Service StationHefei0316

Hefei FAW Service Station INTERVIEW DATE:March 16th, 2000INTERVIEWER NAME:Anne WangInterviewee NameMr. Zhen Shen-faPositionDirector Company and AddressHefei FAW Service StationNo. 159 Wangjiang West Rd, Hefei 230022Telephone/Fax(0551) 5137324BackgroundKey IssuesConclusionsBackgroundn Hefei Service Station is established in 1982. Its parent company is Anhui Auto Repair Factory. Currently Hefei Service Station has 87 workers.n In 1999, Hefei Service Station's total income is around 20 Million RMB, with a gross margin of 3 Million RMB.- Warranty Service:30,000RMB/month- Out-of-warranty Service:30,000RMB/month- Spare Parts Sales:8 Million RMB/year- Truck Sales:10 Million RMB/year§ 178 FAW medium-heavy trucks are sold in 1999.n Total inventory value is 3 Million RMB with 2400-2500SKU. Turnover period is around 4 months. 1 Million RMB-worth inventories are considered as obsolescence. Mr. Zhen hopes to get rid of those parts by coordinating with parts centres or sell them in lower price.n 1/3 of parts is sourced from Shanghai Parts Centre. 40% of parts are sourced from Changchun Fu Ao. Others are sourced from FAW suppliers directly.n Hefei Service Station is able to price its parts at 25-30% higher than its purchase price, as the station has is credibility in local market.Key Issuesn Price from FAW parts centre is 10-15% higher than that of suppliers and service attitude of parts centre is not good. The parts centre does not get back parts with quality problems.n Location of parts centre is too far away. It usually will take 3 days to get to Shanghai. Only large purchase with a value higher than 200,000RMB will make profit.n Hefei Service Station occasionally found that, parts from the centre also has quality problems. Some of the parts are also sourced from grey channel.n Hefei Service Station hopes to get back the warranty fee in forms of trucks. Currently the service charge is settled in forms of parts. n Hefei Service Station is very interested in truck sales business and hopes FAW can give the station more policies, i.e., more turnover trucks, or more welcomed truck types. n Supply of technical information is not on time and caused difficulty to technicians. Mr. Zhen wish FAW could provide the parts catalogue and some spare parts for each new type of trucks to them.n There will be a new service station in Hefei and Mr. Zhen doesn't think it rational, as the standard service radium should be 50km, but the new service station is only 10km away. n Hefei Service Station donates almost 1 Million RMB to its parent company last year, and have almost no net profit left. Mr. Zhen hopes to restructure the service station but faces resistance from the parent company. Mr. Zhen thinks FAW should provide some assistance to them.Conclusion Hefei Service Station operates its parts and trucks sales business quite well and gets a gross margin of 3 Million RMB in 1999. Main problem is that Hefei Service Station needs to donate almost 1 Million RMB each year to its parent company, and leave itself almost no profit. 2