Tuesday June 19, 2012
Automotive workshop operators offering better services
Story and pictures by MENG YEW CHOONG
The unregulated automotive workshop sector is slowly changing for the better.
WHEN Surhan Jubri started his engineering workshop business in 2000, he “max-ed” out five credit cards, each of which had a limit of RM5,000.
“Borrowing money from a bank to expand one’s business is easier said than done,” argued Surhan, who persevered through the difficult initial years until he saved enough to open an automotive service shop called Nuren Auto in Shah Alam, Selangor. “This is the common chorus of businessmen like me,” said the 50-year-old who has been in the line for 15 years.
People like Surhan, who typically own workshops no larger than 230sqm, can now breathe a sigh of relief as the Government has made available a soft loan of RM100,000 for those operating automotive workshops, and RM50,000 for motorcycle workshops. The funding comes under the year-old Automotive Workshop Modernisation (Atom) Programme and interest is capped at 3% on a reducing principal basis, and repayment can be done over 15 years.
Atom is not about legalising illegal automotive workshops, though. To obtain the soft loan, the workshop must be Malaysian-owned, be in operation for at least two years, and have all the regulatory approvals like operating licences from local authorities. Last year, 55 workshops that were affiliated with either the Federation of Automobile Workshop Owners’ Association of Malaysia (Fawoam) or the Automotive Workshop Industry Operators’ Association (Persatuan Pengusaha Industri Bengkel Malaysia or PPIBM) obtained the loan, and as of May, 53 more workshops qualified, bringing the total number to date to 108.
“There is now a backlog of hundreds of applications to be processed,” said D. Ravindran, director for the National Key Economic Area (Retail) of the Economic Transformation Programme, which comes under the jurisdiction of the Performance Management and Delivery Unit (Pemandu). “It was one of the programmes that was very grassroots-driven. We struggled at the beginning, but we met the targets last year. Our push managed to create interest.”
A lot of small automotive service centre owners operate rather basic workshops, and they are the ones being targeted by Atom. “There are a lot of young guys who got into the business, and all acknowledge that they need to do something about their business but don’t quite know what that something should be. As such, they were quite happy when we came up with the programme.”
Ravindran said RM30mil was budgeted for the programme last year and this year, RM10mil.
Time to modernise
The automotive sector is a relatively informal sector that is not subject to much regulation or benchmarking of service standards. For family-operated workshops, knowledge is passed on from father to son or relatives, and it is only recently that one can study about car repair and maintenance from accredited institutions such as The Otomotif College. To be fair, there were already efforts to modernise the sector, and that came in the form of certificates and diplomas offered by Government-recognised institutions.
Even the industry itself recognises that it needs to impose greater levels of self-regulation and professionalism, to cope with changing times. To that end, the National Automotive Workshop Administration Malaysia (Nawam) was introduced recently to elevate automotive industry standards. Demonstrating the urgency of the task at hand, Nawam has the backing and support of Government agencies such as Bank Negara; the Domestic Trade, Cooperatives and Consumerism Ministry; as well as the General Insurance Association of Malaysia.
Still, the question of money, or lack of financial backing for business expansion, needs to be addressed, and this is where Atom fits in. Rather than handing out cash to workshop operators, Atom, through its panel of banks, will pay the supplier or contractor involved in the modernisation programme as and when it is billed for approved purchases or workshop improvements.
Atom is leveraging upon this financial aid to push forth what it believes to be substantial improvements to auto workshops. Prior to the loan approval process, a consultant from the industry will evaluate the applicant’s operations and make recommendations on the necessary renovations and equipment purchases.
For example, many small-scale workshops are still relying on the manual jack where the operator has to lie on his back in order to access the vehicle undercarriage. To qualify for the soft loan, the purchase of a hydraulic lift set (at about RM20,000 each) that can handle at least three tonnes is compulsory. “Working with a manual jack is difficult as space is restricted, we can’t show our customers the extent of the damage, and if you are not careful, the vehicle could also collapse on you,” said Surhan, who is now a proud owner of two sets of scissor lifts bought under Atom.
His wife Nuriah Kostari agrees that the lift was a good investment. “I think it worked like magic. Not long after we procured the scissor lifts, our business went up by 30% to 40%. It seems that customers are drawn into the shop just by seeing the presence of a vehicle lift. And sometimes, a simple oil change can be transformed into an opportunity to sell more products and services,” said Nuriah.
For Amir Hamzah, co-owner of a workshop in Taman Sri Muda, Shah Alam, Selangor, the Atom consultants were concerned about enhancing the look and feel of his already popular workshop. “They recommended that I purchase a working cabinet that costs more than RM65,000, as well as complete tool sets for all my mechanics. I also procured another two sets of scissor lifts,” said the 32-year-old operator of AMR Technologies Fastec, which hires 11 technicians.
“The hydraulic lifts speed up service time, and the staff love it. For example, to change the steering rack for a car using the manual jack method, where the mechanic slides under the car, would need one hour. With the hydraulic lift, the job can be done within half an hour. We can also invite the customer to inspect the undercarriage together to allay their concerns as well as to explain things better to them,” said Amir, who thinks that his takings went up by 20% since the arrival of the additional equipment.
