Feasibility study of an Automobile Repair & Service Workshop
1. Prepared by: Engr. Md. Imam Hossain (Rubel)
Pre-Feasibility Study of an Automobile Repair &
Service Workshop
March-2015
Prepared by: Engr. Md. Imam Hossain (Rubel)
2. Prepared by: Engr. Md. Imam Hossain (Rubel)
PPRROOJJEECCTT PPRROOFFIILLEE
A. PPuurrppoossee ooff tthhee DDooccuummeennttss
This document is developed to provide the entrepreneur with potential investment
opportunity in setting up and operating an Auto Repair & Service Workshop offering
various services. This pre-feasibility gives insight into various aspects of a Workshop setup
including both technical and general information for each particular service offered. The
document is designed to provide all relevant details to facilitate the entrepreneur in
making the correct decision providing various technological as well as business
alternatives. The document also allows flexibility in change of various parameters to suit
the customized needs of the entrepreneur.
BB.. PPrroojjeecctt BBrriieeff
The Auto Repair market has a lot of competition, almost all offer repair and service
features. Very few have fully stocked parts owing to the problem of tied up capital in
case of non-utilization of these parts. However, quick availability of parts supports the
service and repair departments by allowing them to turnaround jobs at a faster rate
than the competition. Wheel alignment and balancing facilities are also provided by
many large scale workshops along with their primary services.
The proposed pre-feasibility addresses the unmet need of having a quality auto
repair Workshop that provides:
(i) Quick and quality repair & maintenance services;
(ii) Wheel Alignment and Balancing Facilities
(iii) High Pressure Cleaning Services; and
(iv) Easy access to new and used retail parts to meet the demands of the customer.
B. OOppppoorrttuunniittyy RRaattiioonnaallee
The Auto Repair & Service Workshop business is a viable business provided that it is
operated with a good business acumen that involves having a thorough knowledge and
experience of the repair and service operations and also managing the jobs with the right
type of skilled manpower. When these factors combine with good customer relationship
management and effective business development skills, the business is expected to give
considerable profits which are expected to grow over the years.
C. Market Entry Timing
The Bangladeshi automobile industry has registered a considerable growth over the
past couple of years. It was further estimated that the car industry experienced a growth
rate of 51.4% signifying an increasing demand for cars which is expected to continue in
the future.
Furthermore, increasing competition between leasing companies have caused the
lease rates to decline considerably which have made car an affordable commodity for a
majority of the middle-income class which constitutes a considerable segment of the
3. Prepared by: Engr. Md. Imam Hossain (Rubel)
population of Bangladesh. These factors coupled together reflect on the growing need
for quality repair and service facilities.
Unlike many countries, the Bangladeshi car industry is unique in the sense that once the
car comes on the road it is expected to run for an indefinite period requiring major repair
and maintenance services throughout its operational life. Moreover there is a
considerable demand for wheel alignment and wheel balancing services, which is
required by almost every car, whether new or old. The roughness of the roads and
continuous friction causes a continuous disruption to the alignment and balancing of the
wheels which require adjusting at least once every two weeks for proper upkeep and
maintenance.
Conclusively it can be said that there exists an ample demand for quality repair and
service workshops in Bangladesh and also that the existing scenario provides conducive
opportunities for entry into this business venture.
C. KKeeyy SSuucccceessss FFaaccttoorrss oorr PPrraaccttiiccaall TTiippss ffoorr SSuucccceessss
The three main critical success factors that affect the decision to invest in the
proposed business setup are:
i) Hands on Experience
Having a thorough knowledge and hands on experience of all the relevant
technical details is a must for entry into this business. Relevant work experience is
the most important pre-requisite because it has a direct impact on the
successful management of the business.
ii) Marketing Skill
Another critical factor is that the entrepreneur must have effective PR &
marketing skills. These marketing skills should enable the entrepreneur to
carryout business development activities to target his potential customers and also
to maintain his existing client base.
iii) Technical Skill
The third critical factor relates mostly to technical skills required especially for
operating computerized Wheel Alignment & Balancing machines and high pressure
cleaning equipment. The machine operators should be properly trained in order
to completely inspect steering and suspension systems, take computer
measurements, make factory adjustments to restore alignment specifications. In
case of unskilled workers handling these equipment, there will be loss of time,
equipment and most important of all unsatisfactory service leading to customer
dissatisfaction.
