To drive more competition in the spare parts market, since 2011 the industry across the EU has been subject to regulations under which OEMs may not hinder their suppliers from also supplying their products as spare parts to independent distributors.
In addition, manufacturers are obliged to release electronic data enabling the exact identification of replacement parts for vehicles. Taken together these regulations have strengthened the position of independent service providers as they now have the same access to electronic repair and information enjoyed by authorised repair shops.
A recent report1 suggests that independents have been successful at expanding their parts and services businesses at the expense of OEMs, while traditional authorised repair shops have also experienced price pressure from large independent service providers. Non-traditional players have also entered the market as insurers, fleet operators and leasing firms strike exclusive agreements with independent repair shops.
While wear-and-tear parts currently represent the largest share of suppliers’ aftermarket revenue, services and diagnostics products are expected to drive growth3. The services sector is expected to grow particularly strongly, driven by digitally-enabled services and the power of new technologies to drive a ‘diagnostics 2.0’ revolution.
Digital systems provide a great opportunity to use connectivity in order to predict the need for servicing and repairs. For instance, most new Mercedes vehicles are now connected online to the dealer/OEM repair shop which can then predict when the car needs a service, and even book a time automatically so that the owner does not need to go to an alternative repair shop.
Frost & Sullivan2 says telematics, e-commerce and 3D printing will all form key foundations in the evolution of aftersales channels, with OEMs attempting to integrate all aftersales services into a single, digital platform.
As McKinsey3 says, collecting data on parts inventory/warehousing and car and fleet activity can help aftermarket players fine tune their operations, build customer leads, and boost sales. With an integrated, digital supply chain, suppliers are able to provide the right parts or components in time to reduce repair cycles.
It adds that parts sales online are expected to increase to 20-30% of sales by 2035, a level at which it is likely to plateau as parts such as windscreens and airbags, which are difficult to transport or part of complex workshop processes, will continue mainly being sold via traditional OEM or independent wholesale channels.
Automation, and the increasing use of robotics, also presents a huge opportunity to secure greater efficiencies within parts storage systems.
Remanufacturing means the rebuilding of a part to specifications of the original manufactured product. This includes using a combination of reused, repaired and new parts.
OEMs are investing heavily in their remanufactured parts businesses to compete with independent players and keep customers in their network longer. The market is also growing rapidly due to legislation demanding increased recycling of parts.
Remanufacturers with the technological capabilities and scale to handle new technologies will benefit, while remanufacturing can also provide a shorter lead time on spare parts.
Customers increasingly appreciate that a remanufactured part can provide comparable levels of quality to OEM parts at a beneficial pricing point. Indeed, for some models remanufacturing is now the only way to find the appropriate parts to keep older vehicles on the road.
The result is a remanufacturing market that has grown significantly in recent years. This growth is forecast to continue given the strong market dynamics.
Electric Vehicles (EVs) and Autonomous Vehicles (AVs)
Both electric and autonomous vehicles have the potential to significantly disrupt the global aftermarket business.
The EV revolution could have a huge impact on the aftermarket, but leading players are currently grappling with how this transformation in vehicle technology will play out, and what specific timeframes they need to consider.
In the mid-term the industry has seen a boom in the hybrid vehicle market which, in theory, is beneficial for the aftermarket as vehicles with effectively two engines need more replacement parts. But longer term the vehicle industry is heading towards one drive technology which means less replacement parts with less complexity are needed, although the value per part will presumably be higher.
AVs will lead to a decreasing crash rate, resulting in a reduced need for replacement parts, especially in the field of body and exterior components such as bumpers, bonnets, fenders, lighting and grills.
Online channels give customers quick access to information on the prices of parts. McKinsey suggests that across Germany, France, and the UK some 25-30% of end customers now evaluate workshops using online channels, and 20-30% of end customers use these channels to determine which car parts to buy.
Online forums also give customers peer perspectives on the quality and value of workshops, while online purchasing of services will also become increasingly important. Greater price transparency through e-commerce has already fuelled cross-border trade within Europe, resulting in price drops in countries with, formerly, little competition and/or generally high price levels.
Parts manufacturers and distributors need to assess sales globally and analyse integrated product and application data across regions using two different global vehicle description standards – ACES for North America, and TecDoc for the rest of the world.
WorldView claims to be the first online, global aftermarket portal that integrates vehicles-in-operation (VIO) data for the vast majority of vehicles with ACES and TecDoc parts catalogues4.
1: BCG – European automotive aftermarket landscape
2: Frost & Sullivan – Global automotive aftermarket outlook 2018
3: McKinsey – The changing aftermarket game
4: IHS Markit