How Automotive Aftermarket is Embracing Technology to Meet Customer Expectations

Blog 4

The automotive aftermarket is affected considerably by increasing customer expectations and evolving technologies. These changes have impacted how automotive suppliers and auto aftermarket companies are conducting business and how they aim to deliver value.

The emerging markets will increase pressure on automotive aftermarket industry to act sooner. There is increased competitive pressure from players who deliver at different levels of aftermarket value chain and those driven by tech-based business models.

The aftermarket of the automotive industry includes services and parts businesses. The service business that includes the maintenance and support generates 45% of total revenue, while retail and wholesale of vehicle parts include the rest. These two aftermarket businesses entail around 20% of total automotive revenues with more profitability ratio than other subsectors.

vehicle parts identification platform

The market is also divided into

  • Parts manufacturers such as OEMs and automotive suppliers that produce parts and offer services
  • Parts distributors who constitute independent distributors and retailers.
  • Workshops, including OEM networks, system chains, and garages
  • Intermediaries including auto clubs, leasing companies, and portals

The industry as a whole is affected by major disruptions, owing to digitization and changing consumer preferences. The use of smartphones has enabled new and advanced mobility services, including taxicab services, information search offerings, and online purchases. In recent years, one can witness the consolidation of parts distributors and trends and new players entering the automotive market. The legacy companies are now forced to tweak their business models to stay relevant to consumer preferences, while stricter regulations on emissions have led to the rise of electric vehicles.

Some of the present and future trends include:

  • Digital channels influencing customers’ research and purchasing affinity in emerging markets. Customers rely on online reviews as a way to boost their purchasing decisions.
  • Suppliers, OEMs, distributors, and the like will bring their services online while launching new platforms.
  • The e-commerce share of parts sales is expected to rise by 20% in a couple of decades but logistically demanding parts including airbags that lack clear logistics and transport plan will continue to be sold through traditional wholesale channels.
  • Aftermarket players boosting their value via digital channels as enhanced connectivity and collaboration will help them reach their end customers better.
  • Since the automotive industry is evolving as a hub of software and applications, tech giants will have a huge role to play in the aftermarket. New software entrants could compete with parts manufacturers and distributors to secure profits.
  • OEMs and online providers can drive their influence on end customers, shrinking their returns in turn to guarantee the complete interest of their clients.
  • The short value chain means that some players will expect margins to continue to be stable or even get boosted, owing to the fact that distributors will be divided among different customers, manufacturers, and shops.

One can expect parts distributors and workshops to drive their individual market presence with consolidation and collaboration while intermediaries will strive to connect customers and services with new profit channels and opportunities. Software enabled solutions are aligned to new expectation of agility and personalization. Aftermarket may tend to be a follower but embracing the smarter tech based solutions is the only way to survive and stay relevant.

Anamaya Dwivedi

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