03 Apr 2019
Around 30-40% of profits from the automotive aftermarket could be redistributed in the next decade as electric and connected vehicles as well as other e-commerce services become more widespread.
That’s the findings of consultancy McKinsey’s report ‘Ready for Inspection, the automotive aftermarket in 2030 published last year, which points to a changing industry over the next 10-20 years.
Advances in technology together with changing customer expectations will drive emerging trends in the sector, which will also see the concentration of profits shifting.
Changes will be more apparent sooner in Europe and North America, homes to a mature automotive market.
As the digital natives, those who have grown up with digital tech like the internet, computers and mobiles, dominate the workplace, these employees and entrepreneurs will create new e-commerce solutions in response to consumer demand for industries such as the automotive aftermarket.
The report urges the sector to start preparing now for rapid changes and take on board lessons from other industries where disruption can result in decline for traditional players who don’t move with the times.
With a current business value of about €800.0 billion and growth expectations of 3% annually, the sector is expected to be worth around €1.2 trillion by 2030. Mckinsey’s report identifies 10 trends:-
1) More digitisation of channels and interfaces delivering more transparency
2) Big data and analytics put to even more uses and even more influential
3) Companies adapt a service mind-set
4) Fleet customers require different servicing offerings
5) Wider adoption of electrification and reduced servicing requirements for EVs
6) More advanced software meeting service needs demands a new skill set
7) Autonomous driving reduces accidents but increases product complexity resulting in shorter service intervals
8) Connected vehicles deliver predictive intelligence maintenance services
9) New players, particularly in the digital arena, emerge increasing competition
10) Consolidation and integration put pressure on all providers to deliver added value
McKinsey predicts these will result in disruption along the value chain including new entrants with software and EV component manufacturers at the beginning. At the end of the chain, e-commerce will see changes in parts distribution whilst workshops will see competition from emerging specialist providers such as EV aftermarket businesses and fleet service operations. Intermediaries will connect customers and services in new ways. New customer touchpoints will develop and customers will embrace automated systems and recommendations.
As a result, around €100 billion, accounting for 30-40% of aftermarket profits, will be dispersed differently, the report concludes. The profit will be distributed along the value chain of this new system but how much will stay in the hands of established players depend on whether they have adapted effectively.