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Strategic Analysis of the Indian Automotive Aftermarket
P7A0-18
February 2015
High Market Growth Attracting New Entrants
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Contents
Section Slide Numbers
Executive Summary 3
Research Scope, Objectives, Background, and Methodology 12
Definitions and Segmentation 20
Country Overview 24
Automotive Aftermarket Overview 28
Vehicles in Operation Analysis 32
Parts Analysis 37
Service Analysis 45
Distribution Channel Analysis 54
OES Channel Analysis 71
Regulatory Influences 80
Technology Trends 84
Consumer Trends 87
Why Market Participants Should Consider Entering the Indian Aftermarket 90
Conclusions and Future Outlook 97
Appendix 101
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Key Findings Industry growth will be driven by old vehicle parc and the country’s strong market potential.
Automotive Aftermarket: Key Findings, India, 2014–2021
• 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 % 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.
Growth
Top
Trends
• 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.
Regional
Trends
Source: Frost & Sullivan
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Key Findings (continued) Independent aftermarket are projected to gain strength from OESs in vehicle servicing, repair, and replacement.
• 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:
o Implementation of Dealer Management Systems by OEMs in an effort to improve customer service
o Preference towards alternate fuel vehicles will increase in future
o Advancement of manufacturing process and parts technologies as part of the Go Green Initiative
o Internet 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 % 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 out of owners
every years to independents. This is the biggest threat for automakers, who need introspection.
Competitive
Environment
• 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.
Technology
Trends
Consumer
Trends
Regulatory
Influences
Source: Frost & Sullivan
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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.
Tires %
Batteries %
Other Parts and Accessories
%
Collision Body Parts %
Oil & Lubricants %
Servicing Parts %
• 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 %)
compared to the growth of the VIO in India (CAGR %).
Note: All figures are rounded. The base year is 2014. Source: Frost & Sullivan
Automotive Aftermarket: Aftermarket Parts Revenue Distribution by Product Category, India, 2014
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Automotive Aftermarket—Market Share by Channel and Repair Service Providers Independent Aftermarket (IAM) to gain from OES, and service chains to take away market share from OES and
independents.
OES Channel
%
IAM %
Automotive Aftermarket: Percent of Auto
Parts Sales by Key Channel, India, 2014
Key:
IAM (Independent Aftermarket):
Includes warehouse distributors,
wholesalers and auto parts retailers.
ASC—Authorized service center or
vehicle dealerships
OES—Original equipment service or
vehicle dealerships.
Automotive Aftermarket: Repair Market Share for
Post-warranty Vehicles, India, 2014
ASCs %
Service Chains
%
Independent Garages
%
IAM vs OES
• IAM expected to gain
from OES because of
standard quality
offering at a
competitive price and
providing parts at a
shorter turnaround time
Service Chains to Gain
• Service chains to gain
from others because of
lower waiting time at
workshops, and
availability of
competitively priced
genuine parts
Note: All figures are rounded. The base year is 2014. Source: Frost & Sullivan
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Automotive Aftermarket—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.
Automotive Aftermarket: Key Growth Drivers, India, 2015–2021
Economic Rebound: India faced its worst economic slowdown in years that has
depressed personal vehicle (PV) sales for consecutive years ending Q1 2014.Post
2014 elections, India earned a stable government after many years, which has begun
economic revival.
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 % until 2021. This will drive demand for parts in the aftermarket.
Increasing Vehicle Age/Miles Driven: Indian consumers tend to use their vehicles longer and so
the number of vehicles older than years will grow. As road infrastructure improves (currently only
50% paved roads), consumers will drive more. Both these factors will drive the aftermarket.
Regular Scheduled Vehicle Maintenance: Of owners, % do regular maintenance to improve the performance
and life of the vehicle. This would drive the aftermarket. However, % 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.
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 % to %.
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.
Degree of Impact
Gro
wth
Dri
ve
rs
Low High Source: Frost & Sullivan
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Automotive Aftermarket—Growth Opportunities for Industry Participants Most Indian consumers change from authorized service centers (ASCs) to local service centers (LSCs) after two
years of vehicle ownership.
Source: Frost & Sullivan
• % of customers shift from ASCs to LSCs within years of purchase primarily because of greater waiting time at ASCs as they take in vehicles beyond capacity. IAM suppliers need to assist their service partners in seizing this opportunity by providing high quality parts at a lower price.
Capitalize on Opportunities
Created by OES
• IAM organized part suppliers should focus on supplying parts in high volumes to multi-brand service chain outlets such as myTVS, Carnation, Castrol Pitstop etc. because these service chains are expected to gain market share in future for providing value for money quality to car owners.
More Sales to Multi-brand Service
Chains
IAM Participants
• Compressed natural gas (CNG) vehicles have better acceptance than any other gasoline-diesel alternative in India. Currently, only % of owners have CNG vehicles, but is expected to gradually grow. IAM participants should begin to focus on servicing and repairing such vehicles.
Growth in CNG
Vehicles
• More than % of all prospective car owners/buyers go online before they walk
into a dealership. Dealers should invest in online marketing and social media
for better CRM results, brand building, and increasing sales without spending a
lot of money.
• Used car businesses and exchange programs help increase new car sales by
acquiring new customers, and retaining existing customers.
• Vehicle servicing accounts for less than % of dealer profits, so the used car
business has strong potential to overtake vehicle servicing revenue in the
future.
• OES is preferred for major and accidental repairs. Affiliations of OEM part suppliers with multi-brand service chains such as Bosch Car Service and Mahindra First Choice will be beneficial because of less costly labor rates and usage of low-cost genuine branded parts that attract vehicle owners.
Affiliations with Multi-brand Service
Chains
Used Car
Business Potential
Investment in Online Marketing
OES
Participants