The European Commission is set to liberalise rules over copying designs of so called ‘visible’ spare parts, freeing the market to greater competition from independent aftermarket suppliers. This will continue the trend towards consolidation in the aftermarket, which may result in fewer players in the sector but greater focus on consumers’ needs.
The aftermarket represents an important source of revenues for vehicle manufacturers and an even more important source of profits, as a result of the high margins earned on ‘genuine’ or ‘original’ spare parts sold in their name. However, the steady flow of profits from this segment of the aftermarket has come under pressure from increased competition in a mature market, and from the changes to block exemption. The European Commission is now posing a further threat to this revenue stream.
While the market for replacement car parts as a whole is highly competitive, the vehicle manufacturers have benefited from the ability to protect the design of their spare parts if these are sufficiently distinctive. This has enabled the vehicle manufacturers to maintain a much higher share of the market for ‘visible’ spare parts such as glass, lighting and body panels. The Commission proposes ending this protection across Europe. If it goes ahead, independent suppliers will increase their share of the market and prices will fall.
Better quality car parts on new cars are lasting longer and needing replacement far less frequently. Competition in the market is also having a negative impact on prices, further limiting the scope for growth. Equally, the market is highly fragmented and ripe for consolidation. This process has begun in earnest, with a series of consolidation moves occurring in recent months: Dana – one of the world’s largest car parts manufacturers – announced its withdrawal from the aftermarket, Fiat sold its Midas fast fit operation to a competitor and MG Rover has offloaded its aftermarket parts business to its logistics provider.
If enacted, these latest proposals from Brussels can only increase the speed at which consolidation happens. The number of aftermarket outlets – currently over 350,000 – will undoubtedly fall. For consumers, this may reduce choice. But if a leaner and fitter supply base emerges, it may be better able to serve their needs.
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