OEMs and Low-Cost Country Competitors Will Attack Independent Aftermarket for Cars in Europe

DUESSELDORF, Germany, September 9, 2008 - A.T. Kearney and SupplierBusiness Conducted a European Study to Take a Look into the Future of the Aftermarket for Cars

Car manufacturers are expected to significantly attack the independent aftermarket channels within the car age range of 4 to 7 years. This will lead to a dominating role of the Original Equipment Service channels in this segment within the next years. The 165 billion Euro aftermarket for cars in Europe will also see more low-cost country competition and more discounting by existing players, and growing retailer and wholesaler buying power through market concentration and internationalization. This is the conclusion from the recent study conducted by the top management consultancy A.T. Kearney and SupplierBusiness based on a survey of 70 executives working in the European automotive aftermarket. To still successfully grow their aftermarket businesses, suppliers should primarily focus on long-term strategies and local footprints for the growing opportunities in Eastern Europe, extend their independent aftermarket product portfolio with parts of the prospectively fast growing part segments, establish stronger international key account coordination and further improve their supply chain. OEMs on the other hand should further align their OES and IAM strategies to avoid cannibalization effects especially in the car age range of 4-7 years.

The automotive aftermarket in Europe is a key business field, with high margins, for the majority of players, namely car manufacturers (OEMs), suppliers through their Original Equipment Service (OES) and Independent Aftermarket (IAM) business. "Until 2020, we estimate a real total aftermarket growth of 40% in Europe, leading to a total market size at retail value of approximately 230 billion Euro", said A.T. Kearney partner Martin Haubensak.

Aftermarket revenues in Europe will develop differently by region, mainly driven by the car park development. Aftermarket participants right across the value chain expect on average only a slight increase in future aftermarket business in Western Europe. Revenues in Eastern Europe are expected to more than triple up to 2020 reaching an overall size of 66 billion Euro at retail value.

Product & technology changes will be major drivers

The study identified product and technology changes until the years up to 2020 as the key "macro trend" with the highest impact on the aftermarket business. From the expected product & technology changes, increasing car electronics and parts longevity have been ranked as factors with the highest impact. Economic, environmental and customer behavior changes are also expected to impact the aftermarket business, but to a lesser extent.

Structural changes and strategies through to 2020

"In our survey we identified key future strategies", said A.T. Kearney's Joerg Branschaedel: "Besides increasing investments into IAM service business, OEMs are expected to strengthen the OES aftermarket business via extended warranties and full service contracts which are seen as the most probable OES strategies. These aggressive strategies in the OES channel, together with increasing repair complexity, will create a significant threat to IAM market participants like franchised repair shops or auto centers. The capability to provide comprehensive diagnosis software, tools and know-how to the independent aftermarket will be critical for the further development of the IAM channel. Overall, the survey respondents expect that the OES channel market share will increase in future after decades of decline".

The way to success

"We expect more low-cost country competition and more discounting by existing players", said Haubensak: "Competition will get tougher with growing retailer and wholesaler buying power through market concentration and internationalization."

The research of leading top management consultancy A.T. Kearney, in co-operation with SupplierBusiness, is based on a survey of 70 executives working in the European automotive aftermarket. The survey was conducted between June and August 2008.