Market liberalisation, changing consumer habits, and rapidly accelerating technologies are transforming the automotive aftermarket sector, leading to a buoyant M&A market.
The market splits into the services sector (maintenance and repair of vehicles) and the parts sector, with market share split between OEMs and independent operators.
Today the aftermarket comprises of five distinct groups1:
- Parts manufacturers such as OEMs, automotive suppliers, and generic manufacturers producing aftermarket parts and services
- Parts distributors including buying groups, independent distributors, online retailers, and OEMs
- Workshops including OEM workshop networks, auto centres, system chains, and small garages
- Intermediaries such as automobile clubs and leasing companies
- End customers consisting of the private, business, and fleet market Global market
In 2018 global automotive aftermarket demand is set to rise 4.4%2 with most analysts predicting strong growth and profitability in the years ahead. One forecast1 suggests that the market will be worth approximately €1,200bn by 2030 with an underlying annual global growth rate of roughly 3%.
However, this masks wide regional variations with annual growth in China of 8.1% but only 1.5% growth across Europe and North America.
The service market is expected to grow particularly strongly in China due to the growing average age of the vehicle population, a defining global trend. Indeed, as growth of new car sales has come under pressure globally in recent years, aftermarket sales have become even more important for OEMs.
The wider pressures on OEMs in the aftermarket are intense. As McKinsey1 remarks, as well as facing new competition from players at different stages of the aftermarket value chain, OEMs are also having to deal with new players operating digitally-driven business models.
As previously stated, as the age of vehicles increases globally the aftermarket business of OEMs comes under particular pressure. This is because older vehicles do not necessarily need to be serviced at the OEMs’ partner garages, hence offering additional business for independent providers. For instance, the average age of passenger cars across the EU is 11 years and this figure has been increasing in recent years.
French carmaker PSA Group is a good example of an OEM that is tackling these challenges head-on. It recently launched a new aftermarket business that extends its spare parts offering for international customers, providing parts from a range of rival OEMs along with an expanded version of its own EUROREPAR multi-brand range.
Other OEMs are also creating their own networks of non brand-specific repair shops, while some are introducing secondary brands such as VW’s Direkt Express.
For aftermarket suppliers the pressures are no less intense. Indeed, to run a successful and competitive business in this industry today, suppliers need a combination of critical size, a strong stock keeping unit, global reach, high quality products and fast delivery systems.
1: McKinsey – The changing aftermarket game
2: Frost & Sullivan – Global automotive aftermarket outlook 2018