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5 Trends for the Automotive Aftermarket in 2023

Trends

December 2, 2022

14 MIN of Reading

The aftermarket sector is going through several structural challenges that question the future of many businesses today installed, due to these continuing to operate according to paradigms that are being strongly conditioned by the new dynamics of the markets and the global economy itself.

The electrification of mobility driven by the legal force of the EU is highlighted; the new players on the production side; the change in the concession model in Europe; the consolidation of the parts distribution business; the convergence of the independent aftermarket with the original and also digitalization as a strategic transformative factor for any business.

Despite the 'typical' resilience that has characterized the used vehicle market compared to the new car sales business, there remains concern about the long-term strategic vision in many companies operating in the IAM market, whose core activity is sustained by the aging vehicle fleet.

In fact, Portugal is the 6th country with the oldest fleet in the EU, according to ACAP data. About 65% of the circulating fleet is over 10 years old. This scenario may be accentuated due to the scarcity of new model deliveries.

The main trends
for 2023 from Tips4y's perspective

Inflationary pressure will play a decisive role in product management, commercial policies – prices and payment terms – and distribution, in the face of an expected economic recession, and with that influence many businesses, without prejudice to the possibility of seeing the strengthening of some trends already pointed out for 2022.

1. Digitalization of Services

Cost review will be a priority in business management and process digitization a strong ally in this need, by allowing the operation to be profitable based on process agility. It is foreseeable that digitization will also continue to increase e-commerce and the relationship with the end customer in B2B and B2C models.

2. Electrification of Mobility

The sale of electrified vehicles will continue to be a priority for major manufacturers globally, contributing to this segment's strong growth trend until it begins to reach the aftermarket, especially used EVs (due to the trend in the following point) constituting an opportunity for workshops in the sector to reposition themselves in order to capture this business by providing maintenance and repair services in a differentiated way.

3. Increase in Used Car Sales

In addition to the cost of raw materials, the context of supply chain restrictions for semiconductors will continue to condition the production of new models and, consequently, the strong demand for used vehicles, thus influencing price behavior in this market and intensifying what has been observed this year with the increase in the import of this type of vehicles.

4. Sector Consolidation

A search for greater efficiency in business and structural synergies will become increasingly evident, so the sector will continue to witness concentration movements: the disappearance of barriers between OE and IAM channels; the consolidation of the Parts Distributors segment and the entry of manufacturers into the aftermarket parts business.

5. New Business Models

In light of the ongoing dynamics in the sector, it is anticipated that the competitive environment in 2023 will lead to new business models, largely influenced by manufacturers planning to enter the IAM sector through concrete initiatives: launching alternative sales channels based on value-added services (e.g., innovative mobility solutions, differentiated warranty plans, etc.), alongside the introduction of an agency model that phases out the traditional dealership concept.

IN AN INDUSTRY IN TRANSFORMATION DUE TO TECHNOLOGICAL CHANGES, CHANGING CUSTOMER HABITS, AND AN AMBITIOUS EUROPEAN REGULATORY FRAMEWORK, IT IS CRITICAL TO KNOW HOW TO INTERPRET CURRENT AND FUTURE SIGNS AND TRENDS THAT WILL SHAPE THE DESTINY OF BUSINESSES.

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