“There are three current trends that will set the agenda over the next twelve to twenty four months and contribute significantly to the market size and dynamic over the next five years.
The first of these is the fierce price competition at all levels that many in the industry are currently engaged in; this is driving down margins and profitability. The need to compete is creating the second trend with many companies turning to the introduction of lower cost parts and even the introduction of recognised brands sourced via low cost countries, both of these will contribute to destabilising and devaluing the market. The final trend is the unrelenting expansion within an already over subscribed market with larger groups seeking new sites and determined to keep up with noisy neighbours.
The market size is unlikely to grow significantly over the next five years and the current number of outlets at every level is unsustainable; it is inevitable that their will be a number of casualties and these will not be restricted to small independent businesses.
The impact of the internet will also have a profound impact, once the issue of first time accurate application of parts is achieved this will quickly take off and take market share.
In the nineties one of the big buzzwords was ‘disintermediation’ whereby supply chains were shortened and links in the chain removed. Twenty years on the technology exists and the need to compete will mean fewer larger distributors and a move a way from delivering the parts before the garage has had a chance to put the phone down. Coupled with this will be new product ranges and technologies and a resurgence in Vehicle Manufacturer presence in the market.â€
Peter Cox
General Manager, Motaquip
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New car sales staying low. Average age of the parc increasing. Owners of older cars tend to favour local independent garages. Despite the best efforts of the vehicle manufacturers to make their cars difficult for independents to repair, it will be hard for dealers to compete from high-cost premises designed for new car sales. Their share of the aftermarket will continue to decline despite rearguard actions with extended warranties and dealer service plans.
The UK car parc, already the world’s most diverse, will not get any simpler. The long-predicted consolidation of world car manufacturers shows no signs of happening soon with at least 6 Chinese VMs entering our new car market.
High motor insurance premiums and excesses will cause an increasing number of motorists, guarding their no-claim bonuses, to have minor collisions repaired privately. We could even see the return of garages offering both mechanical & body repairs.
A much greater emphasis and awareness of cost by the motorists: the marketing of servicing, MOT, bra kes, tyres and other ‘user-definable’ jobs – predominantly over the web – will be largely price-driven. The independent garage’s ongoing task will be to sell the benefits of regular servicing and preventative maintenance.
Garages must adopt multiple labour rates. Low margins on the basic jobs – but high margins on complex jobs electronics, diesel & petrol injection, turbos, exhausts etc. This will fund their essential investments in equipment, training, signage & branding, web marketing, IT etc.
The task of the parts distributor is to assist the independent garage to embrace these changes and grasp new opportunities. This means holding very high levels of range, availability, delivery and price competitivity on basics items. Additionally, the required stock range for specialised and slow-moving items will continue to explode – Euro Car Parts already stock 120,000 different parts and we lare adding nearly 1,000 new parts every month. The smaller distributor will have difficulty in financing these stocks and much larger groups, probably pan-European, will predominate.â€
Sukhpal Singh Ahluwalia
Managing Director, Euro Car Parts
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“Life is pretty tough for all of us in the independent automotive aftermarket at the moment and, frankly, it’s not going to get any easier anytime soon, so we’d all better be prepared to stand up and be counted if we want a successful future. Cars are getting more and more complicated, customers are getting more and more savvy, dealers are getting sharper with their marketing and are having some limited success in attracting older cars back into their service bays.
The chances are that if you bury your head in the sand for the next five years, when you eventually extract it things won’t look much different on the surface but if you think standing still really is an option, be prepared to find yourself so far behind in the race that you’ll never catch up.
But it’s not all doom and gloom, there are huge opportunities for all of us if we are prepared to work closer as an industry.
Manufactures need to sell product to distributors (Factors), Factors need to sell product to garages and garages need to have a constant flow of vehicles passing through their workshops to survive. Oh, and we all need to make a profit. So we’re all relying on Mr Consumer to choose the independent aftermarket when he needs work on his car.
In my view there are three key points we have to address:
- The erroneous belief that new car warranties will be affected by allowing anyone other than a dealer to look after your car during its warranty period. We all need to get behind the IAAF’s Right 2 Choose campaign but we also need to give consumers confidence that we really can look after their car, that we know what we’re doing, we won’t cut corners and that they’ll get everything that a dealer can offer for less money.
