to make. I am addicted to a mobile game called Candy Crush. One of the standout features of this finely tuned advertisement delivery machine masquerading as a game is that you keep running out of ‘lives’ just when you feel you’re winning. You can buy more or watch an ad to get an extra life. I usually do the latter, which is why I have been carpet bombed of late with ads for a service called ‘GoMechanic’.

The premise behind the GoMechanic app is simple — aggregate the unorganised sector garage market under the app’s umbrella, standardise rates, directly source spare parts, give assurance of service and spare part quality, thereby disrupting the ‘authorised service provider-authorised spare part’ stranglehold automobile manufacturers have on their new car buyers post the warranty period. The icing? A promise of up to 40 per cent savings in costs.

By all accounts, GoMechanic appears to be solving a real problem for the Indian vehicle owner. From just a handful of garages and one city in 2016, GoMechanic now offers services through about 600 garage partners in 35 cities as per its website. Revenues have reportedly grown from ₹4.65 crore in 2018-19 to ₹68.35 crore in 2020-21. This kind of performance is attracting attention of funders, with Tiger Global leading a $42 million funding round last year.

By all accounts GoMechanic, and other similar tech-based platforms, are on to a good thing. According to a study by Ken Research, India’s post-warranty vehicle service market is expected to grow from an estimated $8 billion in 2020 to over $25 billion by 2030, growing at a CAGR of 12 per cent. The study also found that as many as 65 per cent of Indian vehicle owners try to find cheaper alternatives to the authorised service centres after their warranty period is over, which will assure a steady flow of customers for those who can brand and standardise multi-brand service.

This means that Tiger Global and the others are on to a good thing. Or are they? There is a potential fly in the ointment — India’s policy-backed shift to electric vehicles (EVs). With several manufacturers ranging from traditional two-wheeler manufacturers like Hero and Bajaj to new disruptors like Ola entering the fray with mega manufacturing plans in the two-wheeler segment, and Tata Motors and Mahindra leading the charge in four wheelers, India’s much bemoaned glacial shift to EVs has suddenly gathered pace.

Ecosystem approach

For a change, policymakers have adopted an ecosystem approach, with a production-linked incentive (PLI) scheme for components as well as batteries. The National Electric Mobility Mission Plan (NEMMP) and Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India (FAME I and II) are pushing EV manufacture and adoption with incentives for both sellers and buyers. Under FAME-II, the government will subsidise 7,090 e-buses, 500,000 electric three-wheelers, 550,000 electric passenger vehicles, and 1,000,000 electric two-wheelers.

According to a research study by Mordor Intelligence, the Indian electric vehicle market was valued at $1.4 billion in 2021, and it is expected to reach $15.4 billion by 2027, registering a CAGR of a scorching 47-plus per cent during the five years from 2022 through 2027.

Which is all very good and great for the planet, but what about the ICE-based automobile ecosystem built up over the past four decades? The automobile manufacturing sector, which contributes nearly half of all manufacturing GDP, is one of the few success stories of policy-led ecosystem development in India, with broad-spectrum capability being built up in automobile manufacturing, components as well as after-market service.

While statistics and policy have focussed on the new manufacture segment, a vast under-served market, as well as purchasing power constraints, have led to most vehicles continuing to be on the road in one form or the other, despite a recently introduced scrappage policy. The number of registered vehicles in India is upwards of 25 crores. There are a huge number of unregistered vehicles as well (some are legally exempt).

After-market service

All this has helped create a vast formal and informal after-market service ecosystem. It is precisely this network that players like GoMechanic are tapping into and trying to bring under a common brand umbrella, much like what Oyo did to the budget hospitality sector.

The question is, what will happen to this network — and more importantly, the millions employed in it — after EVs start dominating? A conventional car has over 2,000 moving parts. An EV has around 20, which completely changes the number of times the vehicle has to visit a garage for tweaks and tune-ups

This has implications for the sales network as well. There are over 5,000 authorised car dealerships in India with many times that number of bike showrooms. Most of them depend on a service set-up, where the margins are upwards of 30 per cent, to make up for the thin margins on new vehicle sales.

Between the formal and informal sales and service sectors alone, we are looking at millions of jobs at stake. At the moment, neither the automobile industry nor the government appears to have thought about the long term implications of a wholesale shift to EVs. There is also the question of what will happen to the component vendor industry as well. Some of them will undoubtedly morph into EV component vendors but the rest are looking at a bleak future. Auto components form a significant chunk of India’s MSME sector, which accounts for 80 per cent of the jobs in the manufacturing sector (though not output).

It is high time that our policymakers thought about this challenge. We need a plan to see how the skills and quality levels among the vendor ecosystem so painfully developed over the years is repurposed and redeployed in other sectors. Equally, we need a plan to find some kind of alternative for the millions of people involved in providing garage and mechanic services.

True, none of these challenges are immediate. But a decade or a decade and a half from now? As the saying goes, time flies!

The writer is a senior journalist

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