The meeting place and business platform for senior automotive executives

Autumn 2018

Posts by tag: after sales industry

After Sales Automotive Industry Europe Middle East

 

The GCC After Sales Market is estimated around US$ 10 billion. Annual Growth expected at 13.9% to reach US$ 17 billion by 2020.

The Gulf market for auto components is gearing up for double digit growth till 2020and demand for spare parts in Saudi Arabia expected to grow at 7.7% yearly till 2018.

 

GCC after sales market value

 

  • The Emirate of Dubai could have 2.2 million registered vehicles by 2020 (The number of vehicles in Dubai doubled over the past eight years)
  • Dubai has more cars per person than London or New York (540 cars for every 1,000 people versus 213 in London and 305 in New York)

When we look at the Aftermarket operating model and at the main players on the value chain, Aftermarket Channel Structure in the GCC is simpler compared to Europe.

 

Europe GCC market comparison

 

There are some key drivers and product segment that have a different impact on the After sales industry depending on the trends of the specific Markets (Mature markets vs developing markets).

 

Automotive After sales market volume drivers

 

1. Vehicle sales

Europe MENA light vehicle sales by country

 

New cars sale growth in the MENA Region is expected to grow at a 7% CAGR until 2019. European market is marginally increasing.

Saudi Arabia, UAE and Egypt are the main contributors to this sales increase.

 

2. Car Park

Europe MENA light vehicle car park

 

As far as Car Park a moderate growth is expected in Europe (~2% p.a.), whilst 2 times higher the growth in less mature countries (4– 5%) with Saudi Arabia in the Highest part of the range.

 

3. Average Age

Average car age

 

At the same time the average age of the car park is lower in the GCC if compared to some of the mature markets.

In Europe increasing car age is the result of better product quality and long-term durability (rust protection). Ageing car park usually favors independent aftersales channel.

 

4. Mileage

Average mileage per vehicle

 

Mileage is another important driver that has a direct impact on the Aftersales Market and on which Europe and GCC present different patterns.

Mileage is in fact flat to declining in Europe, increasing in GGC markets.

In Europe decreasing mileage reduces wear of components and reduces the need for maintenance and service. Over the last five years, wear & tear parts like brakes and wiper blades experienced steady declines in replacement rates.

In UAE cars require 5000 Km Service Intervals (usually every 10000 /15000 km in Europe) in order not to compromise the warranty

UAE is the largest importers of used cars and has become a regional hub for vehicle parts and components in the entire MENA region, that’s why average mileage is usually higher if compared to Europe.

The 4 above stated key volumes drives have to be analyzed together some structural and consolidated trends in the most mature markets and that somehow will have an impact on the GCC After sales market as well.

a) Share of independent garages & DIY as well as repair and maintenance cost increase with increasing vehicle age.

 

Vehicle maintenance and repair loyalty

 

b) Whilst Loyalty curves are fairly similar, cost profiles usually differ between maintenance and repair segment. The example in the picture refers to Germany.

 

Maintenance loyalty by vehicle age

 

c) OEMs aggressively target the segment of 3-8 year old vehicles to grow the aftersales business. The main levers that they use are basically:

 

  • Increase network capillarity (number of dealers, service points)
  • Increase customer loyalty (warranty time, service contracts, no goodwill if the service is not done at a OE dealership, telematics solutions and mobility service)
  • Secure authorized dealer business (Bonus system  for OE parts, second brand/ remanufactured parts at lower price point to target older vehicles)
  • Target the IAM (Independent aftermarket) through setting up concepts to serve independent repair shops with OEM/OES parts or multi OEM platform to broaden presence in the IAM and share logistic cost)

 

d) Role of Intermediaries increasing influence over the aftersales work: Insurance Companies, leasing / rental Companies, OEM financial services, Routing portals. The following picture summarizes the role of these Intermediary players and their degree of impact on the IAM.

 

Role of intermediaries auto after sales

 

e) The connected car is becoming a reality allowing for new aftersales services that will enable the OEM to tie the customer closer to the franchise network.


The scheme below gives an overview of the connected car aftersales services in three main areas: Proactive service scheduling, E Call, Remote diagnostics / repair.

 

Connected Car

 

As far as the Connected Car major OEMs are following a range of partnership approaches whilst Open-Source OS trend is growing.

 

Vehicle operating systems

 

f) E Commerce is already playing an important role in the European market and will further develop in the GCC.  Currently in the most mature markets E Commerce is predominantly gaining share in accessories, service parts and tires. 

The following picture shows the typical product offering for online aftermarket sites:

 

Automotive product offering

 

In light of the above stated considerations and key trends, the Automotive Aftersales industry in the GCC is developing closer to more mature market.

 

GCC Europe key elements

An article by:

 

 Eugenio Berenga    Alessandro Missaglia
Eugenio Berenga
Managing Director
AlixPartners
Dubai
  Alessandro Missaglia
Director
AlixPartners
Dubai