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These are the real enemies of the aftersales business
Electric cars are not a mood maker: They do not need any engine oil and hardly any wear parts, so the need for spare parts and maintenance is correspondingly lower and therefore the service sales in the aftermarket. According to a new study, everything is half as it should be - at least for now. And the real enemy is another achievement.
These are the real enemies of the aftersales business
This is going down like oil: At a time when the auto industry is talking if not about the Corona crisis, then about long-term falling sales in the wake of new trends and technologies, the market researchers at Bain & Company are speaking out with a surprisingly “positive” forecast.
Admittedly, they also expect business to decline, but to a much less dramatic extent than other studies had previously predicted. The forecast up to 2035 refutes the widespread belief that a growing number of electric vehicles will put pressure on the aftersales business in the coming years.
In their new study “Aftersales: The silent curse of driving assistance systems,” the management consultants at Bain & Company come to the following conclusion: By 2035, the growing spread of electric cars in the five major European markets of Germany, France, Great Britain, Italy and Spain will only lead to a decline in sales of 1.9 percent. Together with the effects of automated driving, the overall decline is expected to be 5.4 percent.
Tires have potential
This seems downright encouraging compared to what the experts from the management consultancy Deloitte, for example, predicted in a study from the previous year: There they spoke of a 55 percent decline in sales in the aftermarket over a 15-year period. According to the current Bain forecast, an overall increase in vehicle numbers will cushion the sales losses caused by electric vehicles and driver assistance systems until 2035. The decline is only likely to become significantly noticeable in the years after 2035.
Increasing tire consumption can also partially compensate for the negative effects of electrification. The greater slip during acceleration and recuperation as well as the higher vehicle mass mean that the tires of electric cars have to be changed more frequently. On top of that, they tend to have larger and therefore more expensive tire dimensions.
Meanwhile, driver assistance systems have a much greater effect than e-mobility. As a result, the Bain experts expect a decline of 3.7 percent in aftermarket sales by 2035. “The systems currently in use reduce the probability of accidents by up to 30 percent and the severity of accidents by up to 10 percent,” explains Bain partner and study author Eric Zayer. For safety reasons, this is very welcome, although the need for repairs and spare parts is significantly reduced.
As Zayer emphasizes, we are only at the beginning of automated driving. The fact that the increasing automation of passenger cars will have a greater impact on the aftersales market in the coming years than the electrification of drives is logical insofar as assistance systems are already penetrating the vehicle market to a greater extent. According to Bain, by 2035 two thirds of the vehicles used worldwide will have so-called Level 1 and Level 2 systems that enable assisted or partially automated driving. In addition, there are another 10 to 15 percent cars that are equipped with Level 3 systems and can take on certain driving tasks.
After 2030, the growing number of electric vehicles will of course have an increasing impact on the overall market. Bain sees car manufacturers and branded car dealerships as the main losers in these market trends. Service companies whose earnings situation is already tense could find themselves in difficulties that threaten their existence.
Take advantage of new opportunities
Against this background, the experts recommend that everyone involved adapt structures and costs to the new framework conditions today. Untapped earnings potential should be tapped and new opportunities taken advantage of even more consistently than before. The spectrum ranges from insurance and the tire business to assistance provided in setting up a private charging infrastructure. “Those who strategically position themselves correctly in the service business with such approaches will free themselves from the silent curse of driving assistance systems better than others,” says the study.
The industry already has to adapt to new times. While the aftersales business has grown steadily in the past and was a guarantee of stable income even during the global financial crisis of 2008/2009, the corona pandemic is already causing drastic changes in the short term. This is hitting the aftersales market with full force: During the lockdown, mileage in Western Europe was reduced by 10 to 15 percent - correspondingly, sales of repairs, maintenance and spare parts will decline significantly in 2020 as a whole. According to Bain & Company, recovery is only slowly emerging. The number of newly registered vehicles is more than 20 percent below original expectations - and these vehicles are then missing from aftersales.