The Aftermarket in the Automotive Industry

The Aftermarket in the Automotive Industry How to Optimize Aftermarket Performance in Established and Emerging Markets Contents 1 Executive Summary 4 2 The Aftermarket in the Automotive Industry 6 3 Characteristics of the Aftermarket 8 4 Investments Into Key Initiatives in the Aftermarket 13 5 Performance in the Aftermarket 16 6 Management Approach for Winning the Aftermarket 17 7 Conclusions 34 The Aftermarket in the Automotive Industry 3 1 Executive Summary The automotive industry is analysis. The main aim of this experiencing significant changes in analysis was to develop a frameset global market volumes, with flat sales that allows automotive companies to in Western Europe and increasing best prepare for challenges in the importance of the emerging markets global aftermarket business. The of Eastern Europe, Russia, China and analysis is based on an in-depth India. This growing importance survey in combination with additional includes not only new car sales, but interviews with over 150 aftermarket also the aftermarket. Given the fact managers of the world’s leading that the aftermarket business creates automotive companies. attractive revenues and margins, aftermarket activities are on the Based on the results of this study, the management agenda in both following key conclusions can be established and emerging markets. drawn for the aftermarket: Winning the aftermarket is far from easy, since it entails significant 1.The Western European complexity, a large number of aftermarket is a rather mature maintenance and parts activities, and market with flat aftermarket crucial supply chains. volumes. The competitive intensity remains at a high level and will be To identify key patterns about how to further accelerated by new best operate in the established as well regulations and competitors. as in these fairly new markets, 2.Improvement of marketing and Capgemini Consulting, together with sales activities is the main the University of St. Gallen (ITEM- trigger to remain competitive in HSG), conducted an aftermarket Western Europe. Because of the flat nature of the Western European aftermarket, marketing Exhibit 1: Global Revenues and Headquarters of Participants and sales activities must concentrate on keeping the Global revenue distribution of participating companies Headquarters of participating companies customer loyal to dealers and 35% Asia Pacific repair shops across the car 31% 9% lifecycle. 30% 27% America 3.Emerging markets offer 25% 13% 22% Germany attractive growth rates with 20% 47% relatively moderate competitive 15% 14% intensity in Eastern Europe, Russia and India but with high 10% competitive intensity in China. 6% 5% Rest of Europe In the future, the competitive 0% 31% intensity is expected to increase to <100m 100m- 501m- 1bn-5bn >5bn a similar level as in Western 500m 1bn Europe. To benefit from the attractive growth rates requires Capgemini Consulting immediate managerial action, before the growing competition makes it more difficult to succeed in the aftermarket. Still, low- performing companies in particular need to focus on selected markets that best fit their strategy and their current capabilities. 4 4.Each emerging market (Eastern different phases to optimize the Europe, Russia, China and India) aftermarket performance in Western is specific in terms of the Europe and the emerging markets. competitive environment and This model helps companies to better customer needs. The different position themselves and develop characteristics of the markets strategic options to boost their require a localization of the aftermarket performance in the aftermarket. Companies trying to respective markets to the point where exploit the aftermarket with a they can become a global aftermarket standardized global approach will champion. To accomplish this, the most likely fail. Finding an model uses three different levels: the individual approach becomes exploration, exploitation and finally essential. the aftermarket champion phase I Surprisingly, most companies are leading into the global aftermarket not prepared to exploit the champion phase.