Auto Parts Market -“Brilliance” in the Automotive Aftermarket

By: Ankur Rishi

Key takeaways for achieving brilliance in the automotive aftermarket

1. The shift to electric vehicles poses challenges for the automotive aftermarket, reducing demand for traditional engine parts and accessories.
2. The growth of shared mobility services presents opportunities and challenges for the aftermarket industry, with electrified fleets and autonomous features potentially affecting demand for aftermarket parts.
3. Digital transformation is reshaping the aftermarket sector, with major players dominating the market while niche players have the potential to disrupt by enhancing customer experiences and introducing innovative features.
4. To thrive amidst these changes, aftermarket businesses must adapt by optimizing operations, refining forecasting methods, and offering specialized products and services tailored to evolving consumer needs and market trends.

The global auto parts aftermarket is in the throes of a thorough-going transformation, and this is significant since the sector accounts for up to four-fifths of the auto parts manufacturers margins! The fast-paced transition to electrified transportation, vehicle sharing and fractional ownership services, as well as the inevitable adoption of digital technologies, represent the hurricane-strength winds shaping the landscape of the aftersales market. On the face of it, all these are positive and decisive trends that should lead humanity toward net-zero pathways by the end of the decade. However, amid most market-shaping shifts some existing product lines might find themselves overwhelmed and rendered nearly obsolete (“creative destruction”). The case of the auto parts aftermarket is hardly anything different. The shifting sands could bode well for the after-sales sector overall, but there could be a few bumpy stretches ahead that might put the perseverance and skills of auto parts manufacturers to the test. For instance, the transition to electric vehicles is expected to reduce the consumption of various internal combustion engine parts, starters and alternators, and various vehicle fluids (e.g., engine oil, brake fluid). Personalizing autonomous vehicles is quite a challenge. So, the widespread adoption of driverless, crash-avoiding fleets might dwindle demand for unique vehicle accessories. So, auto parts manufacturers must brace themselves to ride out the rough with the smooth and turn those few hassles around the corner into opportunities to grow their business.

Electrification: Navigating Potential Disruptions in the Automotive Aftermarket

The shift to electrification in the automotive space is arguably a positive development since electric vehicles are known to discharge only half as much greenhouse emissions as gasoline cars. However, even positive advancements can bring about disruptions in existing markets. With the advent of electric vehicles, the traditional engine is replaced by an electric motor, fundamentally altering the landscape of engine maintenance.

The electrification revolution extends the lifespan of brake pads by 6x to 12x compared to fossil fuel vehicles, leading to decreased demand for such automotive components. While this shift is beneficial for the environment, it poses challenges for the automotive aftermarket, impacting businesses involved in component sourcing forecast and planning, technology testing, feasibility, and launch assistance, and competitive analysis.

To navigate these disruptions effectively, stakeholders must engage in comprehensive market assessment and regional opportunity assessment to identify acquisition and merger candidates and strategize their M&A buy-side commercial diligence and M&A sell-side market studies. By embracing innovation and adapting to the changing automotive landscape, businesses can position themselves for success amidst the electrification revolution.

Shared Mobility Growth: Adapting to Challenges

The automotive aftermarket is experiencing an unprecedented surge due to the rapid expansion of shared mobility services, where fleet operators provide vehicles for rent, making transportation more accessible and cost-effective. By the decade’s end, revenue from shared mobility is forecasted to reach a staggering $1 trillion! This growth is propelled by various options such as mass transit, private shuttles, buses, taxis, auto-rickshaws, car, and bike-sharing, all increasingly transitioning to electrified fleets with self-driving capabilities.

While these advancements promise to reduce carbon emissions per mile and promote sustainability, they also pose challenges for the aftermarket automotive industry. The adoption of electrification and intelligent driverless features in shared mobility services is expected to decrease the demand for internal-combustion engine accessories and other traditional aftermarket parts. This shift may impact vehicle owners and OEMs (Original Equipment Manufacturers) alike, necessitating adaptation and innovation in the production and distribution of performance parts, collision parts, recycled parts, and even vintage parts. As the automotive industry embraces these transformative changes, the aftermarket sector must evolve to meet the evolving needs of consumers and the market.

Digitization: Responding to Increased Competition and Pricing Pressures in the Automotive Aftermarket

Digital enablement is rapidly permeating every facet of the automotive value chain, including the aftermarket and service sectors. While the digital distribution of aftermarket auto parts is currently advancing at a steady pace, major players like eBay Motors (with $411bn in net sales) dominate the market, leaving smaller niche players such as carparts.com ($559m), advanceautoparts.com ($400m), carid.com ($350m), discounttire.com ($210m), and tirerack.com ($200m) trailing behind. However, emerging players in specialized segments have the potential to disrupt the market by continually improving cost structures, enhancing customer experiences, and introducing innovative product features. This trend holds true even for the automotive IoT market, currently dominated by digital giants.

As digital transformation continues to reshape the automotive landscape, the aftermarket sector must adapt to meet the evolving needs of consumers. This includes catering to the demand for wear parts, providing comprehensive aftermarket research & analysis, refining production forecasting methods, conducting thorough price and cost analysis, and optimizing supply chain operations. Additionally, with the rise of digital technologies, automotive enthusiasts, including vintage vehicle owners and vintage car connoisseurs, seek specialized products and services from reputable aftermarket automotive shops like BBI Autosport. Collaborating with designers and engineers, these shops offer high-quality LED headlights and other OEM car parts tailored to specific Porsche models and other vehicles.

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Conclusion

In conclusion, the automotive aftermarket is undergoing a remarkable transformation driven by electrification, shared mobility growth, and digitization that is helping in achieving brilliance in the automotive aftermarket. While these trends offer promising opportunities for sustainability and innovation, they also present challenges for aftermarket businesses and stakeholders. The electrification revolution, with its extended lifespan for brake pads and reduced demand for traditional aftermarket parts, requires adaptation from manufacturers and OEMs alike. Simultaneously, the surge in shared mobility services necessitates adjustments in the production and distribution of aftermarket parts to meet evolving consumer needs. Additionally, digitization is reshaping the aftermarket landscape, creating opportunities for emerging players to disrupt the market and innovate in providing performance, collision, recycled, and vintage parts. As vehicle owners, OEMs, and aftermarket businesses navigate these changes, collaboration and innovation are key to thriving in the dynamic automotive industry landscape.

Author’s Details

Ankur Rishi

Vice President, Sourcing and Procurement Intelligence

With more than 12 years of advisory experience, Ankur manages platform content and services within the sourcing and procurement vertical. Over the years, Ankur has provided consulting services to category leaders from chemicals, energy, and packaging industry, on varied topics, such as category strategy, spend analysis, commodity pricing, and clean-sheet analysis.