The global automotive aftermarket will gather momentum this year as a slowdown in new vehicle sales due to the impact of COVID-19 and ageing vehicle parc will create more opportunities. According to the recent analysis - “Global Aftermarket Outlook, 2021” by Frost & Sullivan (F&S), the availability of vaccines and lockdown lifts, the aftermarket is estimated to garner $ 478.8 billion by 2025from $362.21 billion in 2020, growing by 5.7% CAGR.
According to F&S analysis, the aftermarket replacement revenue from parts and accessories sales dipped by 8.8% in 2020. The demand contraction was primarily due to the restraints imposed by the COVID-19 pandemic, which crippled the mobility demand. In addition, work from home, higher adoption of the online channel for retail purchases, and large-scale unemployment resulted in lesser use of vehicles for personal mobility across segments.
Recessionary scenarios of the economy added to the woes of market participants. But, on the flip side, the situation pushed market participants to innovate and increase their solutions’ effectiveness. As a result, the research agency expects the aftermarket revenue growth to be 7.1%, making up for some of the revenues that were eroded in the previous year.
The research agency also said that the revenue from online sales in the aftermarket is estimated to grow at 14%.
According to F&S, China leads the world in terms of innovating with new business models for retail. Currently, its vehicle population is only behind North America and is well poised to overtake it, resulting in tremendous demand potential.
In Europe, EV servicing and repair is in demand, while in North America, the preference for personal vehicles rather than shared mobility will promote used cars sales.
In India, the vehicle Scrappage Policy announced at the beginning of 2021 could boost new vehicle sales and potentially help increase the used and remanufactured parts aftermarket.
Anuj Monga, Mobility Research Analyst, F&S, said that since customers shifted away from using public/shared transport in 2020, sales of used cars witnessed a boom during the same period across regions. This phenomenon presented potential business prospects for service providers to engage with independent aftermarket manufacturer (IAM) service contracts. In addition, the increasing proliferation of alternative powertrain vehicles is creating new categories in the parts and services aftermarket and promoting newer business models for the fulfilment, he said.
“Rising customer exposure to digital channels across lifestyle aspects will push aftermarket stakeholders to invest aggressively in digitisation beyond parts retail and even workshop services. Market players should further explore building dedicated digital platforms on offline networks offering standardised quality services for a variety of vehicle types, especially in company and retail fleets.”
F&S suggests that industry players look into growth opportunities from Online Sales of Replacement Parts and Accessories. It asked the companies to leverage the heightened exposure to their websites, marketplace; pure-play operators will need to deliver higher value to their customers by ensuring delivery and fulfilment.
Though most of the demand for advanced driver-assistance systems (ADAS) sensor recalibration services is fulfilled at the original equipment (OE) dealerships, IAM stands a chance in the medium to long term, the study noted.