Fumes of change / Foreign competition pulls into auto repair market
Two big European companies are entering the market and that should mean lower prices for car owners.
Drivers in Israel find themselves in a bind when it's time to service their cars.
On one hand, they feel tethered to certified dealers who sold them the car, even though service there can be significantly costlier. On the other hand, there is a reluctance to trust the cheaper independent garages, in which spare parts are of doubtful origin, and where less professional mechanics may not be familiar enough with the highly complex systems of modern cars.
A new business model about to be launched will address this quandary, carrying the car service industry into a new era. Two international chains, the Italian-based Checkstar and the German company Bosch Car Service, have committed to begin local operation of as many as 50 new garages by the end of 2013.
These will guarantee their clients professional service and reliable spare parts, even in garages not associated, and even competing with, authorized importers.
Aiming for a niche segment
This move is part of a reform initiated by the Transportation Ministry, in which garages will receive an official stamp of recognition as specializing in specific makes. These new garages will operate in a niche lying between the dealer-certified and the independent ones.
Their mechanics will have all the professional know-how regarding the cars' electronic systems as well as required diagnostic tools.
The charges will likely be lower at these garages, bringing real competition to the profitable car repair industry.
In the past, car importers conditioned their warranties on maintenance and repairs being done at their licensed garages. This was canceled back in 2002, but most Israeli drivers prefer, in the first three years after purchasing a new car, to go to a dealer-certified garage, even though prices there are significantly higher, especially for spare parts. This is based on the perception that these garages are more professional and reliable, being more acquainted with the car's systems.
Modern car systems are indeed highly sophisticated. A regular garage may not be able to connect to the car's computer system in order to perform a diagnosis and solve problems. However, these systems rarely malfunction in the first few years, and oil changes can be done at any reliable garage.
The problem then is to identify which garages are reliable. Globalization of spare parts
Globalization of spare parts
Those that are not part of a chain may inflate prices, use low-quality spares, or invent nonexistent problems. Regular garages usually don't have the knowledge to care for all makes of cars. Importers of hybrid cars report that their customers keep coming to their certified garages even five or six years after purchase.
All this is about to change. Although the newcomer chains are not associated with the carmakers or importers, they are backed by internationally reputable spare parts manufacturers.
Checkstar, operating mainly in Italy, belongs to Magnetti-Marelli, part of the Fiat Group, a company supplying parts to Hyundai, Toyota and Peugeot-Citroen. Bosch itself is the largest parts manufacturer in the world, supplying parts to all carmakers.
Checkstar and Bosch are basing their business model on the assumption that car owners will prefer buying parts from them and not from the car manufacturers, who deal mainly with design and assembly. These garages will thus sell high-quality spares, identical to the ones supplied to carmakers, but at lower cost.
The chains are also relying on their immense purchasing power, allowing them to buy large quantities at lower prices. This will allow them to compete with the dealer-certified garages that purchase original parts from the car importers at higher prices, as part of their deal to become associated with a reputable carmaker.
Bosch and Checkstar will offer local garages the opportunity to join their chain and use their brands, in exchange for a fee. Garages that join will gain access to professional knowledge and training, in addition to using brand name parts, which they will obtain at reduced prices.
The Warco Group, the local importer of Magnetti-Marelli components, will open its first garage in Tel Aviv by the end of this year. By the end of 2013, it will grant licenses to 30 other garages.
"Things have changed", says Oren Shahar of Warco. "People now go to malls and super-pharmacies, rather than to local stores. The same trend is happening with garages, where the big chains, sponsored by importers, are replacing the back-street operators."
According to Shahar, the target customers are car owners whose warranties have expired.
"Our prices will be comparable to those of regular garages, lower than at dealerships," he says. "I believe that after we build our reputation, we'll get customers with cars still under warranty. We'll offer mainly Magnetti-Marelli components at lower costs."
The company also plans on operating body shops.
The first garage to operate under the Bosch Car Service license will be Lev-Gan in Jerusalem.
"The gap between dealerships and regular garages is enormous", says David Levi, manager of car imports at Ledico, the importer of Bosch products.
"We realized that there was a niche for a different kind of garage, which will be certified by Bosch, with professional and transparent services. Prices will not change in the course of a day's work."
The target will be cars towards the end of the manufacturers' warranty and up to seven years after purchase. Leasing companies will be offered special maintenance deals. On-board computers will transmit data, without cars having to come to the garage. Niche markets for garages
Reputation attracts customers
Twenty such garages are projected to be operational by the end of 2013.
Currently, some garage chains operate in Israel, the largest being Sixth Gear, comprised of imported car dealerships that sell only original spare parts. Shayke Horowitz, CEO of the chain, says that their reputation attracts customers.
"We are growing at the expense of regular garages, due to the increasing complexity and sophistication of cars, which requires advanced expertise," he says.
Horowitz anticipates the disappearance of the smaller garages.
"Clients that fear the prices at the dealers will now be able to go to the new chain," he notes. However, he is not convinced that prices at Checkstar and Bosch will be lower. "Dealing with advanced electronic systems will require expensive experts, and cutting costs will be difficult," says Horowitz.
In tandem with the new initiative, the Ministry of Transportation will soon start certifying garages specializing in specific cars.
These garages will receive technical guidance from the vehicle manufacturers. The change is expected to upgrade existing garages and serve as competition to the more expensive dealership garages. The new arrangement will be assisted by a European directive to manufacturers to transfer technical information to garages requesting it.
Some garage owners, however, foresee difficulties in this ambitious reform actually materializing.