The automotive aftermarket is a crucial component of the UK economy. Through both franchised and independent networks, it provides motorists with choice over maintenancing their vehicle. By keeping vehicles safe and roadworthy, this sector is essential to keeping the country moving on four wheels, delivering both direct and indirect financial benefits to the country.
A new year tends to mark new challenges for manufacturers. As we move deeper in to 2019, we can begin to see the key disruptive trends the aftermarket will face in the run up to 2030. The following points are referenced from McKinsey & Company’s latest report: Ready for Inspection – the Automotive Aftermarket in 2030.
Changes in customer expectation and value generation
Digitization of channels and interfaces reduces information asymmetry and increases price transparency for customers. Customers today are more informed and empowered than ever. Whether the aftermarket is reshaped in ways similar to other industries remains to be seen. But the evolution of online savvy customers will change the automotive aftermarket in two ways.
Customers are using digital channels to gain a clearer insight of cost and quality. More than a quarter of aftermarket customers in the UK, France and Germany use online channels to evaluate workshops, while over a third use digital tools to better inform their decisions about purchasing car parts.
Workshops almost exclusively turn to traditional channels to buy car parts today. 85% – 95% of all purchases are happening on their B2B platforms, or through physical channels. Moving forward, it’s likely that workshops will increase their e-commerce activity on distributor B2B platforms, shopping less via traditional parts distributors’ physical channels. It could also change as end customers increasingly use digital platforms to purchase parts online.
Big data enables advanced analytics of field and customer data, allowing for use cases on both revenue and cost sides. New data is here, including the collection of telematics and driver behaviour today. This new level of information opens doors to competition-differentiating insights. It presents a myriad of game changing opportunities for the aftermarket industry, with the potential to increase revenue and increase the efficiency of operations.
Increasing importance of fleet customers requiring differentiated service offerings. The current increase in shared mobility suggests nearly one out of ten cars sold in 2030 will be a shared vehicle. New corporate fleet customers will enter the market e.g. Uber with their large fleet of vehicles, which could affect the numbers of individually owned vehicles, and have an increased on demand for professionally managed fleets.
Shifting market growth and size to emerging markets requires adaptation of service mindset to new customers.
Emergence of next-generation vehicles
Green consciousness will lead to electrification of powertrain and shifting aftermarket requirements. Staying updated with rapid technological advances will be essential. Many automakers have announced plans for electrification in 2019/2020. Manufacturers that make these items must prepare to adapt quickly to keep up with the latest trends – as will auto parts stores. Today’s routine maintenance items generate a lot of revenue for a typical auto parts store – retailers could face a decline in sales when those items are no longer required.
As we are all well aware, the transition to electrification likely won’t be as smooth as we would like it to be, but ample preparation will help.
Increasing importance of software impacts service needs and requires an updated or entirely new skill set. Software os growing to be increasingly central to cars. The survey shows that more than 50% of industry experts expect that aftermarket services will become more important than parts, and 40% expect that services will become as important as parts.
Autonomous driving reduces accidents, but increases product complexity and leads to shorter maintenance intervals. Fully autonomous vehicles are unlikely to be commercially available before 2030. When the time does come however, AVs will reduce the human error element of driving. They will also be designed to operate optimally, and as drivers become less active in vehicle operation, regulatory frameworks could likely shift liability more toward OEMs.
Connected vehicles enable predictive intelligence maintenance services. An array of Internet-based services e.g. navigation systems are enabling new features like track routing park and find, accident and breakdown assistance, dealer search and vehicle status information – and there’s plenty more to come.
Shifts in competitive power
Entry of new players (e.g. digital players, intermediaries) increases competitive pressure by occupying profitable businesses. New players will focus on growing automotive value chain and target only specific, economically attractive market segments. New players however, will focus on digital/e-commerce companies, expanding their value chain footprint, gaining more power in future.
Industry consolidation and integration forces all aftermarket players to extend their value. Most global aftermarkets will follow the same consolidation path as the US and Europe.
Whilst the impact of long term trends may not yet be being felt in the aftermarket, there are many other changes and challenges that are affecting the way the industry works. It is important for all aftermarket stakeholders to be agile and responsive: the only way to remain competitive is to evolve as the market requires.
Did you know that we are partnered with the Independent Automotive Aftermarket Federation? Take a look at their website here.
