Encouraging outlook for the auto parts market

Encouraging outlook for the auto parts market

Every year new trends appear in retail and wholesale of spare parts. This is due to technical innovations and modern trends. And no matter what the market players come up with, in the end the consumer wins.

Encouraging outlook for the auto parts market

The Right Solutions for Growth

The automotive industry usually works in two broad directions: fixes successful solutions and tries to get rid of disadvantages, sometimes even turning them into advantages. Thus, one of the problems for many dealers in recent years has been the drop in margins – both for new car sales and for used cars. The most popular way out of this situation is the additional emphasis that vehicle dealers have placed on auto service and parts sales. The decision turned out to be mutually beneficial: these types of business bring good profits, and increased competition has a positive effect on the quality of services provided.

Another well-known problem from the recent past is the shortage of parts for certain models. The automotive industry solves this problem by unifying components: auto manufacturers unite to create new models. This leads to the appearance of identical modules, units and assemblies on vehicles of different brands.

This approach has a positive effect on the aftermarket:

  • the cost of development and production is reduced;
  • the manufacturer provides the necessary volume of parts even with small production runs of individual models;
  • the consumer or intermediary repair service provider receives the part in a short time.

New technologies – new rules

Today’s market, including the wholesale and retail sale of auto parts, predominantly works for the millennial generation. This is a technically savvy consumer who demands from the manufacturer convenient mobile solutions, high technology, compliance with environmental standards, etc. Such a consumer is listened to.

For example, sales of electric vehicles are projected to grow significantly by 2025: the share of electric vehicles in the Chinese market may grow to 26% and 15% in the Western European market. We are not talking about a complete reorientation and rejection of the internal combustion engine, however, companies in the automotive industry, including retailers and wholesalers of spare parts have made the necessary changes to the operating business models.

The next stage of market players’ realignment is planned with the mass appearance of unmanned vehicles on the roads. Self-driving cars could probably appear to a certain extent now, but society is not ready for it yet – in terms of infrastructure (automatic gas stations, parking lots, special signs and markings), traffic rules (there is nothing about autonomous cars), insurance issues (it also needs to be optimized for driverless cars), the human factor (it will take time for people to trust unmanned vehicles).

In any case, technical progress undoubtedly affects consumer culture as well. The more complex the mechanism, the greater the increase in confidence in the professional companies involved in the repair and maintenance of vehicles. In particular, the better known the manufacturer, distributor or supplier of spare parts, the safer it is to do business with them. The time for gray schemes and “backyard” repairs is over.

Encouraging outlook for the auto parts market

From private to corporate

The changing model of consumer behavior also affects the dynamics of the industry. Representatives of the modern generation are ready to use a car but do not tend to own one.  For example, in the U.S. about 2% of vehicles per year are transferred from personal to corporate fleets. And in the future the trend will only grow. This is due to the introduction into our lives of new forms of interaction between private companies and the consumer:

  • Different types of sharing (short-term car rental with a per-minute, hourly or daily payment);
  • “a car on a subscription basis” or similar services (long-term rental: the consumer chooses the car he or she likes and pays in advance for its use).

How do the new services affect the growth of the auto parts market? Carshares and vehicles on a subscription basis are used more intensively, and a large part of the service life will be exhausted during the warranty period. On the one hand, such a business model is a direct route to the service of automakers and dealers. On the other hand, there is a significant number of used cars on the market, which also need to be serviced. Therefore, the prospects for wholesale and retail trade in spare parts are really encouraging. According to some forecasts, it has reached a maximum, however, there are all preconditions for the trend of increasing demand to remain.

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