4. Prepared by: Engr. Md. Imam Hossain (Rubel)
D. PPrrooppoosseedd BBuussiinneessss LLeeggaall SSttaattuuss
Although the legal status of business tends to play an important role in any setup, the
proposed Auto Repair & Service Workshop is assumed to operate on a sole proprietorship
basis which may extend to partnership in case of addition of new services that might add
significant business to the existing setup.
11.. PPrroojjeecctt IInnvveessttmmeenntt
This section will provide the total cost of the
project.
ITEM COST (BDT)
Construction – Office / Store 4,25,000
Construction – Service Stations 1,50,000
Masonry/ decoration Work 50,000
Mechanical Repairs Equipment 90,000
Denting Equipment 100,000
Painting Equipment 30,000
Wheel Alignment Machine 4,00,000
Wheel Balancing Machine 64,000
High Pressure Cleaning Equipment 550,000
Piston Pump/ Lift 250,000
Spare Parts Purchases 80,000
Lubricant Purchases 25,000
Working Capital 600,000
Pre Operating Costs 50,000
Office Furniture & Equipment 80,000
Total Cost 2,944,000
5. Prepared by: Engr. Md. Imam Hossain (Rubel)
22.. PPrrooppoosseedd PPrroodduucctt MMiixx
A typical Auto Repair Workshop is assumed to provide the following four major services:
(i) Mechanical, and
(ii) Denting & Painting
(iii) Wheel Alignment & Balancing
(iv) High Pressure Cleaning
The following table presents an overview of the proposed main services to be
offered under the first two major categories identified above:
MECHANICAL DENTING & PAINTING
CNG Back-up , Repair and Services, Cosmetic Repair
Major Repairs Accidental Repair
Body Restoration Services
33.. RReeccoommmmeennddeedd PPrroojjeecctt PPaarraammeetteerrss
Capacity Human Resource Equipment Location
450 Cars / Month
2 (Management)
17 (Technical Staff)
Chinese High Income
Locality
Financial Summary
Project Cost IRR NPV Payback Period
Remarks
2,944,000 37% BDT 14,879,579 2 Years & 5 months Positive
44.. EEqquuiippmmeenntt RReeqquuiirreemmeenntt
The equipment required for running an Auto Workshop would relate to the activities
that the workshop tends to undertake. In this case, the equipment required would be as
follows:
MECHANICAL REPAIRS & MAINTENANCE
Equipment Number Estimated Cost (BDT)
Complete Mechanical Toolbox 2 26,000
Work Bench 2 5,000
Vice 2 9,000
Tool Box Cupboard 1 5,000
Voltmeter / Ammeter 2 5,000
7. Prepared by: Engr. Md. Imam Hossain (Rubel)
HIGH PRESSURE CLEANING
Equipment Number Estimated Cost (BDT)
High Pressure Cleaner (including
Piston Pump)
1 550,000
Piston Pump 1 250,000
Total - 800,000
WHEEL ALIGNMENT & BALANCING
Equipment Number Estimated Cost (BDT)
Complete Computerized Alignment
Equipment (Including Heads, Disc
plates etc.) – A Class
1 4,00,000
Computerized Wheel Balancing
Machine
1 64,000
Total - 4,64,000
55 LLAANNDD &BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTT
55..11 Land RReeqquuiirreemmeenntt
The proposed Auto Workshop setup is assumed to operate in 1,500 sq. yards that allows
ample space for Denting & Painting and Mechanical services and also for general parking
services for walk-in customers.
Mechanical Works – 800 Sq. Yards
Denting & Painting – 300 Sq. Yards
Wheel Balancing & Alignment – 200 Sq. Yards
High Pressure Cleaning – 200 Sq. Yards
8. Prepared by: Engr. Md. Imam Hossain (Rubel)
55..22 OOffffiiccee FFuurrnniittuurree && EEqquuiippmmeenntt
A total of BDT 80,000 is required for purchase of office furniture and related equipment.
