Car Repair in Russia: Dealer, Independent Or Black Market

May 15, 2011

Not too long ago the choices in auto repair in Russia were like the choices available in governing when the country under communism - there were none. You could have your car repaired at the dealership and that was it.

But a number of conditions as reported by The Moscow Times have changed all that. First, the same type of new car market crash that affected American sales hit the Russians in 2009 and 2010, when sales dropped by 50 percent. This means that number of out-of-warranty cars (older than three years) is expected to grow until 2013. This has created a need for competent repair shops.

Under the table operations

This need has given life to a shadow economy of repairers in a country used to dealing with someone who operates under the radar of the official business environment. The word is spread by “word of mouth.” Avram, a mechanic working out of a metal shed in northern Moscow, who is on a first name only basis with the Times, called that type of marketing “the people’s radio.”

His operation is built around the use of smuggled and off-label parts that he can install for much less than the dealerships. Even with this business model he is able to attract car rental companies to his garage as well as enough individuals to keep him, a partner and a trainee busy.

The unofficial status of “garazhis” like Avram’s makes it nearly impossible to estimate the size of the repair sector. An editor of a trade magazine told the Times that by using the country’s fleet size and assigning average expenditures per vehicle, the market for repairs could be as large as $15 billion per year.

Enter the big guys

Following the overworked but effective advice of “following the money,” one of the country’s largest auto distributors, Rolf Group, sought out the expertise of a British firm, Kwik Fit, to service the estimated 10 million off -warranty vehicles. Kwik Fit runs 1400 repair shops in Britain and Europe. Together with Rolf they used a franchise model to open 70 stations in 43 cities during the first year.

A menu of services provided with fixed prices available at the company’s website couldn’t be further from Avram’s murky operation. Besides this, the brand called White Service promises to undercut the dealerships by 50 percent, a price point that the magazine editor believes is unsustainable.

The Times sent a staffer out to a dealership for a “basic technical audit and oil change” on a 2003 Ford Explorer with a 4.0-liter engine and was charged $212. White Service offers the same maintenance package, using Esso instead of Ford synthetic oil for over 30 percent less.

While that might not be quite up to their promise, if you are the customer you have to be loving what competition has done to prices.

[The Moscow Times]

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