Aftersales has long been seen as the backbone that reliably delivers profits to sustain OEMs and dealers through hard times, and are clearly the sole focus of the many independent players who have built significant businesses.
There have been downwards pressures on repair and maintenance aftersales volumes for many years as cars have become more reliable and service intervals extended.
Real revenues have been protected to some extent by the higher cost of more complex parts. Increased capability and professionalism by the independents have slowly chipped away at the market share of the franchised sector, despite their best efforts to fight back with extended warranties, service plans and more diligent follow-up of customers.
However all of this represents the general picture – the average across whole sectors with many thousands of individual players who focus on different brands, age segments and customer types.
The picture actually varies widely, so depending on an ‘average’ projection is not a reliable means of planning your business.
If you are a repairer focused on an established brand that has consistently lost market share, the parc will be reducing in size and ageing relatively quickly, whereas one of the more recent growth brands that have built their share over the last couple decades will be seeing exponential growth and a reducing average age as the parc expands at an ever-increasing rate.
With the newcomer brands, providing a strong aftersales offer will be key to convincing customers to buy one of their products, but it will be years before the aftersales business will become viable as the parc grows from a zero base, and significant parts of the parc are still under warranty that depresses revenues, whilst increasing retention.
Even drilling down by brand still masks some of the underlying factors that make a difference to the opportunities an individual player.
Manufacturers are restructuring their networks in parallel to dealer groups reviewing how they use their property portfolio and independent players expanding their footprint through acquisitions and organic growth.
In a specific local area, this can have a significant influence on the opportunities for specific sites. Will a site gain if a site nearby closes – where will those customers take their business?
Will they remain loyal to an OEM network or the repairer brand – whether that is a dealer or independent? Is the switching behaviour consistent across a network change, or are there local factors that have more influence than simple questions of distance?
Taking a final example of electrification, we have a growing body of evidence, largely derived from the Norwegian market who are well ahead on the path to 100% BEV sales, that the impact on aftersales is less than we first imagined.
The loss of the oil change (and the related bumper profit margins) combined with Tesla’s example of dropping any mandatory service intervals seemed to represent a major threat to repairers.
In practice, most other OEMs have maintained similar service intervals to their ICE products and found enough ‘essential’ checks to generate meaningful service hours.
Perhaps less positively, the new BEVs have not been without their problems so a significant additional volume of jobs has been generated for repairs and software updates.
Again, this is not uniform across all brands, and the pace at which this unplanned workload is reduced will vary by brand.
Will we reach the point where those original fears materialise, and even more significantly will any brands move towards the Tesla position of reducing or eliminating the need for scheduled services?
All of these factors combine to create a situation where general projections are less useful than you need when seeking answers that are specific to a real world situation.
That was the genesis of the ICDP aftermarket simulation model that we built in response to requests from some our members.
It provides the flexibility to model a range of different user-defined scenarios to understand the top line revenue effect, the differences across different brands and powertrain types, the capacity requirement at channel and workshop level and the effect on different parts categories.
For individual players who need to understand the likely future direction of their business and consider ‘what-if’ scenarios for different assumptions of change in the external influences, it is invaluable. A full description of the model is available here.
We have a webinar on 8th April (open to ICDP member and non-members) where we will use the model to demonstrate three different scenarios – the effect of a reduction in network density on overall volumes, including capacity at outlet level, how adding in a parallel, low-cost, channel to a traditional franchised network can improve efficiency, and the pace at which workshop load will grow for a newcomer brand with no parc.
