[black_rider]

Carnation is bankrupt.

http://www.financialexpress.com/indu...n-auto/822056/

[GTO]

Thanks for sharing, black_rider! Moving post to a new thread.

It was only a matter of time. The company has had so many pivots that one lost count. Car owners also didn't quite understand what exactly Carnation stood for. There's a limit to how much investor money you can burn and at one point, a company has to become profitable.

Here's an excellent Livemint article on their problems:

In late 2008, Carnation did a pivot (start-up lingo for change in business model) and figured that its go-to-market strategy should be service—your friendly neighbourhood garage. Khattar raised money and invested heavily on setting up workshops across the country. But car manufacturers balked again and they restricted sale of spare parts in the open market. Carnation was caught unawares once again.

In 2009, in another pivot, Khattar figured that a viable business idea would be the selling of used cars, which, in turn, could become fodder for his idle facilities. So, an entire organization was created with purchase, inventory management, inspection and sales functions. The idea didn’t fly.

While Khattar went about building his business, he completely missed the online wave. This saw the rise of new players, aggregators of used-car listings. These scaled rapidly, thanks to the push from venture capital investors. It was only late last year that Khattar figured that a rethink was called for; that owning facilities was a bad idea and it would be best to take the franchise route. He also stumbled upon the car-inspection business. And voila—Carnation became an asset-light model.

Needless to say, Carnation’s numbers reflect what has come to pass. From 2009-10 to 2013-14, its cumulative losses stood at Rs.278 crore, according to filings with the Registrar of Companies. The losses completely wiped out investments by private equity firms—Rs.104 crore by Premji Invest and IFCI Ventures and Rs.84 crore by Gaja Trustee Co. Pvt. Ltd.

[Turbanator]

wonder what sort of assets will they have? their workshops must be on the lease and their major outflow would have been on manpower and rentals, so how is PNB going to get anything back? How do such guys get loans at first place- Collaterals or hypothecated machines?

[Chetan_Rao]

Failed idea aside, one important comment there is car manufacturers choking out competent independent garages by restricting OTC spare part sales, while most A.S.S. barely qualify above piss poor service quality themselves.

Lose-lose for customers.

[Dry Ice]

I think it's more to do with their aggressive expansion and frequent "pivots".

The largest manufacturer of our country, Maruti, has been selling spares OTC for decades now. TML, Mahindra also offer OTC spares without too much of an issue. So you have about 60-70% of the market covered. The only problem child could have been VW/Skoda/Germans. But then, what percentage of these cars would come to them anyway. Had they managed to offer a better experience than the manufacturer service centers, people would have voted with their wallets.

I sense, they might have been in a race to become profitable, expanded too much too quickly and eventually lost their edge (expertise and competitive rates).

[Shreyans_Jain]

The basic problem with Carnation, or with any third party service network is that car manufacturers will not allow access to spares and service manuals. Without that, the system just can't work. They were basically condemned to being like your neighborhood mechanic's shop, with extra overheads and fixed costs. The average Maruti, Tata and Mahindra customer who has given up on the authorized network will be fine getting his car fixed at the FNG. There, they can't compete on prices.

[V.Narayan]

Sad this has happened. Khattar is a well meaning man and I am sorry to see his enterprise go belly up. Let us not pelt stones without having stood in the other man's shoes. Setting up a business in India is an extra ordinary endeavour where a price conscious market combines with (still) some red tape and above average taxes. Getting your business model wrong is easy. Determining what is wrong is easy with hindsight. He made his mistakes & paid for it.
Only someone who has stared at bankruptcy knows the sheer stress. Having stared into the abyss I wouldn't wish it on anyone. Getting sacked is several notches below on the distress-o-meter. Some businessmen in our country use bankruptcy to escape liabilities, the law and their employees. But for the less foxy or less politically connected it is a nightmare. *

[ACM]

Sad thing to happen.

The ideas were not totally outrageous, but circumstances spelt their doom. Earlier car manufacturers did not permit sales of spare sparts in the open market but the courts have ensured this changed over time. This was too late for carnation. The used car business on the other hand was late into the game and online models have made that defunct.
P&B though may not have much to recover from as places would be leased and if equipments and inventory were substantial they wouldn't have gone bankrupt in the first place.

[Sebring]

Carnation was not a customer friendly company. Sub standard work and inflated bills meant they had to close down. Nobody had any passion over there, at least in Bangalore.

[petroguzzler]

Carnation tried multiple ideas but none generated a positive cash flow. I'm surprised how Khattar with his experience in the auto industry had steered Carnation into this fiscal mess.

[PrideRed]

I think it was a right idea at wrong time. Back then Genuine parts could be bought only through authorized dealer. Now many of the manufacturers have started counter sales of spare parts. Once my car warranty period is over, I would not mind buying genuine parts and get my car worked at a expert third party mechanic. This was to be Carnations core expertise and should have capitalized.

[aashishnb]

For most customers - its the ASS or FNG (unorganized sector).

He tried to be in the middle - providing good service at lower than ASS prices. However, being organized, Carnation could not've beaten the FNGs at cost & therefore charging structure. So, competition is ASS network, which are one-stop shop - warranty, company notices / recalls, insurance, etc. In effect, Carnation provided some additional value (in perception of some customers, maybe even this is non-existent) at a marginally lower cost than ASS.

If they could've claimed / got access to official manuals, etc., which would've had to be legally enforced (as no manufacturer would give it to the detriment to their customers - the ASS); perhaps the value/price equation would've been more favourable.

Originally Posted by Dry Ice

I think it's more to do with their aggressive expansion and frequent "pivots".

The largest manufacturer of our country, Maruti, has been selling spares OTC for decades now. TML, Mahindra also offer OTC spares without too much of an issue. So you have about 60-70% of the market covered. The only problem child could have been VW/Skoda/Germans. But then, what percentage of these cars would come to them anyway. Had they managed to offer a better experience than the manufacturer service centers, people would have voted with their wallets.

I sense, they might have been in a race to become profitable, expanded too much too quickly and eventually lost their edge (expertise and competitive rates).

I think their biggest target market would've bee the VW/Skoda/Germans, thanks to their ASS. Maruti, the largest player, still provides decent service levels at their ASS for customers to not look elsewhere (other than the FNG of course!!).

[Ashdel]

I have got my car serviced sometime 4 -5 years back at their Gurgaon outlet. I found service to be 10-15 cheaper than MSIL service centers, because of cheaper labour rates as spares are at par with company prices.

I was expecting a WOW experience, however just had a okay type service through them. Post that i decided to pay those 10-15 % extra and get my car serviced through authorized workshop only.

[R2D2]

Frankly, I would be comfortable giving my car to a jack-of-all-trades FNG, a large majority of which probably don't have the workshop manual and hire people without requisite training, ONLY for minor jobs.

The car will visit the ASC for any maintenance/service routine with higher complexity than an oil/filter change.

So, if Carnation died, it's probably because they couldn't source good quality (read OEM) spares and the quality of their service was sub-standard.

[Cool_leo_guy]

Car manufacturers should learn that to do great numbers in India they have to keep the markets supplied with spares and manuals. A big factor in Maruti Suzuki's astounding success, apart from their extensive service network, is the availability of spares and mechanics in every nook and cranny of this big country with varied demographic. Europeans and a few Japs keep a chokehold on spare supply to outside market and insist on selling them and providing service at their ASS(es) which more often then not results in questionable practices and exorbitant bills. This also explains why technologically sound and great performing products fail to sell in bigger numbers, or fail to take off at all.