Competition is good but ethics are important, Competition Commission of India (CCI) has alleged 17 car manufacturers in India for practicing anti-competitive measures in India. CCI has found that these car makers are selling spare parts at higher prices to the consumers and has scheduled hearing for next month for seeking explanations on same from them. The show-cause notice has been issued by commission to alleged car makers, for not practicing a healthy competition. The name of the manufacturers has not been disclosed yet but it’s expected that some overseas manufacturers are also there in the list.
The final decision on the same will be taken after seeking explanations from car makers and considering Director General’s report. CCI filed a complaint last year that some of the manufacturers were making spare parts available only at their authorized dealers which in turn sell them at a higher rate. This results in many issues for the buyer as he has to pay more for spare parts or for-go his warranty when he chooses to opt for parts outside the authorized service centre.
Some manufacturers also charge prices based on the customer profile. Toyota for instance sells the Corolla Altis and Innova in the Indian market, pricing of both the cars being more or less the same. The Innova is a bigger car (in dimensions and engine capacity) but the service charges for the Innova is much lesser than the Corolla. The reason is that the Corolla is targeted towards private buyers, while the Innova is targeted more towards fleet operators.
Source – Business Line
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S Pani September 21, 2012 at 6:42 pm
I hope the CCI exercises correct judgement and throws these cases out.
You cannot say that because car manufacturer dont sell spare parts outside their authorised dealers means they are indulging in monopolistic behaviour. Spare parts are part of proprietary technology of the car makers, and they have the right to sell them through specific points only. It’s the same as saying that manufacturer are selling cars only through authorised dealers is causing monopoly.
Similar is the case with electronic goods too. You cant take a Nokia cell phone, out to any shop for repair and expect them replace any part. As it is part of Nokia’s technology which they are trying to protect.
No reasonable company will deny warranty for changing non-critical and non-proprietary parts, like tyres, batteries, fluids, wheels, wipers, glass, music systems, speakers etc. Manufacturer’s wont deny warranty if you get body repair done outside the authorised service points.
And even if car owners change parts with non-OEM ones, all that happens is they lose warranty. This is because there is practically no way to say how a single critical component may affect other parts of the car. Manufacturer’s are not preventing companies from coming up with after market components, or from selling them or preventing owners from using them.
As for saying that this prevents competition among car makers, I dont agree at all. Customers always take into account the cost of maintenance when making a decision, including cost of spare parts and cost of labour at the authorised service stations. Thus it is in the interest of car makers to decrease their spare part costs as far as possible. If a customer thinks the service costs of a particular manufacturer are too high they are free to move to another manufacturer. In fact many customers actually do so, and most foreign manufacturer’s still have a reputation of being high maintenance vehicles.
Bagheerath September 21, 2012 at 10:45 pm
I have seen manufactures quote diff prices depending on class of vehicle even when the vehicles share common spares.
eg: Figo OVRM costs 1400 odd where as classic OVRM costs 2000 odd.
S Pani September 22, 2012 at 7:17 am
So, dont buy the Ford Classic, or if you really that pissed off dont buy a Ford. Go buy a Maruti Dzire, if you think Ford service is just too costly.
Of course prices are different, because the kind of money that a Figo owner expects to spend on spares is lower than the kind a Classic owner. Thus the classic owner will get charged more for the same part.
Remember a very important factor of pricing is the ability and willingness of the customer to pay, and the pricing of competitors. Car manufacturers are not running a charity, it’s a business.
The CCI’s job is to ensure there is enough competition, and with such a variety of manufacturer’s, and a massive variety of cars to choose from in today’s market how can you say that there is no competition.
yila September 22, 2012 at 12:01 am
Many car dealers, who are from same company in different cities, like Honda dealers of a same company in Tamilnadu, do not reveal the actual discounts allowed for the customers by the Manufacturers and try to sell the products at the original price. Is it not cheating?
S Pani September 22, 2012 at 7:20 am
You are talking about unethical practices of dealers, which is not the issue here.
And about the issue you are talking about, car manufacturer’s do bring out many ads so as to inform customer’s regarding any discounts they are offering. And in large cities, there are multiple dealerships among which to choose from.
Rohan September 22, 2012 at 11:18 am
Do you have the list of these 17 car makers?
I am pretty sure VW, Skoda and Honda are there.
I am also pretty sure that Fiat and Tata aren’t there.
Faisal Khan September 22, 2012 at 6:56 pm
Rohan, 17 car makers means almost every one is there.
