Although the USA automotive aftermarket is growing steadily at around 4%, year on year, franchised vehicle dealers have experienced reduced levels of sales growth resulting in a loss of overall market share for all dealers, according to Hopkinson, Massachussetts-based management consultancy Walden Consultants.
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The study said that, since 2003, dealers’ aftermarket parts sales have grown an average of about 1.3% per year. Simultaneously, large traditional distributors and retail chains have achieved consistent, above-average growth during the same period.
Some vehicle companies have announced plans for increasing dealers’ capacity to perform aftermarket service – the service most profitable activity available to them.
Redesigning and expansion of existing dealerships, establishing service satellites, training service technicians, and intensified parts wholesaling are among the strategic investments being pursued.
Large distributors and retailers, on the other hand, are content with edging-out into adjacent market areas by making small acquisitions of similar companies. Incrementally larger operations have the potential for leveraging profitability from scale economies.
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By GlobalDataFor those vehicle brands fortunate to have strong new unit sales, customers have been drawn into dealer service departments for warranty work and scheduled maintenance. Together with longer warranty periods, and free maintenance programmes (by some vehicle makers), service departments can be heavily utilised.
Thus, expanded capacity is a necessity for some vehicle brands and selected dealers.
At the same time, more durable vehicles with longer repair and maintenance intervals are requiring service at a vehicle age which is often beyond the point at which franchised dealers are the usual service providers. In other words, peak aftermarket activity occurs after the normal warranty period, and/or when a vehicle is maintained by a second owner with a “used car.”
The aftermarket service activity which is delayed into the future can be lucrative business for an independent repair shop. It is this service work which is becoming more difficult for franchised vehicle dealers to capture.
Henry Allessio, managing director of Walden Consultants, sees “proactive measures by OEMs to improve sales and profits of their dealers’ service business, and to create innovative ways to sell incrementally more aftermarket parts which generate above-average profits for both the vehicle companies and their dealers.”
Thomas Mortimer, who oversees computer-related research services at Walden, added: “Near one-half of all franchised vehicle dealers now have online parts selling capability.”
Electronic marketing, and web-based transactions could be the launch pad for the next plunge into the aftermarket by vehicle OEMs, the firm said.
