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5 Trends for the Automotive Aftermarket in 2023

Trends

December 2, 2022

14 MIN of Reading

The aftermarket is facing a number of structural challenges that threaten the future of many companies, as they continue to operate according to paradigms that are being strongly conditioned by the new dynamics of markets and global economy itself.

In particular we highlight the electrification of mobility driven by the legal power of the UE; the new players on the production side; the change in the concession model in Europe; the consolidation of the parts distribution business and the digitalisation as a strategic transforming key factor for any business.

Despite the ‘typical’ resilience that characterises the used car market compared to the new car sales business, there is still concern about the long-term strategic vision of many of the companies operating in the IAM market, whose core business is based on the ageing of the car parc.

In fact, Portugal has the 6th older car parc in the UE, according to ACAP data. Around 65% of vehicles in circulation has more than 10 years old. This scenario might be accentuated by the lack of new cars being delivered.

The main trends
for 2023 from Tips4y perspective

Inflation pressure will play a decisive role in product management, commercial policies - prices and payment terms - and distribution, against the expected economic recession, and will thus influence many businesses, without prejudice to the fact that we may see the reinforcement of some trends already mentioned for 2022.

1. Digitalization of Services

Costs review will be a priority in business management and the digitalisation of processes will be a strong ally in this need, as it enables operations to be made more profitable based on the agility of processes. It is also predictable that digitalisation will continue to increase e-commerce solutions and the connection 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) being an opportunity for independent workshops 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 of imported vehicles.

4. Market 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

Given the dynamics underway in the sector, it is predictable that the competitive environment in 2023 will give rise to new business models, largely due to the influence of manufacturers who plan to enter the IAM through concrete initiatives: launching alternative sales channels based on added-value services (e.g. innovative mobility solutions, differentiated warranty plans, etc.), along with the introduction of the agency model that discontinues the traditional concession concept.

IN AN INDUSTRY THAT IS CHANGING DUE TO TECHNOLOGICAL DEVELOPMENTS, TO CUSTOMER BEHAVIOUR AND TO AN AMBITIOUS EUROPEAN REGULATION FRAMEWORK, IT IS CRITICAL TO KNOW HOW TO UNDERSTAND THE CURRENT AND FUTURE TRENDS THAT WILL SHAPE THE FUTURE OF THE AFTERMARKET BUSINESS.

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