Rajan September 22, 2012 at 2:46 pm
If the Government can tax based on teh car length then why not the manufacturers charge spares based on the price segment of the car. I think teh concept is the same here. Suck more from one who can afford.
Similar concept applies to registration and road tax as well.
But we must also agree to the fact that proper governance is not practiced in automotive segment to keep a watch on how the cost of car manufactureres take customers for ride. of late i started to feel that Maruti has increased the labour cost hugely. I dont have numbers to quantify that but thats my hunch because i get my car serviced at authorised center. I was shocked to see lineitem Rs 250 or something for Nitrogen fill for the tyres.
on teh lighter side.. how do expect teh auto manufacturer to get back all teh discounts he had given when you purchased teh car.
Faisal Khan September 22, 2012 at 6:56 pm
Rajan, I agree they are free to sell the spare parts but they should make the parts available through more channels, rather than restricting it to cause a monopoly situation.
S Pani September 22, 2012 at 7:58 pm
How is controlling who sells your products creating a monopoly???
And how can you say spares of a product create a monopoly. Remember, the spares by themselves are not products.
A monopoly would mean a customer has no choice but to buy a product, the product here being “the car”. And there is no limitations in choice of car in today’s market.
Once you have made your choice, you have to go to the guy who can fix the product properly. And in case the product includes proprietary technologies, like a car invariably includes, the seller should have the right to protect this technology by controlling who sells it.
And even here, the manufacturer is not forcing a customer to get their car fixed with them. The customer has every right to replace or tamper with the proprietary parts provided by the manufacturer, like a few of us actually do . All the manufacturer does in that case is deny you warranty. The warranty presumes that the customer will take care of his car within certain parameters, as is mentioned in the terms and conditions of the warranty.
And how is increasing the service costs and spare part costs beyond certain limits advantageous to the manufacturer. Because if it happens the manufacturer obviously loses customer who will shift to buying cars from other manufacturers. Unless there is a collusion among the car manufacturing companies to knowingly increase service costs across all manufacturers, I dont see how competition has been prevented.
And why does this apply only to automobile manufacturing?? Why not to electronic companies??
If I buy a Whirpool washing machine, and it’s circuit board has a problem and I change that with a certain non-proprietary circuit board, should Whirlpool continue to honor its warranty??
Faisal Khan September 23, 2012 at 1:31 am
S Pani, the problem is that companies are making the spare parts available only through its own dealerships, which price the parts at a premium. I completely agree unauthorized parts should not be used and the manufacturer has every right to for-go warranty.
However there is no realistic behavior in this regard. Pricing should not be done at a premium, just because customers have no option.
Wiper blades for Innova at Toyota showroom cost more than double than wiper blades (Bosch) sourced from a local accessory shop. Fair enough, but if you don’t use Toyota wiper blades, they voud your warranty, a bit too much?
S Pani September 23, 2012 at 8:41 am
First of all, the dealer doesnt price the spares, the company does. All spare parts come with an MRP. Even if a outside dealer wants to source spares from the company, I doubt he will sell at anything below the dealer price.
Also, the dealer cannot charge what they want for spares or labour, since the pricing is controlled centrally by the manufacturer through IT based solutions, as all billing and work orders etc are done via computers linked to servers of the manufacturer.
As for pricing done at a premium, I still dont understand why a company will price it at a level beyond what the customer would want to pay. If one manufacturer does so, wouldnt customers move away from that manufacturer, considering the numerous manufacturers to choose from.
Also, wipers blades are a non-proprietary part, I doubt any manufacturer will void warranty based on wiper blades. Even if they do, the warranty will be void only on the windscreen, in case you damage it, which in my view is very reasonable.
If Toyota does void your entire warranty, over a wiper blade, would you as a customer ever return to a Toyota showroom for your next car? Would you not talk to all your friends about the high handedness, and absolute foolishness of Toyota?? And anyway, how is that related to prevention of a monopoly at all??
I think two separate things are being intermingled here.
First is the question of there being a prevention of competition/creation of monopoly by the manufacturers by controlling who sell their “proprietary” spare parts.
Second is the existence of unethical practices by the dealers. For example, the dealers dupe customers into thinking warranty wouldn’t pay for certain things. Or dupe you into doing unnecessary part replacements etc. This is a separate issue. One that must be addressed, but has nothing to do with intentional creation of a monopoly.
Rajan September 23, 2012 at 2:34 pm
Faisal,
If we think from other angle it makes sense. Why we go to authorised shops to get our cars serviced? Just to get peace of mind that teh parts they changed is original and that the technician knows what he must do. I dont want anyone to experiment with my car. How satisfied we will be if we buy parts from non-dealer? We will still be driving with taht sense of doubt about the genuinity of the spares you just changed from non-dealer.
