Demographic shifts and traits reshaping the automotive aftermarket

The rising variety of girls driving throughout the GCC is certainly one of 5 key traits reshaping the area’s automotive aftermarket. Vishal Pandey, Associate at Glasgow Consulting Group, informed ConsultancyME that because of these shifts, the market is bouncing again quicker than anticipated after the final two years of the pandemic.

The automotive aftermarket is the secondary market of the automotive business. After the sale of the automobile by the unique tools producer (OEM) to the buyer, the aftermarket is anxious with the manufacturing, distribution, retailing, and set up of all automobile components and tools wanted to keep up or improve these automobiles.

The development of those components and equipment on the market is just not at all times related to the OEM, and as an alternative centres on a burgeoning economic system of impartial suppliers.

Traditionally, the automotive aftermarket has been essentially the most recession-resistant a part of the automotive business. It’s because its measurement doesn’t depend upon new automobile gross sales. When financial strain causes drivers to delay buying new automobiles, repairs on their present (and older) automobiles grow to be much more very important – thus bettering gross sales within the aftermarket.

Whereas the Covid-19 pandemic was completely different from earlier recessions – because it meant many drivers have been utterly off the street for big intervals of time, so much less upkeep was wanted – Vishal Pandey is seeing indicators that the aftermarket is again, and set for a stronger than ever return in 2022.

The associate at Glasgow Consulting Group famous, “The non permanent dip in common kilometres lined by automobiles throughout the pandemic has not affected the demand for components negatively; as an alternative, the regular variety of automobiles in operation and the expansion within the used automotive market have solely ensured the resilience of the aftermarket.”

“This growth is so sturdy that although public transport utilisation is growing, it isn’t prone to have an effect on automotive gross sales within the close to future.”

One other issue driving up demand is the truth that a rising variety of shoppers are falling out of licensed dealership as soon as the guarantee interval is over – this proportion is estimated to presently sit at 80%. “That is primarily because of lengthy ready interval and excessive price of service at supplier shops,” defined Pandey.

Trying on the GCC (Gulf Cooperation Council) area, Pandey famous that the aftermarket growth is especially sturdy within the United Arab Emirates (UAE) and Saudi Arabia. Mixed the 2 markets account for 60% of all automobiles bought within the GCC, and consequently they’re additionally the most important markets automotive aftersales and auto components.

In keeping with Pandey, the passenger automotive markets of the UAE and Saudi Arabia are anticipated to keep up an upward development trajectory for the following 5 years – pushed by 5 key traits.

Altering demographics

Most notably, the gradual modernisation of the conservative oil-states signifies that new markets are opening up for automotive gross sales and aftermarket customized. To this finish, Pandey pointed to the automotive aftermarket in Saudi Arabia – which is witnessing a brand new part of development and growth on the again of current traits, such because the elimination of the ban on feminine drivers.

He continued, “A mid-year 2020 report from the Common Authority for Statistics in Saudi Arabia indicated the inhabitants to be 35 million, amongst which the variety of females have been 14.7 million. The Worldwide Commerce Administration of the US Division of Commerce estimates that Saudi Arabia’s 2.5 million feminine drivers will result in a rise in automotive gross sales by 9% every year by way of 2025. This may additional increase the demand for aftermarket spares components and companies within the nation.”

These shifts are contributing to 2 additional traits. Whereas new automotive gross sales have nonetheless not totally recovered, used automotive gross sales are a possible different to supply transport to girls on the lookout for their first automobiles. These automobiles usually tend to want spare components – driving demand for that side of the aftermarket.

Used auto spare components are primarily sourced from “broken automobiles bought by insurance coverage firms at throwaway costs or from police auctions”, in accordance with Pandey – however altering this might supply an enormous alternative for the area.

As governments throughout the GCC look to wean their economies from their dependence on oil manufacturing, they’re boosting manufacturing within the area. This third key development will include jobs, boosted shopper spending energy, and alternatives for the automotive aftermarket to develop operations – assembly the rising demand from new drivers taking to the roads.

“Most automobiles and components bought in Saudi Arabia are imported, and native manufacturing is proscribed to small auto components and truck meeting,” Pandey added. “The federal government is eager on making a home automotive business and has inspired world automobile producers to determine native operations. This is able to each result in native job creation, switch of applied sciences and expertise and improve the auto components manufacturing provide chain within the nation.”

One other development which the automotive aftermarket might want to use this growth to assist meet, is rising demand for automobile customisation. This, Pandey argued, is very fashionable amongst Saudi automotive house owners; with the demand for automobile modifications within the Kingdom having “elevated exponentially” over the past decade. That is one thing he anticipates to proceed, heightening purchases of auto parts within the aftermarket.

Lastly, as digital know-how continues to roll out throughout the area, the fifth development driving aftermarket development includes firms leveraging this transformation to benefit from new gross sales and repair channels. That is each serving to prospects supply components and companies linked to the working of their automotive – and companies which may also help them take care of ongoing issues relating to the pandemic, and public well being.

Pandey expanded, “The growing adoption of cellular servicing, workforce hygiene, shared mobility, contactless companies, e-commerce and automobile pick-up has boosted demand for disinfection, cleansing and automotive wash companies. Buyer choice for auto servicing is shifting in the direction of cellular platforms, which has resulted within the emergence of cellular app aggregators that join customers with service suppliers of roadside help, automotive wash and components substitute.”

Trying forward

“All these traits have pushed aftermarket suppliers within the UAE and Saudi Arabia to adopting a service-oriented enterprise mannequin that prioritises customer support,” Pandey acknowledged. “This has seen the profitable development of recent channels for buyer engagement and gross sales of spare components, and lots of suppliers have boosted their gross sales by way of on-line channels in the previous couple of years.”

In the meantime, shifts are additionally anticipated to happen between the OEM’s and different suppliers. With so many extra automobiles approaching the street, OEMs will “not be capable of accommodate all demand for upkeep and spare components”, which means that third occasion suppliers will be capable of develop their footprint.

“In keeping with a current survey we performed, 94% of auto drivers think about third-party aftermarket companies, implying a major variety of prospects are prepared to make use of companies from an out of doors workshop for automotive upkeep.”

Pointing to this mounting alternative for different gamers, Pandey concluded, “Nearly all of respondents opted for workshops inside their cities for automotive washing, filter verify and tyre change, and workshops exterior their cities for servicing of batteries and brake pads. The selection of workshops exterior cities was attributed to decrease price and better velocity and high quality of servicing.”

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