Beyond the Klang Valley, the Atom funding has helped generate new income streams by enabling operators to deliver value-added products and services. For Liu Yeong Huei, owner of the Cameron Highlands Tyre & Car Care Centre in Tanah Rata, Pahang, Atom enabled him to procure the most sophisticated wheel alignment system in the world – a 3D system that cuts 20 minutes from a typical wheel alignment job. “The machine costs more than RM90,000 but the fully computerised and wireless system is so easy to use. This machine is able to accommodate all kinds of vehicles, and I am now able to charge RM45 for an alignment job, compared to RM20 previously when I used an older system that had wires running all over the place.”
The Atom consultant also talked Liu, 33, into buying another tyre changing machine, as well as a nitrogen-based tyre filling system that pumps pure nitrogen into tyres. From what is essentially a free service (inflating tyres using normal air), he now has a new income stream by offering the option of inflating tyres with nitrogen at RM30 per vehicle. Liu seems rather pleased with his acquisitions, and thinks that Atom is a splendid idea for workshop operators like him. “We can forget about getting normal bank loans for our kind of business. At most, we can only get personal loans, and the quantum won’t be as much, while the interest charged will be way higher.”
Atom’s transforming value is even more apparent in smaller workshops, like the barebones motorcycle workshop established in 2004 by V.K. Suhumaran in Kampar, Perak, “The problem is always the tightness in cash flow,” said the 47-year-old who began working as an apprentice after Form 3. Even with 30 years of car repairing experience under his belt, he works as hard as ever, regularly putting in seven-day weeks and rarely closing his workshop before 8pm.
Suhumaran was also made to buy a scissor lift, but one made specifically for motorcycles. The lift can elevate the entire motorcycle to a comfortable level (waist to chest height) for the mechanic to work on while standing straight. Costing more than RM6,000, the lift is a much welcome addition to his shop, though it is not yet a direct contributor to any increase in revenue. “I can stand straight up and need not bend down so much. It is less tiring and there is no back pain. But I need help in handling a computer,” he said, adding that the balance of the RM50,000 loan was used to purchase a display rack to jazz up the appearance of his shop, as well as to order more spare parts.
“With Atom, I can breathe a bit easier now as I can manage my cash flow better. The repayment terms are also good,” said the owner of Kedai Motor Om Ganapathy.
Making an impact
According to Ravindran, one common thread running through Tukar (Transformasi Kedai Runcit or Small Retailer Transformation Programme) and Atom is that both are quite structured and systematic. “We know that some shopowners are struggling, while some do very well, but we can do better if things are more structured. For example, daily stock tracking is a discipline that we would like to instill in our shopkeepers. We did this for Tukar, and we are now trying to push this same discipline onto the Atom recipients.”
So, can Pemandu declare Atom a success? “Anecdotally, yes. From our turun padang (meet-the-people) sessions, we gather that the situation is good, and that the people are happy. But just like Tukar, we need hard data so that we can be satisfied ourselves,” said Ravindran, who is not above conducting the occasional spot check himself.
Atom is one of the projects touted as being capable of delivering visible results within a short time, as epitomised by Pemandu’s adoption of the “Big Fast Results Methodology” (pemandu.gov.my/gtp/Big_Fast_Result-@-Big_Fast_Results.aspx).
“As Pemandu CEO Datuk Idris Jala had said, you just have to keep going, and learn as you go, and cannot wait for all the hard data to come in. No doubt, you will make some mistakes along the way,” said Ravindran in recounting the trials and missteps when rolling out Tukar. Of course, some of the hard-learned lessons came in handy when unveiling Atom, which he said would eventually see a structured automotive workshop sector.
While the number of participating workshops is encouraging, Pemandu would like to see a more balanced racial composition of Atom recipients, which is currently Malay-dominated (close to 80%). It is now roping in co-operatives to help address this imbalance, especially those that are traditionally more closely identified with the respective Indian and Chinese communities. For the former, it will be Suria, while the latter can liase with Koperasi Jayadiri Malaysia (Kojadi). Other co-operatives that have been called on board include Koperasi Pembangunan Usahasama Masyarakat Maju Sabah, Koperasi Jaringan Sepadu Malaysia (Kojaris), and Koperasi Automobil Kuching Sarawak.
“These co-operatives are also given the capacity to appoint their own consultants to assist workshop owners who are less comfortable with dealing directly with the Government. This is a 10-year programme which has to go on until 2020, and it is the first time it has been done anywhere in the world,” said Ravindran.
Whatever the misgivings and teething problems, Atom recipients are often its fiercest advocates and defenders. Surhan, who had complained about the equipment purchase recommendation by his consultant, said he is now ready to share his experience and knowledge with other fledgling workshops so that they too can taste success.
“Initially, I did not know anything about Atom and was just randomly trying my luck asking for loans from all possible sources. Atom has proven to be a great programme, but I hope that the Government will not just stop at giving out loans. We also need help in other aspects, such as business management and marketing.”
For millions of motorists resigned to stepping into cluttered workshops and dealing with mechanics in greasy overalls, there is now reason to hope that things will change for the better. The only question is whether the pace of change will be to everyone’s satisfaction. For starters, it is heartening to note that the automotive service industry itself seems convinced that it too has to get some Big Fast Results.
Atom programme: Servicing workshops