The following table gives an assumed breakup:
OFFICE FURNITURE
Item Number Estimated Cost (BDT)
Table & Chair Set (Manager) 1 10,000
Table & Chair Set (Customer Service) 1 5,000
Air Conditioner (Split Unit) 1 30,000
Waiting Chairs 10 10,000
Sofa Set for Customers 1 15,000
Curtains / Interior Decoration - 10,000
Total 80,000
The Office Furniture & Equipment will be depreciated at the rate of 10% per annum
according to the diminishing balance method for the projected period.
66. HHUUMMAANN RESOURCERREEQQUUIIRREEMMEENNTT
GENERAL MANAGEMENT
Designation / Type Number Monthly Salary (BDT)
Branch-In charge 1 -
Accountant cum Customer care 1 7,500 (10-12 hours)
Purchaser / Store Keeper 1 7,000
Office Assistant 1 5,500
Guard 1 5,500 (Night Duty Only)
9. Prepared by: Engr. Md. Imam Hossain (Rubel)
The following table gives the details for the proposed technical labor that forms the
integral part of the cost of sales:
JOB / DUTY ALLOCATION
Designation / Type Number Monthly Salary (BDT)
Service Engineer 1 15,500
CNG BACK-UP AND MECHANICAL REPAIRS & MAINTENANCE
Designation / Type Number Monthly Salary (BDT)
Technician 1 12,000
Assistant technician 1 8,000
Jr. Technician 1 5,000
DENTING
Designation / Type Number Monthly Salary (BDT)
Head Technician(Denting) 1 14,000
Asst. Technician(Denting) 1 8,000
Jr. Technician (Denting) 1 5,000
PAINTING
Designation / Type Number Monthly Salary (BDT)
Head Technician (Painting) 1 12,000
Asst. Technician (Painting) 1 8,000
Jr. Technician (Painting) 1 5,000
Total 15 118,000
The Service Engineer would be responsible for checking and diagnosing the customer’s car
to ascertain any additional repairs / replacements that might not have been identified by
the customer. Once the estimates and repair / replacement work is agreed with the
customer
10. Prepared by: Engr. Md. Imam Hossain (Rubel)
the Service Engineer would then allocate the job and ensure its timely completion. The
Service Engineer would also be required to check the cars (trial run) before delivering them
to the customers.
The total monthly salary of the technical staff would amount to BDT 131,500 and is
assumed to increase by 10% per annum.
WHEEL ALIGNMENT & BALANCING
Designation / Type Number Monthly Salary (BDT)
Operator (Service Engineer) 1 Included
Assistant Operator ( Tech) 1 Included
HIGH PRESSURE CLEANING
Designation / Type Number Monthly Salary (BDT)
Assistant Technician 1 8,000
Jr. Technician 1 5,000
Total 4 13,000
11. Prepared by: Engr. Md. Imam Hossain (Rubel)
77.. RReevveennuuee && CCoosstt PPrroojjeeccttiioonnss
77..11 G r o s s MMaarrggiinnss
The following table gives the Gross Margins for the proposed services:
SERVICE GROSS MARGIN
Denting & Painting 40 %
SERVICE GROSS MARGIN
Cosmetic Touchups
Accidental Repairs
Full Body Restoration
13 %
43 %
30 %
CNG Backup,Auto Repairs & Service 27 %
Maintenance Services
Major Repairs
33 %
14 %
Wheel Alignment & Balancing 94 %
Alignment
Balancing
93 %
94 %
High Pressure Cleaning 77 %
Overall 57%
77..22 MMaarrggiinnss oonn PPaarrttss // LLuubbrriiccaannttss // SSeerrvviicceess
The Auto Workshop being a service oriented setup charges a margin on each of the
products it uses and services it provides. The following table presents the breakdown of the
margin:
SERVICE MARGIN
Spare Parts 35.0 %
Lubricants 12.5 %
Subletting 25.0 %
It is assumed that the cost of parts, lubricants and sublet service is expected to increase at
the rate of 10 % per annum for the projected period.
