The European Automotive Aftermarket Returns to Growth
July 14, 2014 - Berlin, Germany
On the surface, little has changed in the European automotive aftermarket since 2012, when The Boston Consulting Group (BCG) first reported on the dynamics of the region's car-repair business. Several trends indicate that competition in the coming years will remain intense, according to a new report by BCG. The report, titled Returning to Growth: A Look at the European Automotive Aftermarket, is being released today.
Working in collaboration with the European Automobile Manufacturers' Association (ACEA), BCG surveyed executives of European automotive manufacturers and industry experts from across the aftermarket spectrum and updated the firm's comprehensive automotive-aftermarket model to reflect developments since BCG's original 2012 study. The research identified key trends that are already prompting repair providers to take action:
- The increasing complexity of cars is driving the aftermarket repair business toward greater scale and consolidation.
- Nontraditional players -- such as leasing companies, insurers, and fleet managers -- are reshaping the marketplace by steering business to their selected repair networks.
- Independent and authorized repair shops are more aggressively pursuing market share by poaching one another's customers.
- Connected vehicles are penetrating the market at an increasing rate. As the proportion of connected cars on the road grows, this trend could influence the dynamics of the after-sales service market.
"We see signs of intensifying but even competition between and within the industry's two main channels -- independent and authorized repair shops," says Nikolaus Lang, a BCG senior partner and a coauthor of the report. "In addition, telematics could strongly influence the after-sales service industry, depending on how quickly and deeply it penetrates the market."
Nontraditional Players Are Transforming the Repair Business
Nontraditional players -- including insurers, fleet operators, and leasing companies -- have entered the market and altered the competitive dynamics. Because vehicle repair and maintenance are among the highest expenses of these nontraditional players, they are moving more and more toward special-condition contracts or partnerships with networks of selected repair shops. Those contracts are not only controlling costs for nontraditional players but also increasing the business volume of their repair-shop partners.
In recent years, such partners have signed up a significant number of new customers. In Germany, for instance, partner networks established by nontraditional players captured 28 percent of accident repairs in 2012, an increase of 18 percentage points since 2003. "The trend among nontraditional players to form partner networks will continue to reshape the competitive landscape in the European aftermarket in the coming years," says Benjamin Frowein, a BCG principal and a coauthor of the report.
Telematics Is an Emerging Trend
There is clear consensus among the executives and experts interviewed for the report that connected vehicles are penetrating the market for both new and older cars at an increasing rate. But opinions vary widely on the depth and speed of penetration and on the prospects for after-sales, service-oriented connectivity. Some executives think that 15 percent of all cars on the road will be equipped with telematics by 2018. Others expect telematics penetration to grow to 35 percent of all cars on the road by then. The great variance in expert opinion suggests that the industry is highly uncertain about the speed of change, especially for retrofits.
The most common uses of telematics technology will be to perform interactive maintenance and remotely diagnose malfunctions. In the case of interactive maintenance, a telematics solution will allow continuous onboard and remote diagnostics of a car's operation. On the basis of driving performance and the car's operational state, the telematics solution will be able to determine an optimal window for maintenance, connect the vehicle owner and the maintenance provider, set up a maintenance appointment, and, if necessary, order the required parts. In this fashion, the telematics solution promises to optimize the service process, reduce costs, and enhance the customer experience.
To download a copy of the report, please go to www.bcgperspectives.com.
To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or firstname.lastname@example.org.
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