According to Frost & Sullivan’s recent analysis, Digital Business Models Mitigating COVID-19 Implications on Global Aftermarket Performance in 2020, aftermarket revenue expanded by 4.1% in 2019. This was largely driven by a 3.2% growth in vehicles in operation, with the contraction in global gross domestic product (GDP) growth stifling consumer expenditure on new vehicle purchases. For 2020, the market was initially forecasted to grow at a healthy 4%; however, following muted consumer demand and supply-chain disruptions caused by the COVID-19 pandemic, it is now expected to contract between 4.9% and 11.6%. New aftermarket demand pockets will rise from the need for customer safety and wellbeing, creating a $75-billion market opportunity for contactless delivery of parts and services by 2025.
“The global automotive aftermarket is at a crossroads and has severely impacted stakeholders at all levels. Supply chain reorientation, financial aid to channel partners and the digitization of traditional business models and services can help mitigate some of the adverse effects of the pandemic,” said Anuj Monga, Research Manager, Automotive & Transportation at Frost & Sullivan. “Increased awareness about the significance of social distancing and enhanced personal hygiene is expected to drive service providers to adopt digitization of the aftermarket ecosystem as customers will prefer contactless provision of services at their preferred locations, thus diminishing footfalls at workshops. A whole new segment of health and wellness in-car care is opening up and looks promising well beyond the immediate aftermath of the crisis.”
Monga added: “There is ample scope for turning adversity to advantage if appropriate investments are channeled towards the digitization of existing business models. E-retailing of parts and accessories, the uberization of vehicle services on aggregator platforms, and on-demand services are expected to be bright spots in an otherwise dismal business environment.”
The global aftermarket performance is expected to temporarily shrink post-COVID-19. However, to mitigate risks, companies in this sector should take advantage of the growth opportunities by:
- Investing in eCommerce solutions for the e-retailing of replacement parts and accessories. Aftermarket online retailing is forecast to grow between 15% and 17% in the next five years globally.
- Creating platforms for the digital retailing of vehicle service jobs, both for repair and maintenance requirements. This would help extend visibility to out-of-warranty customers and soften the impact of reduced new vehicle sales.
- Offering on-demand services such as fuel delivery, oil change, tire services, maintenance, and cleaning. Such solutions work around customer apprehensions regarding workshop safety while offering the added convenience of ordering a vehicle service at the location of their choice.
- Developing products such as cabin air filters, in-vehicle sanitizers, driver PPE, and even solutions targeted at workshop sanitization and technician safety. Parts, accessories, and services related to the hygiene and in-car care of commuters are expected to generate $2.2 billion in the next four to five years.
Digital Business Models Mitigating COVID-19 Implications on Global Aftermarket Performance in 2020 is part of Frost & Sullivan’s global Automotive and Transportation Growth Partnership Service program.