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Oil majors want to service cars, trucks

By Hemangi Balse in Mumbai
March 31, 2005 09:28 IST
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India's state-owned oil companies have so far been largely confined to hawking just petroleum products. But that is poised to change.

Indian Oil Corporation, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd want to service cars and trucks by setting up service stations.

To be sure, they already run or farm out convenience stores at petrol pumps. But these don't get them fat profits, they've discovered. So the oil companies are moving into the service station business.

The three oil companies have either already tied up with or are talking to Tata Motors, Hyundai Motors, Maruti Udyog Ltd, TVS, Hero Honda and Toyota to set up their authorised service stations at petrol pumps.

"These authorised service stations will not only give best services to customers but also genuine spare parts," an IOC executive explains.

Several oil industry men think that a co-branded service station will bring in more vehicles and consequently more revenues than "off-line" concepts such as convenience stores, eatery places and cyber cafes, ATMs and bill payment facilities.

"Considering the heavy truck and bus movement in the northern and western regions, we are in talks with Tata Motors to set up its authorised stations at our retail outlets in these regions. These service stations will dot the national highways," says a senior BPCL official.

Such moves are part of an ambitious drive to step up revenue from non-petroleum product sources. Right now, the new businesses don't account for even one per cent of their total retail revenue, according to an oil company official.

But in mature markets like Europe, the United States and Brazil, the revenues generated by non-fuel activities at petrol pumps account for almost 40 per cent of total revenues.

But the oil companies acknowledge that their latest foray won't be welcomed by automobile dealers who run service stations.

An automobile dealer pointed out, "Initially we thought that these service stations will eat into our business. But these service centres will only look at lubricant oil changes, car wash and offer genuine spare parts. It will not get into investing in heavy equipments to analyse the cars engine and so on which can only be done by a private authorised station."

IOC has already opened six Tata Motors authorised service stations across the country. By the end of this week, the number will go up to 11. HPCL too has two Tata Motors' stations and the number will grow to 50, says a senior HPCL executive.

"We have just started a similar relationship with Hyundai Motors and plan to have 3-4 authorised service stations at our retail outlets," the HPCL executive added.

"We are actually supplementing our core activity of retailing fuels. By having service stations we can satisfy customers and give them a one-stop point," a senior IOC executive says.

Adds he: "We are placing a lot of emphasis on the non-fuel segment this year."

The three oil majors together have more than 20,000 retail outlets and will offer customers 20 per cent lower rates that other service stations.
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Hemangi Balse in Mumbai
Source: source
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