THE ‘NEW’ AFTERMARKET? LEAN, ‘GREEN’ AND DIGITALLY SMART
NEXUS recently hosted two lively and well attended webinars asking the question ‘Is this the end of the Aftermarket as we know it?’ More than 80 business leaders ‘from Brazil to Japan’, accepted the invitation to take part. Below is a summary of the discussion and the key points that emerged.
Both webinars were held on Thursday, 28th May and began with Sebastian Kempf, leader of McKinsey’s aftermarket sector for EMEA, outlining the impact of COVID-19 and the potential future shape of the aftermarket.
The morning session was joined by delegates from across Europe and the Middle East, with the afternoon’s online gathering attracting senior representatives from the United States.
The consultancy’s view: A more collaborative aftermarket
Sebastian began by comparing the factors, from an aftermarket perspective, behind the 2008 recession and those behind the Coronavirus crisis.
The two scenarios were comparable in that they both saw a drop in GDP and fewer vehicle miles. However, in the 2020 crisis state mandated lockdowns have added to the fall in demand for automotive parts, the restriction leading to fewer collisions and lower numbers of customers visiting stores and workshops.
More positively though, this has created a ‘tailwind’ of opportunities, with:
- A greater focus on e-commerce and buying online
- A move away from public transport to private vehicles
- With prices dropping there is potential for growth in car sales, and lastly
- Government stimulus will increase the purchasing power of motorists, with a subsequent increase in inspections, servicing and repairs.
Key trends already present in the aftermarket are likely to accelerate because of the crisis experience. These include:
- Greater investment in digital infrastructure
- The faster emergence of ‘next generation’ vehicles
- Further consolidation and integration, and
- Sustainability growing in importance.
Fleet customers and differentiated services will also become more important, and new players, particularly digital players, could enter and potentially dominate the market.
Forecasts suggested a slow recovery with the impact of COVID-19 still being felt in 2021, with recovery to pre-crisis level achieved by 2022.
Whichever way the ‘new aftermarket’ goes, said Sebastian, it is likely there will be stronger interdependency and forms of collaboration across the value chain.
The business leaders’ view: A digital shift, a ‘greener’ industry
N! members and suppliers reported a range of experiences from the COVID-19 crisis, all being affected but some more so than others.
All had made changes to adapt to the challenging situation, with a widespread recognition that now was the time to plan for the longer-term and the ‘new normal’.
On action taken to steer through the crisis, reducing wasted time and resources had been a strong focus, with the objective of increasing efficiency and lowering costs ready for the upturn.
A major theme was the growth in digitalisation, with one supplier’s suggestion that ‘the customer journey is now driven by the digital way’ keenly echoed by others. This was seen as not just a technological transformation but also a structural one within the aftermarket.
So, what of the aftermarket of the future? Further digital acceleration, being more than just a parts supplier and ‘greening’ of the industry were identified as major trends, although one view expressed was that there was a lot of talk about digitalisation but not many were actively doing it.
Some questioned whether the concept of ‘the aftermarket’ was outdated to the customer and needed refreshing to meet the ‘smart living’ aspirations of the future, even changing its name.
The development of a circular automotive supply chain would have a major role to play in the longer-term, with moves towards sustainability and a ‘greener’ mobility being driven by and also stimulating consumers. This would include the concept of the ‘clean, green’ workshop or garage.
There was talk of extending traditional roles to offer more, pulling data out of vehicles to devise new products and services, with financial institutions potentially entering the market.
One example was the renting of specialist tooling, too expensive for a workshop to buy but affordable when rented only for when it was needed.
Rounding off the discussion, NEXUS CEO Gael Escribe said four strands of thought had emerged from the response to the COVID-19 crisis.
- Normal ways of working had changed. For many, the home had become the office and the use and importance of technology had accelerated.
- Daily life had become ‘smarter’, stimulating aspirations for ‘smart’ solutions, something being addressed in part by NEXUS’ partnership with Mobilion, the incubation fund for smart mobility entrepreneurs.
- The topic of sustainability was now high, if not top, on the industry’s agenda
- The crisis had put people back at the centre of things, they were ‘the centre of gravity’. This highlighted the relevance of the ‘Talents for the IAM’ initiative that NEXUS had launched and the need to move on quickly with it.