Fuelling Innovation in Aftermarket
One section of the motor trade is benefitting from the cost-of-living crisis: with consumers keeping their cars for longer, independent repairers are in huge demand. But they are also under pressure. Older cars need more repairs. They require more replacement parts, tyres and fluids. With car owners looking for value and a fast turn-around, independents are actively seeking the most efficient and effective way to source those parts in order to achieve that vital first-time fix.
The majority of repair shops would prefer to use genuine parts which are far more likely to fit and work as expected. But they also need to balance speed of delivery and cost – if the local franchise dealer isn’t able to provide the right part, at the right time and price, there are plenty of alternatives. The rise in aftermarket demand is set to continue until 2040 at least – franchise dealers should be champing at the bit to boost revenue and radically expand their trade sales.
It is not complicated. Indeed, many manufacturers already have the foundation for this model in place, albeit on a small scale. Jim Monaghan, Managing Director of Aftermarket at One Nexus, explains how car manufacturers globally need to embrace a new aftermarket mindset and significantly scale up their Trade and Loyalty programs to generate long term, sustainable growth.
Older Car Demands
The shift to electric vehicles at a time of economic hardship has had a dramatic impact on consumer behaviour. Drivers are keeping their cars for longer. The average age of a car in Australia is now almost 11 years, while more than 15.4m 10-year-plus cars are predicted to be on the road in the UK by 2027 – that’s 40% of all cars.
Manufacturers and the franchise dealer network have failed to respond to this shift in buying behaviour. With just 35% of three-year-old cars returning to the franchise for servicing, dropping to less than 10% for a five-year-old car for some brands, the ‘how, when and where’ older cars are repaired and serviced is rarely considered. Yet to safely extend the life of a vehicle, drivers are spending more than ever on servicing and repairs. A 10-year-old car demands more replacement parts and repairs than its two-year-old equivalent – and that is a market that some manufacturers are failing to maximise.
Yes, franchise dealers have parts departments that provide the independent trade with the genuine parts they cannot source elsewhere. Some have added an all-makes model and even offer Trade Clubs, with dealers encouraged to register repair shops into loyalty programmes. Yet at a time of extraordinary uncertainty throughout the automotive industry, with the disruption created by electrification and new competition arriving from China, the one absolute that manufacturers can rely on for the next decade or more on is escalating aftermarket demand.
Supporting the Independent Market
The ever-extending vehicle life is great news for the independent trade – but it also provides a compelling opportunity for manufacturers and dealers. To provide customers with that essential first-time fix, repair shops need fast, reliable access to an array of parts and equipment. And while few customers understand the difference between genuine and non-genuine parts, mechanics know that genuine parts sourced directly from a franchise dealer are more likely to fit and work first time.
What they need is not only the ability to deliver the right part, at the right price and at the right time to give an independent repairer the confidence to present the customer with a price and schedule the fix, but to become the trade’s first choice.
For the franchise dealer, there is an enormous opportunity to do so much more than make it easy for independents to access the ‘must have’ genuine parts. The foundations are in place. The challenge is to take the existing parts department from efficient order taking to a proactive, profitable sales operation that delivers significant incremental revenue.
Extending Trade Clubs
Building on the long-established concept of loyalty-based Trade Clubs, manufacturers can rapidly enhance their aftermarket services. The most successful programmes are moving beyond the sale of genuine parts, not only to include all-makes models but also promote the add-on products such as oils, coolant and consumables that the independent trade would not traditionally purchase from the franchise network. Leveraging both sales and marketing expertise and data intelligence to better understand pricing, marketing and loyalty models, the scheme can provide both manufacturer and franchise dealer with significant additional revenue.
Building trade loyalty delivers more than a significant revenue boost. There are strong benefits to be obtained from creating closer relationships with the independent motor trade. Adding technical expertise and advice, for example, to the provision of genuine parts will provide a mechanic with far greater confidence in achieving a first-time fix.
This not only boosts their own customer ratings; it improves the brand perception of the second and third owners who are unlikely to have a relationship with the original dealership. The cost and speed to repair reflects not only the skills of the repair shop but also the long- term value of that vehicle – something that can reinforce a driver’s brand value and commitment.
Conclusion
Given the challenges facing the industry over the next 15 years, from the evolution to Electric Vehicles to the rise of new market entrants from China and the growing demand for sustainability, this mature car parts market offers a compelling opportunity to boost revenue. It also provides a way to build stronger bonds with the independent motor trade and, through these businesses, with customers that have never had a direct brand experience before.
But to maximise this opportunity, automotive manufacturers need to embrace a serious mindset shift. Stop looking at last year’s sales – that figure should not be a benchmark. This is a 10- to 15-year opportunity to achieve a step change in aftermarket sales that could safeguard profits during this time of transition and provide an important on-going role for the franchise dealership networks. It is time for the industry to look at the true aftermarket potential – not its history.
