OEMs and the Independent Aftermarket (IAM) Competing to Gain Commercial Vehicles (CV) Aftermarket Share

Published: 29 May 2017

By Avijit Ghosh and Veerender Kaul

CV parc in the European Union (EU) was estimated at 38.9 million in 2016 and is projected to grow at a compound annual growth rate (CAGR) of 1.9% to reach 44.2 million by 2023. Eastern European countries, Germany, and the United Kingdom are expected to witness the highest growth in CV parc during the forecast period, which means greater aftermarket demand. There will be an increase in vehicle parc, because of increased CV sales in these countries, due to a growth in the EU economy post Brexit recovery and Russia's recovery to support demand in Eastern Europe.

The percentage share of 4–7-year-old vehicles—in prime repair age—is forecast to grow from 17% in 2016 to 21% in 2025, triggering an increase in aftermarket demand. This will intensify the competition between IAM and original equipment services (OES) for capturing a greater share of this market.

Exhibit 1 depicts CV parc by age group in Europe for the period 2016–2025.

CV Aftermarket: CV Parc by Age Group, Europe, 2016–2025

OEMs Competing to Improve their Aftersales Share—Five Strategic Pillars

OES Expansion

To take away share from the IAM, OEMs will continue to expand and sharpen all-makes programs and develop economy line products for post-warranty trucks. There are examples of existing programs from DAF and IVECO, which significantly increase customer engagement and convenience.

DAF (with the truck and trailer parts (TRP) program) was the first OEM to roll out an All-makes Parts and Services program. In 2016, the TRP program offered more than 72,000 items under 17 product groups, which is one of the broadest coverages of universal parts and accessories for CVs. This program is available at all 1,000 DAF dealer locations in Europe, where services are also offered.

IVECO Parts and Services partnered with Mageti-Marelli aftermarket in 2013 to offer OEM-quality parts for all light commercial vehicle (LCV) makes that are serviced and installed at IVECO-authorized dealers across Europe. Two other key aftermarket programs from IVECO include:

  • Value Line (offered by Magneti-Marelli)—Competitively priced routine maintenance parts for old IVECO trucks (for S2000 and earlier models); higher demand for economy line parts, especially in price sensitive markets such as Eastern Europe and Russia
  • Bullder—All-makes program for trailers and semi-trailers

Other OEMs are expected to formally launch an all-makes or economy line programs in the near future.

Telematics

OEMs will integrate remote diagnostics/prognostics into fleet management solutions, creating more visibility and business for dealer channels, enhancing OES channel loyalty.

Connected trucks with in-vehicle ordering capabilities and a visionary selling platform for parts distributors are a key value addition.

Total cost of Ownership (TCO) Optimization

OEMs will innovatively use Big Data (based on increased connectivity in trucks) to optimize the TCO, aiming to bring more than 2% savings. An example would be the delivery of prognostics features through effective Big Data utilization, offered at $7–15/truck/month, with significant downtime reduction benefits to fleets.

Warranty and Quality

OEMs will use predictive data analytics to achieve 5–15% reduction in warranty costs and quality-related issues, increasing parts profitability.

Technology

To adhere to stringent Euro6&7 regulations, OEMs will focus on engine downsizing and implement truck weight reduction strategies. Light-weighting strategies will lead to significant savings in annual fuel costs. The use of advanced multi-materials is expected to increase.

Other key evolving aftermarket business models include:

  • New logistics models, such as mobile-based freight brokerage (Uber for trucks), which is expected to see growth in adoption rates from offering of free mobile applications with free value adds such as transport management system solutions (TMS) solutions
  • Next wave of eCommerce in CV aftermarket, particularly for LCVs—selling directly to installers and garages, with eRetailing of parts increasing price competitiveness; Yakarouler in France, Oponeo in Poland, and Omega in Russia as key e-retailers

Telematics, prognostics, and all-makes programs are expected to be the top trends that OEMs will focus on for making OES channels fiercely competitive against IAM.

Detailed analysis of the CV aftermarket in Europe is available in Frost & Sullivan’s upcoming study MCDE: Strategic Overview of the Commercial Vehicles Aftermarket in Europe, which is expected to be available in July 2017 on frost.com.

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