Development of Integrated Mobility and Ownership Management Solutions will be the key areas of focus for OEMs to achieve success in the automotive aftermarket
The global aftermarket replacement parts revenue grew by approximately 4.7% in 2016. Aftermarket revenues of about USD 100 billion in North America and about USD 97 billion in Europe (2016) will provide OEMs enough impetus to target and grow in this sector. The OEM aftersales model is moving from a scheduled warranty and authorized service networks focused model to a model with extended periods of warranty which would include telematics and in-vehicle systems. OEMs such as BMW, Michelin, and Goodyear are focused on direct eStore operations, while others such as PSA strengthened initiatives around eRetailing in their long-term plans.
OEMs are looking to increase customer engagement and convenience, attain higher pricing competitiveness, and offer a more efficient delivery system in the aftermarket. To achieve this and also incrementally increase their revenues, the OES channel has adopted a two-pronged approach in the aftersales segment.
OESs can prevent customer base erosions by providing extended warranties and subscription services. They could also exploit advancements in technology that facilitate preventive maintenance and in-vehicle diagnostics, value-added services and service innovation through digitization, faster service options, and demographic focused services.
Frost & Sullivan has identified the 6 pillars of aftersales that would be pivotal in the evolution of OES Aftersales 5.0 in this sector by OEMs.
Aftersales 5.0 Pillars
eCommerce includes Direct OEM eStores, marketplaces such as eBay, and accredited pure play eRetailers used by OEM dealers. BMW has a direct eStore in Germany Audi. BMW, Mercedes Benz, Toyota, VW and GM sell through Amazon.
According to F&S estimates, online sales in the automotive aftermarket are expected to generate revenue of $24.5 billion globally in 2017 and cross $50 billion in 2022. eRetail ensures multiple customer contact points, better utilization of physical space, and higher penetration for the DIFM segment. This channel has already witnessed massive disruption particularly from traditionally non-auto participants such as Amazon.
Independent Aftermarket Parts
Vehicles older than 2–3 years are taken to the independent market (IAM) for servicing due to competitive parts and service pricing. This channel includes IAM Brands (OEMs offer their vehicle parts to IAM distributors and retailers); Remanufactured Parts: Original OE Brand (brands promoted as original OE spares); and Promotions: OEMs also provide rebates to customers to remain competitive.
Penetration in this channel will help OEMs gain revenue through their parts sales even if customer switches to IAM from authorized dealers.
New Service Models
OEMs can offer express service option offers that directly compete with IAM. OEMs will have to invest in infrastructure investment and efficient technicians to gain a foothold in this channel. Subscription-based servicing will be an important tool to extend customer engagement beyond warranty expiration, while opportunities from business models such as ‘park and fly’ will lead to tapping into high value customer segment.
With the proliferation of the Internet, OEMs can interact more frequently with customers, helping them promote, gather accurate feedback, educate, and award loyalty.
Voice assistants, such as Amazon’s Alexa and Apple’s Siri, can create an IOT platform for influencing customer behavior and an almost 24X7 access to customers.
OEMs will target percentage of revenues from connected services, and other in-vehicle packages from ecosystem partners, including on-board diagnostics, automatic collision alert, dongles, and 3D printing. Data monetization will largely drive how connected services are offered to customers.
OEMs, suppliers, and venture capital companies will financially back service aggregation startups, particularly in emerging markets such as India and China. OEMs would look to cater more to DIFM customers and reduce customer acquisition costs. In future, there will be an Uberization of vehicle services which will allow customers to locate service shops, get real-time quotes, and book and pay online.
For example: Autobutler and eBay, Whocanfixmycar and UK OEMs, Openbay and Autozone
Mobility as a Service
The future is set to follow the Mobility as a Service model, in other words, an automotive plug and play program. Renting and sharing models, eHailing, and fractional ownership may lead to a decrease in overall car ownership. Fleet ownership will replace individual car ownership. Smart parking, integrated transportation modes, packaging with connected services, and personalized content will improve driver experience, improve safety but may increase maintenance costs.
At the same time, OEMs will form private labels and value brands for the aftermarket to increase profitability through the OES or dealership channel. The success of OEMs in the aftermarket division will depend on whether they can cater to multi-brand parts and services and develop the expertise and human resources required to address the skills shortages arising out of advancements in vehicle functionality.
Frost & Sullivan is currently working on a research study which involves Comparative Benchmarking of Adoption of New Parts & Service Business Models and Bay Technology.