77..33 Construction CCoosstt
12. Prepared by: Engr. Md. Imam Hossain (Rubel)
The Auto Workshop involves construction cost which translates into three main
components as follows:
The cost for masonry will be as follows:
MASONRY WORK FOR BAY AREAS
Item Bay Areas Estimated Cost (BDT)
Mechanical Work (Duct & Ramp) 10 80,000
Denting 4 20,000
Painting 4 20,000
Total 14 120,000
66..44
CONSTRUCTION COST FOR WHEEL ALIGNMENT / BALANCING
& PRESSURE CLEANING
Item Estimated Cost (BDT)
Wheel Alignment & Balancing( Base making ) 90,000
Scissor Lift for Alignment 4,000,00
High Pressure Cleaning (RAMP) Included
Total 490,000
(Note: For wheel alignment there should be at least a minimum space of 5 feet from the
front & back end of the car and a space of 2 feet at the sides for flexibility in operating the
machine)
77..44 UUttiilliittiieess RReeqquuiirreemmeenntt
The following table presents the assumed breakup of utilities on a monthly basis:
UTILITY MONTHLY CHARGES ()
Electricity 12,000
Water 2,000
Telephone 2,000
Entertainment 1,500
Total 17,500
It is assumed that utilities expenses will increase by 10% every year.
77..55 Labor AAllllooccaattiioonn CCoossttss
13. Prepared by: Engr. Md. Imam Hossain (Rubel)
The technical labor costs form an integral part of the cost of sales for the proposed
Auto Workshop. This makes it difficult to trace the labor costs specifically to
the services offered since a person can work on more than one function at one
time. For the purpose of this study the following breakup of labor costs are
considered according to the workload based on the number of cars for a particular
type of service:
Labor Cost per Car
(BDT)
Denting & Painting Repairs/CNG Backup
Monthly pay Cosmetic Accident Restoration Minor Major
Mechanical 25,000 - - - 12,500 12,500
Denting 27,000 - 19,500 7,500 - -
Painting 25,000 16,000 3,500 5,500 - -
Engineer 15,500 3,875 3,875 3,875 3,875 3,875
Total 92,500 19,875 26,875 16,875 16,375 16,375
Cars (Estimated) 6 7 2 100 5
Labor Costs 3,312.5 3,839.27 8,437.5 163.75 3,275
77..66 WWoorrkkiinngg CCaappiittaall && PPrree OOppeerraattiinngg CCoossttss
It is estimated that an additional amount of approximately BDT 600,000 will be
required as cash in hand to meet the working capital requirements / contingency
cash for the initial stages. The requirement is based on the utilities and salaries
expenses for at least three months. The following table gives the break up.
ITEM 3 MONTHS COST (BDT)
Utilities 52,500
Salaries 394,500
Total 447,000
The provision for pre operating costs is assumed to be BDT 50,000 which will be
amortized equally over a 5 year period.
77..77 KKeeyy AAssssuummppttiioonnss
14. Prepared by: Engr. Md. Imam Hossain (Rubel)
Item Assumption(s)
Sales Increase 15 % per year
Increase in Cost of Sales 10 % per year
Increase in Staff Salaries 10 % per year
Increase in Utilities (Electricity/Water/ Gas) 10 % per year
Increase in Office Expenses 10 % per year
Depreciation
o Building & Masonry Work 10 % per annum (Diminishing Balance)
o Technical Equipment 10 % per annum (Diminishing Balance)
o Office Furniture & Equipment 10 % per annum (Diminishing Balance)
o Wheel Alignment & Balancing 10 % per annum (Diminishing Balance)
o Piston Pump /Car Lift 10 % per annum (Diminishing Balance)
o High Pressure Cleaning Straight Line 33 % per year
High Pressure Cleaning Maintenance Cost 25 % of Cost Price
High Pressure Cleaning Replacement 4 years