THE FUTURE OF THE AFTERMARKET: A GLOBAL GAME
IAAM13, INTERNATIONAL AUTOMOTIVE
New challenges await firms in the automotive aftermarket sector and of particular strategic importance is the ability to enter international markets that, unlike Italy’s, do not appear to have been affected by the crisis. A meeting at Autopromotec acted as a link between Italian firms and markets in the BRIC group
HOW CAN YOU EMERGE from a sector, like the automotive sector for example, that is in the grip of profound crisis? This may seem to be an unsolvable conundrum, but there is an answer to this question: expand the range of action to growing markets and nowadays that means leaving the Old Continent and heading eastwards or towards South America. If we place this general precept in the context of the automotive aftermarket, it becomes even more legitimate: if in Italy, and the
Eurozone in general, the car sector is being shaken by two-figure downturns, firms that can’t resign themselves to simply disappearing from the scene can approach markets in Brazil, Russia, India and China (the so-called BRIC group), markets whose growth prospects are encouraging and where the experience and manufacturing quality that characterize Italian firms can be decisive factors for decreeing the success of commercial initiatives.
Anyone who wants to approach these markets should know, however, that it is not simple. It needs a great deal of preparation and thorough knowledge of the issues involved before the necessary investments are made. To describe the market situation in the BRIC group, currently the most interesting for anyone who wants to take commercial steps outside the Old Continent, the 2013 edition of Autopromotec hosted IAAM13 – the International Automotive Aftermarket Meeting – where major experts in automotive markets in China, India, Russia and Brazil painted a realistic picture of the situation in these countries. The meeting was opened by Giorgio Cometti, president of Aica (the Italian association of garage equipment manufacturers), who emphasized that in one of the most serious economic crises that Europe has ever seen, new commercial opportunities must be sought to assert the high level of know-how and technology that Italian firms possess. “We must be ready to provide developing countries with solutions and products that are suitable for those markets, while bearing in mind that in the not too distant future the BRIC group will be our best customer and commercial ally”.
First Europe and then Brazil
The moderator of the meeting was Joseph Frank, senior aftermarket consultant, who shone a brighter light on the European situation. “Crisis or not, the cars that are among the vehicles on European roads” – Frank said – “have to be maintained. There are three challenges that await European suppliers in the automotive market: diversify sources of growth, continue to innovate, and accelerate the time for responding to requests from the market”. To be successful in 2020, we must be in markets that are growing, like those in Asia, promote innovation, have a position of leadership in the relevant domestic market, and be highly flexible”. Focus moved from Europe to Brazil in the talk by Francois Passaga, president of GiPA Brazil. “In 2012” – Passaga began – “the Brazilian car market continued to grow. There is something very interesting about the vehicles circulating in Brazil: 45% of the cars are five years old or less”. Corresponding to this data is the fact that in Brazil, like the rest of the world, there is a decline in the average distance travelled by cars; more cars, fewer kilometres could describe the Brazilian car market in a few incisive words. It must also be said that in Brazil four car brands represent 82.2% of the vehicles on the road and 71.1% of new registrations. A particular characteristic of this market is the large number of flexi-fuel engines, those that use petrol and ethanol without distinction; they represent about half of all vehicles and 86% of new registrations.
Destination Russia and then further east
After Brazil, the Russian car market was the subject of an in-depth discussion. Talking about it was Pierre Fleck of Europart Holding. “Russia” – Fleck emphasized – “is a country of extremes that needs a structured approach; it is also where the automotive market is growing at considerable speed”. But the vehicles in circulation are fairly old and the market is dominated by local manufacturers. Factors for the success of a commercial initiative in Russia were identified by Fleck as the presence of reliable local partners, a strong team with experience of this market, the support of professional organizations and focus on cash management. Further east and beyond the Great Wall lies China. The automotive market in this country was described by Wayne Xing, chairman of CBU China. “In China” – Xing said – “there are now 120 million cars in circulation and by 2020 there will be 220 million. Around 4 million used cars are sold annually; from these data it is easy to understand that the potential of the aftermarket in China is very high”. It emerged that for maintenance and repairs in China there are about 4,000 servicing centres which generate an annual turnover of $81 billion. But the growth of the car market depends on government policies and there are several unanswered questions that could have considerable influence: the issues of safe energy, air pollution and urban congestion. The panorama of the car market in the BRIC group closed with the Indian market and Les Parfitt of TMG Advisory India. “The Indian automotive sector” - Parfitt said – “is the world’s second largest for growth. Specifically, the automotive components industry has an annual growth rate of 14%”. At the moment, the servicing market is dominated by a large percentage of non-organized workshops, but this leaves ample room for development by OEM networks that are more attentive to the efficiency of the service offered and close to the European model. The huge opportunities offered by the Indian market can be taken if operations are highly automated, especially for the replacement of plastics, aluminium die casting, on-board electronic systems, control systems for electric vehicles, and in the area of new and composite materials. The most effective mechanism for entering the Indian market is to share costs and reduce risks to a minimum by setting up a joint-venture with a firm that is already operating in the territory.