I see it this way.
I think it does matter for people who dont mind their car getting serviced by non-authorised service center to get genuine parts from non dealer.
For those who wants peace of mind and do not want to take even a single chance, this doesnt matter even if they pay a premium.
Abhishek September 23, 2012 at 7:49 pm
Mr. S Pani
If you are in so much favor of companies charging what ever they feel like for spares, request you to answer just a simple question.
One of my friend bought VW Polo Diesel, because there was no cover under the chamber of the car…and also its very low……..hence it chamber got burst…..all the oil leaked.
He send the car immediately to the service centre……because the car was under warranty, they replaced the chamber free of cost……..when they started the car technicians came to know its TURBO CHARGER is also not working and needs to be replaced………U KNOW WHAT they said it does not come under warranty
AND THEY CHARGED 1,25,000/- (ONE LAKH TWENTY FIVE THOUSAND RUPEES) FOR THE SAME……..HOW CAN THEY CHARGE 1,25,000/- JUST FOR A TURBO CHARGER FOR CAR WHICH IS JUST WORTH 6,00,000/-
PLEASE REPLY
S Pani September 23, 2012 at 8:35 pm
Let’s make it clear. We live in a free market economy, where regulation of the markets has to be kept to a minimum.
So, I am completely in favour of allowing a manufacturer to charge whatever he wants for his products. Period.
The solution to a guy overcharging is not the govt, but the market economy. If a manufacturer charges twice as much for a product as everyone else, he will obviously be routed in the market and will be shutting shop in pretty quick time.
And 2nd of all, please inform as to what all was included in the 1.25lakh bill.
Also, why was the warranty not covering the turbocharger??Did your friend enquire?? If the shunt had damagaed the turbo, and the oil sump was under warranty why was the turbo not???
I feel here your friend may have been duped by the dealer into changing parts he need not have changed. And by parts I dont just mean the turbo. But again that is beside the point.
The solution to VW overpricing its parts is not the govt. It is your friend not buying a VW product again. And neither will you buy a VW, nor will all of his other friends who have come to know. Now that you have posted this info here, there will be hundreds of people who will read the same, and they will obviously get the view that maintaining a VW car will be too costly and will not buy it.
The result will be that VW will either loose market share by the bucket loads and shut shop, or it will bring down its spare prices.
My point is not whether any manufacturer is overcharging its spares or not. My point is that the govt has nothing to do with what a particular manufacturer is charging.
The govt should only intervene, if all manufacturer together in collaboration are knowingly conspiring to keep spare and service costs high to make more profit. This would mean that they are not competing, but rather collaborating to keep service costs artificially high, which would definitely be unfair market practice.
The govt is not there to right every wrong, or to take care of every citizen like a mother takes care of a baby.
Faisal Khan September 25, 2012 at 2:37 am
S Pani, the point is that spare parts pricing is not known to most when they purchase a car. Its only once they buy the car they come to know, when they become helpless and have no option at all, but to buy the spare parts, to keep the car running or to prevent the warranty from being terminated.
S Pani September 25, 2012 at 7:59 am
I dont think that is true.
People may not know the exact spare part prices of different manufacturers and vehicles, but there definitely exists a perception among the car buying class about, cars which are costlier to maintain, and cars which are cheaper to maintain.
There is a definite perception that Tata/Maruti are cheap to maintain, while companies like VW/Skoda/Toyota are costlier to maintain.
And this perception has been built over time, and that is how the market works.
And anyway, the point here is not about whether a particular customer made a decision without knowing the service costs or not. If he did, and is stuck with a car that is costly to maintain, all I can say is tough luck. The company is not trying to dupe all their customers here. If they think they can make huge profits from service costs without losing sales volume, it is well within their rights to do so. There are no limits set on how much profit you can make. As long as a customer is willing to pay a certain amount, why should the manufacturer not charge said amount.
If a customer is really that concerned about spare parts cost, he can very well ask manufacturer/dealer to supply him with a list of prices for common parts and compare these costs across various cars. I even remember many auto magazines doing surveys comparing common spare part prices across vehicles and manufacturers, the customer can refer to those if he wants.
Like I said, in the previous comment, the govt is not there to baby sit every citizen. The customers have to learn to protect themselves and make informed choices. If they make uninformed choices, it is their own fault, not the government’s or the manufacturer’s.