- The crazy idea that we all have to give product away. There’s a belief (in some quarters) that customers won’t pay for quality any more. We are all feeling the squeeze on margins and we really don’t have to! Consumers will pay for quality products and quality service. I’m not disputing that there are drivers, usually with older vehicles that want cheaper parts but that’s OK, we can do that too. We have to be confident in our skills and we have to be prepared to charge a reasonable price for those skills.
- The idea that we can muddle through with little or no training – and by training I’m thinking technical, marketing and customer service. Without training we are going nowhere, any of us. Just over 30 years ago, a young, naive, Richard Swann emerged from the University of Salford with an honours degree in Vehicle Engineering Science tucked under his arm. At the time I knew (in a lot of detail) how a car worked but think how things have changed in the intervening years – and some of us haven’t! It’s not just technical training though; customers have become significantly smarter, they expect to feel good when they part with their hard earned cash these days. If we do nothing else as an industry, we must embrace training and in particular technical training. Otherwise we might as well pack up and go home.â€
Richard Swann
Marketing Director, GSF
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“Could technology be our biggest threat and opportunity over the next 5 years?
February 2011 saw Toyota unveil its latest attempt of an automated vehicle powered by Google, is this future of the automotive aftermarket? Well maybe not in 5 years but it could certainly be a real possibility in 10 years time. Whatever happens, technology is changing the face of the humble motor car and we are seeing massive leaps in the development sector when it comes to the design and manufacture of vehicles.
Technology is a real threat to the aftermarket, for vehicles to be repaired knowledge and understanding is prime, garage owners need to embrace technology and training rather than looking at it as if it is a two headed beast from the world of unknown. Tackled correctly it’s no more of an obstacle that the once feared BMW service light, a cutting edge feature of its time but one now regarded as being simplistic.
Technology offers great opportunities to those willing to invest a little time and money in training, whether you are a car parts distributor, vehicle mechanic or parts adviser, training in the understanding and methodology underpinning the vehicles workings will allow you to better service the needs of you customer, this in turn will aid the independent aftermarket in keeping its market share in the parts and repair sector.â€
Damian Milling
Group Marketing Manager, Mill Auto
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“Unless there is a fundamental change in thinking and attitudes to the independent aftermarket it will be still considered a backstreet trade full of Arthur Daley type characters ready to rip off the ordinary man in the street of which there is some truth. Vehicles will be fitted with cheap low quality parts that compromise safety as this market becomes ever more price driven.
The price price price situation we now find ourselves in is leading to quality brands being sold at ridiculously low margins. Part of this is down to suppliers allowing the product to be oversubscribed in certain areas via buying groups. Gone are the days when a certain Company was known as being the primary stockist for a brand, a sad fact that only the suppliers can remedy.
We now find ourselves at the mercy of garages and workshops that demand an instant service at the lowest price possible. There is no loyalty any more as there doesn’t have to be. The various garage schemes and codes are utterly irrelevant to the man on the street, and none of them are policed to any kind of standard. What needs to happen is a garage scheme that is targeted to the consumer not the garage. This way quality can be brought back into the main. Garages that are part of this scheme will be policed and have to work in a certain fashion that will bring a value of trust back into the marketplace. Adverts placed in The Sun, The Star and The Sport will have far more impact on getting the message across. In summary it’s the public we need to start winning over as they hold the key to recovery.”
Steve Candy
RRD
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“I sometimes wonder why we ask where the industry will be in five, ten or fifteen years? When we are not 100% certain what the next year will bring for us. What I do know is that the factor industry is heading for self destruction if we don’t change the way we compete with each other. We all want a piece of the pie , but slashing margins as a weapon against your competitor is not the way to go.
With the economic climate still unstable “FACTORS†should be protecting their business not running it into the ground by trading at ridiculous low margins, I come from an era when service was number one, stock second and price a very close third, but third never the less. Yes the garage is being squeezed by the end user to be competitive but surely we have more in our box than “being cheaper than themâ€. The large factor groups use this as an aggressive tactic and in turn have forced the independent to follow suit, surely to protect our future we should go back to providing the best service we can with the best staff to do it with. There is an opportunity to be successful in the factor game , if we don’t stop this B&Q type price war we will see a lot of smaller/independent factors go under within the next five years ,factors that provided a great service but cannot sustain their margin being forced to below say 30 percent.
The way forward is to educate the customer to understand the future for him, his customer and the technologies they will be faced with in the very near future. The aftermarket is vital and needs to be protected not sent into a black hole.”
Vaughan Wetherill
Motorserv
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