McKinsey analysis: The automotive aftermarket will change in the next decade!

According to the McKinsey research report, the automotive aftermarket will undergo a major change in 2030. The United States, Germany, Brazil and China will become the recommended locations for automotive software, and 58% of owners will follow the advice.

China's automotive aftermarket volume will grow faster than new car sales, with a compound growth rate of 8% by 2030 and only 4%. The global automotive aftermarket currently has a market volume of 800 billion euros, which is growing at a rate of 3 points per year and will reach 1.2 trillion euros by 2030.

Fundamental changes in the coming years

McKinsey predicts that in the next few years, digital and big data analysis will become a new value growth point for the automotive industry. A networked car produces 25G of data per hour, including the collection of remote data and driver driving behavior. Combined with the right analytical capabilities, these data will become the core competitiveness of the future. With the combination of big data and advanced analytics, the automotive aftermarket is welcoming opportunities to change the rules of the game, which is expected to increase revenue or improve operational efficiency. Big data analytics helps the market understand customer behavior, preferences and needs. Help post-marketers adjust products and services to increase revenue and customer satisfaction.

Specialized fleet management will become increasingly important. At present, shared cars are becoming more and more popular. By 2030, nearly one-tenth of the vehicles are shared cars. In addition, fleet-type companies like Uber are entering the market. This means that the share of private cars is getting lower and lower, and the management of specialized fleets is becoming more and more important. The frequency of use of the fleet is higher, and the subsequent maintenance needs are higher, which is a new opportunity for the aftermarket players.

Emerging markets and service awareness will be further enhanced. Take China as an example. At present, China's car ownership accounts for about 60% of Europe's. It is expected to catch up with Europe by 2025. As the age of the car increases, China's position in the global aftermarket is becoming more and more important. In addition, Chinese customers value customer service and are willing to pay for the service premium, so the service to satisfy the customer experience will continue to strengthen.

The rise of a new generation of cars has spurred the automotive industry to rely more on software development and update capabilities. The development of autonomous driving will reduce accidents and maintenance, and network-connected vehicles can make maintenance forecasts. With the deepening of electrification, more and more new components (batteries, motors, etc.) will emerge, and these components have technical requirements for players in the aftermarket. Software will become the core of the car. Traditional, mechanical maintenance stores will be difficult to stand in in the post-market ecosystem. More than 50% of experts believe that after-market services are more important than accessories, and 40% of experts believe that services are as important as accessories. For post-market players who are beginning to build software capabilities, there is huge potential in two specific areas.

For maintenance stores, greater software capabilities create the potential for remote replacement modules or "virtual guidance" services, both of which reduce the time and cost of customer-to-store service. These software-based features and services can drive brand differentiation, generate revenue, reduce costs, and help increase the value of software in the aftermarket.

New players will enter the market, and e-commerce players like Google, Amazon, and eBay will gain important market share and profits in the automotive aftermarket, and industry consolidation will accelerate. These changes are mainly caused by the reshaping of the value chain, the transformation of end-user acquisition methods and the transfer of profit sources.

Under the influence of electric vehicles, networked cars, e-commerce and other trends, by 2030, an estimated 100 billion euros, or 30%-40% of the entire post-market, will be redistributed along the value chain. For each stakeholder, this shift is two-way, and the new distribution of benefits depends on how stakeholders position themselves in the new post-market ecosystem.

In order to protect market share and sales, original equipment manufacturers need more customer-centric and enhanced ways to reach customers. At the same time, multi-channel strategies will effectively protect digital players. It is also necessary to shift some of the focus to emerging markets.

Suppliers need to explore more sales, branding and pricing strategies. Suppliers can develop additional sales channels to reach out to end customers. Suppliers should also actively respond to competitive pressures and integration trends by partnering with powerful distributors or e-commerce or following multi-brand strategies.

Parts distributors need to strengthen their digital service capabilities. Embracing digital and system analysis is important to ensure that they are not eliminated by new players with digital genes. For distributors, focusing on digital and system analysis, they can optimize their online platforms and leverage big data analytics to build customer data platforms. Distributors are also suitable for choosing the right growth strategy: small players can occupy a profitable market segment, and large players need to focus on organic growth and inorganic growth at the same time. After reaching a certain scale, they can form higher industry barriers.

Stores need to improve their professionalism to cope with increasingly complex markets. Increasing investment in recruitment, training and equipment will help stores face the complexity of next-generation cars. In the face of customers, stores should establish a digital process, while considering the physical transformation, to establish a new customer service thinking. Finally, stores should explore their own positioning and help them improve their competitiveness.

Automotive aftermarket trend forecast

The automotive aftermarket will enter a chaotic period in the next few years. There is still no definitive point of view, whether the entire industry will be subverted, just like the paper media, mobile phones, cameras and other industries.

According to McKinsey's calculations, the global automotive aftermarket in 2017 is about 800 billion euros, of which the North American market is about 270 billion euros, Europe is about 240 billion euros, and the Chinese market is about 90 billion euros. It is expected that the entire automotive aftermarket will grow at a rate of around 3% per year, reaching a scale of 1,200 billion euros by 2030.

However, some subversive trends will have an opposite effect on the development of the market and the distribution of value among players. As the mileage of shared cars increases every year, it will become a positive factor in improving the annual maintenance costs of vehicles. On the other hand, there are some limiting factors. The maintenance cost of electric vehicles is very low. The maintenance cost of self-driving cars in collision is expected to be reduced by 90% by 2030. Due to the development of electric vehicles and self-driving cars, McKinsey expects the after-sales value of each car to decline.

The difference in the after-sales market growth in different regions reflects the market maturity to a large extent. Specifically, the growth rate of emerging markets will exceed that of mature markets. The rapid growth of China's car ownership will boost Asia's share of the global automotive aftermarket by as much as more than one-third (430 billion euros) in 2030. Between services and accessories, as the average age of Chinese cars grows, the service market will show stronger growth.

In mature markets, the market's growth rate has been only 1%-2% in the past few years, and this steady growth is expected to continue. By 2030, the post-market revenues of the North American and European markets will reach 340 billion euros and 300 billion euros respectively. As the average age of these two markets is also growing, the post-market players will also have to address the needs of the old models.

At present, China's car ownership accounts for about 60% of Europe, and it is expected to catch up with Europe by 2025. As the age of the car increases, China's position in the global aftermarket is becoming more and more important. In addition, Chinese customers value customer service and are willing to pay for service premiums, so post-market players need to consider two factors of customer experience: First, customized services. China's geographical region is complex, customer needs vary from region to region, and a one-size-fits-all approach to service may not work. Therefore, customers need to develop quality services. Including customized road rescue services, on-site services and car wash services. The second is to retain customers with differentiated services, such as membership systems.