The pandemic is unlikely to stand in the way of significant growth according to analysts.
Look at reports on the Automotive Aftermarket over the past few months and you would be forgiven for thinking that the COVID pandemic has been a benefit for an industry set record sales of more than $720bn by 2021,with the US recording $296bn alone.
Despite the human cost of COVID on the world's population, automotive aftermarkets are projected to not only survive the pandemic, but show exponential growth over the next five years. According to US-based Auto Service World, the pandemic has simply accelerated the trend in e-commerce that was already well underway, as vehicle owners took advantage of the 'spare time' suddenly available to them to repair or upgrade their cars.
The other trend observed by ASW is the increase in 'near-shoring', particularly in the US market, where aftermarket providers sought domestic suppliers to meet stock demands as regular sources - particularly from China - dried up. This trend was enhanced by US trade tariffs as well as a desire for diversification of supply chain management. The impact of Brexit (the UK leaving the European Union) is also likely to have a similar impact on the European aftermarket as supply chains get to grips with new customs regulations.
However, ASW goes on to warn the industry that consumer convenience is the key to the long-term future of the aftermarket sector and it is essential for suppliers to focus on this aspect of the supply chain.
President of the Automotive Aftermarket Suppliers Association (AASA), Paul McCarthy is quoted as saying: “If we were going to have a pandemic, we were probably pretty lucky for the timing with our industry because the industry saw this trend towards omni-channel and e-tailing and consumers wanting information." He continues: "Pre-pandemic, we were already having a huge number of decisions being influenced by the internet and the online information. If this had been five years ago, we would have been in trouble.”
Analysts Linchpin note that not only has e-commerce changed the aftermarket landscape, but mobile device technology is now playing an important role in consumer decision-making. They state: "94% of consumers head to a manufacturer’s website first to get product information and specific details on the warranty. 84% want to check and see if the part fits their vehicle, and 57% of consumers want detailed installation instructions."
Both McCarthy's and Linchpin's views are borne-out by statistics from Global Market Insights which predict e-commerce related aftermarket growth of a significant 18.5% over seven years, boosting 2019's value of $8.69bn to a massive $28.42bn by 2026, with Europe alone likely to see a 17.5% increase over the period while China drives the APAC market. Further analysis of the GMI statistics suggest that ageing vehicle parcs - based not least on enhanced vehicle quality offering greater longevity - are a contributing factor to aftermarket growth. Ageing vehicles require more replacement parts and that is good news for the sector. The pandemic is also likely to have some impact here as there is almost certain to be a short to medium-term stall in consumer spending, particularly on new vehicles.
Meanwhile, Linchpin stated that the balance of power is changing in the sector as consumers move away from OEM websites to make purchases, acknowledging, as McCarthy does, that consumers are focused on information gathering before seeking an omni-channel approach to purchase. The analysts conclude: "The Aftermarket Industry digitization has decreased defect rates and boosted production. Aftermarket manufacturing plants are rapidly becoming over 75% automated. Smart factories use AI and advanced algorithms to expand annual production rates by nearly 8.5%."