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Strategic Analysis of the Indian Automotive Aftermarket : High Market Growth Attracting New Entrants

  • February 2015
  • 105 pages
  • Frost & Sullivan
Report ID: 2750952

Summary

Table of Contents

Key Findings

Industry growth will be driven by old vehicle parc and the country’s strong market potential.

• The passenger vehicle aftermarket is estimated to grow at a CAGR of % for the following reasons:
o The growth of vehicles in operation (VIO) is estimated at % over the forecast horizon, with more vehicles in the to year range requiring replacement.
o Vehicle maintenance needs are higher than average in India because of poor road infrastructure and consumption of low-quality fuel.
o A strong economic growth forecast combined with an increase in disposable consumer income will drive consumer spending habits on vehicle maintenance.
•Global automakers operating in India will increase the amount of locally made parts in vehicles, which they sell in India to cut costs in a competitive market dominated by cheap small cars. This opens up new growth opportunities for original equipment manufacturers (OEM) part providers and would make the market more competitive.
•Counterfeit parts account for as much as x % of passenger car aftermarket part sales. This is the biggest challenge for the aftermarket and will continue to be unless regulations are imposed on selling these parts.
•Due to increased competition in new car retailing, OEMs are looking to extend the relationship with customers by ensuring that they continue to return to their dealerships for their servicing needs.
•Unauthorized multi-brand service chains are likely to take market share from original equipment service (OES) and local garages.
•India is a highly fragmented market with regional variations and no distributor has complete presence in India.
•Gurgaon, Pune, and Bangalore forms the strategic locations for Indian OEMs to establish regional warehouses, which distributes parts in the independent aftermarket.
•The aftermarket in India is currently unregulated for both parts and services.
•Because there is no mandatory standard for products sold in the aftermarket, the production and import of counterfeit products cannot be checked. This is a large challenge.
•Automotive Component Manufacturers Association (ACMA) plans to propose “incorporation of aftermarket standards” in the “Motor Vehicles Act” to the government in 2015, which will make selling counterfeit parts a cognisable and non-bailable offence.
•Key technology trends in India are:
oImplementation of Dealer Management Systems by OEMs in an effort to improve customer service
oPreference towards alternate fuel vehicles will increase in future
oAdvancement of manufacturing process and parts technologies as part of the Go Green Initiative
oInternet emerging as key vehicle diagnostics source of information for aftermarket technicians
•As per Frost & Sullivan’s study finding on passenger vehicle service patterns in India, % of customers do regular maintenance to increase the performance and life of vehicles. This would drive the aftermarket.
•Close to x % of the customers shift from the OES channel to the independent aftermarket for vehicle servicing within two years of a car purchase. This means that automakers are losing x out of x owners every x years to independents. This is the biggest threat for automakers, who need introspection.
•In parts manufacturing, the unorganized sector does not adhere to government stipulations poses a significant threat to the organized sector (OEM and aftermarket part suppliers) because they are price competitive.
•In vehicle servicing, multi-brand service chains are likely to be the biggest competitors for the OES channel because they have a strong quality brand image.

Aftermarket Parts Revenue Distribution by Product Category

Servicing parts such as filters and brake parts will be the fastest growing category during the forecast period.
•Other automotive parts (e.g., engine and transmission parts, HVAC parts, fuel delivery system parts), as well as accessories (e.g., body kits and seat covers), will dominate the aftermarket and is expected to continue to be the largest revenue generator in future.
•Consumable servicing parts, such as filters, brake parts, spark plugs, and lighting, will be the fastest growing category and will capture a greater share of the pie in future.
•Improved vehicle safety features are more likely to slow the growth of the collision repair parts market (CAGR x %) compared to the growth of the VIO in India (CAGR x %).

Key Growth Drivers

India is gradually becoming the manufacturing hub of auto components for most global OEMs. This opens up new growth opportunities for OEM part providers and makes the aftermarket more competitive.
Poor Condition of Roads Causes Increased Wear of Parts: The poor road conditions resulting from the use of substandard raw materials, overloading, and weather conditions cause great damage to parts resulting in faster replacement. A faster replacement cycle translates to higher demand for parts in the aftermarket.
India becoming the Manufacturing Hub for Global Automakers: Global automakers operating in India will increase the amount of locally made parts in the cars they sell in India to cut costs in a competitive market dominated by cheap small cars. For example, Volkswagen had planned to soon make engines and transmissions in India so that it can raise the locally made parts content in its vehicles from the current x % to x %.
Regular Scheduled Vehicle Maintenance: Of owners, x % do regular maintenance to improve the performance and life of the vehicle. This would drive the aftermarket. However, x % of owners report that they do not follow the manufacturer’s recommended schedule for maintenance, as they find it to be too expensive and frequent.
Increasing Vehicle Age/Miles Driven: Indian consumers tend to use their vehicles longer and so the number of vehicles older than x years will grow. As road infrastructure improves (currently only 50% paved roads), consumers will drive more. Both these factors will drive the aftermarket.
Steady Increase in VIO: Vehicle sales have been robust until 2012 and dipped in 2013, but is forecast to show strong growth. This will result in increased VIO, which is forecast to grow by x % until 2021. This will drive demand for parts in the aftermarket.
Economic Rebound: India faced its worst economic slowdown in x years that has depressed personal vehicle (PV) sales for x consecutive years ending Q1 2014.Post 2014 elections, India earned a stable government after many years, which has begun economic revival.

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