The aftermarket parts sales and repairs business continues to be a valuable source of profits for margin-squeezed vehicle manufacturers in Europe. But longer service intervals, better parts quality, changes to block exemption and the rise of fast-fit operations are all threatening future profitability levels.
That was one recurring theme at a conference hosted on Tuesday by IMS and ARU looking at issues facing the UK aftermarket sector.
Tim Gilchrist, of the consultants Accenture, said that aftermarket activity typically accounts for 10-25% of European vehicle manufacturers’ revenues. However, it accounts for a higher 25-50% of their profitability and has been critical to the vehicle manufacturers’ well-being. Gilchrist told just-auto that some carmakers in Europe had been given a big profitability boost from their aftermarket operations in recent years at a time when margins on car sales have been reduced to almost zero.
However, the conference heard that with improving parts quality, longer service intervals and longer parts replacement times, the aftermarket business looks set to be under increasing pressure in Europe in the future.
The vehicle makers’ franchise operations are also facing increased competition from fast fit operations and independent garages under new EU block exemption rules.