Aftersales business growing, but disruption ahead, study says
The most stable factor in the aftersales market will be repairs and spare parts – McKinsey’s study “The changing aftermarket game” predicts a constant market share of some 20% of the total aftersales market. The fastest growth will be seen in China (8.1% p.a.) whereas Europe (1.5%) and North America (1.6%) will experience only very modest growth. In the segment of repairs and spare parts, wearable parts will be the strongest pillar with 53% of the total sales. Accident repairs will be wort 12%, diagnosis 9% and services 6%, the study says.
Sounds boring? Not at all, says Andreas Cornet, head of McKinsey’s automotive consulting business. Because “the aftersales market will be transformed completely.” The reason: “New business models like direct sales of spare parts over the internet will reshape the existing division of roles and labor between OEMs, tier one suppliers, distributors and workshops.” In particular, digital, driving data based services such as software updates for the vehicle as well as real-time theft protection will see strong growth, Cornet predicts. Such services will reach a market share of 20% of the total market, he adds. Up to 25 % of the parts will be sold online in 2030.
Likewise, the transition to electric mobility will leave its traces in the aftersales business. Low-wear parts such as electric powertrains will reduce the demand for spare parts; the growing acceptance of safe, self-driving vehicles will have the same effect. 80% of the automotive suppliers and industry representatives questioned stated in the survey that they were ill-prepared for these changes. “Many suppliers are still lagging behind in the process of digitization,” warns Cornet. 42% of suppliers expect the profitability of their aftersales business to deteriorate over the next ten years, while only 29% expect the margin to improve.
The study identifies six trends that suppliers should face:
- Consolidation will continue in Europe, especially among distributors and wholesalers. A landscape like in North America, where the four leading wholesalers represent 40% of the market, should not be unrealistic.
- Car manufacturers are expanding into the aftersales business with their attractive returns – also with the goal to offer the customer an experience “from a single source”.
- Like other products, car parts will be increasingly sold online. Only sensitive or complex components such as airbags or windshields will still be distributed by manufacturers or independent workshops.
- The value of driving data will climb rapidly – they can help resellers to better understand customers and their wishes and offer services (for example, in the event of a breakdown) more quickly or even warn them before an important component in the car fails.
- New competitors from digital industries, for example from fleet management or insurance companies, are trying to grab a part of the business.
- Digitization increases the price transparency. Up to 30% of customers in Europe are informed about favorable workshops in advance.
“Suppliers must now act to secure their share of the Aftersales business,” says Dirk Breitschwerdt, a senior partner in the Munich office of McKinsey and co-author of the study. “They should implement a strategy that builds on their own strengths – whether customer loyalty, superior network or technology leadership.” Then it will be necessary to enter the market quickly with new offers to gain early experiences. Breitschwerdt: “This also includes cooperation with digital technology start-ups.”