The rising variety of girls driving throughout the GCC is one in every of 5 key tendencies reshaping the area’s automotive aftermarket. Vishal Pandey, Companion at Glasgow Consulting Group, instructed ConsultancyME that resulting from these shifts, the market is bouncing again quicker than anticipated after the final two years of the pandemic.
The automotive aftermarket is the secondary market of the automotive business. After the sale of the automobile by the unique tools producer (OEM) to the buyer, the aftermarket is worried with the manufacturing, distribution, retailing, and set up of all automobile components and tools wanted to take care of or improve these automobiles.
The development of those components and equipment on the market just isn’t all the time linked to the OEM, and as an alternative centres on a burgeoning economic system of impartial suppliers.
Traditionally, the automotive aftermarket has been probably the most recession-resistant a part of the automotive business. It is because its measurement doesn’t rely on new automobile gross sales. When financial strain causes drivers to delay buying new vehicles, repairs on their present (and older) automobiles turn into much more important – thus enhancing gross sales within the aftermarket.
Whereas the Covid-19 pandemic was completely different from earlier recessions – because it meant many drivers have been fully off the highway for giant durations of time, so much less upkeep was wanted – Vishal Pandey is seeing indicators that the aftermarket is again, and set for a stronger than ever return in 2022.
The companion at Glasgow Consulting Group famous, “The short-term dip in common kilometres lined by vehicles through the pandemic has not affected the demand for components negatively; as an alternative, the regular variety of automobiles in operation and the expansion within the used automotive market have solely ensured the resilience of the aftermarket.”
“This growth is so sturdy that regardless that public transport utilisation is rising, it’s not more likely to have an effect on automotive gross sales within the close to future.”
One other issue driving up demand is the truth that a rising variety of shoppers are falling out of approved dealership as soon as the guarantee interval is over – this proportion is estimated to presently sit at 80%. “That is primarily resulting from lengthy ready interval and excessive price of service at supplier retailers,” defined Pandey.
Wanting on the GCC (Gulf Cooperation Council) area, Pandey famous that the aftermarket growth is especially sturdy within the United Arab Emirates (UAE) and Saudi Arabia. Mixed the 2 markets account for 60% of all automobiles bought within the GCC, and because of this they’re additionally the most important markets automotive aftersales and auto components.
Based on Pandey, the passenger automotive markets of the UAE and Saudi Arabia are anticipated to take care of an upward development trajectory for the subsequent 5 years – pushed by 5 key tendencies.
Altering demographics
Most notably, the gradual modernisation of the conservative oil-states signifies that new markets are opening up for automotive gross sales and aftermarket customized. To this finish, Pandey pointed to the automotive aftermarket in Saudi Arabia – which is witnessing a brand new part of development and growth on the again of current tendencies, such because the removing of the ban on feminine drivers.
He continued, “A mid-year 2020 report from the Basic Authority for Statistics in Saudi Arabia indicated the inhabitants to be 35 million, amongst which the variety of females have been 14.7 million. The Worldwide Commerce Administration of the US Division of Commerce estimates that Saudi Arabia’s 2.5 million feminine drivers will result in a rise in automotive gross sales by 9% each year by means of 2025. This can additional increase the demand for aftermarket spares components and companies within the nation.”
These shifts are contributing to 2 additional tendencies. Whereas new automotive gross sales have nonetheless not totally recovered, used automotive gross sales are a possible various to supply transport to girls on the lookout for their first automobiles. These automobiles usually tend to want spare components – driving demand for that facet of the aftermarket.
Used auto spare components are primarily sourced from “broken vehicles bought by insurance coverage corporations at throwaway costs or from police auctions”, in keeping with Pandey – however altering this might provide a giant alternative for the area.
As governments throughout the GCC look to wean their economies from their dependence on oil manufacturing, they’re boosting manufacturing within the area. This third key development will include jobs, boosted client spending energy, and alternatives for the automotive aftermarket to develop operations – assembly the rising demand from new drivers taking to the roads.
“Most automobiles and components bought in Saudi Arabia are imported, and native manufacturing is proscribed to small auto components and truck meeting,” Pandey added. “The federal government is eager on making a home automotive business and has inspired world automobile producers to determine native operations. This is able to each result in native job creation, switch of applied sciences and expertise and improve the auto components manufacturing provide chain within the nation.”
One other development which the automotive aftermarket might want to use this enlargement to assist meet, is rising demand for automobile customisation. This, Pandey argued, is very standard amongst Saudi automotive homeowners; with the demand for automobile modifications within the Kingdom having “elevated exponentially” over the past decade. That is one thing he anticipates to proceed, heightening purchases of auto elements within the aftermarket.
Lastly, as digital expertise continues to roll out throughout the area, the fifth development driving aftermarket development includes corporations leveraging this variation to benefit from new gross sales and repair channels. That is each serving to prospects supply components and companies linked to the operating of their automotive – and companies which might help them take care of ongoing issues concerning the pandemic, and public well being.
Pandey expanded, “The rising adoption of cell servicing, workforce hygiene, shared mobility, contactless companies, e-commerce and automobile pick-up has boosted demand for disinfection, cleansing and automotive wash companies. Buyer desire for auto servicing is shifting in direction of cell platforms, which has resulted within the emergence of cell app aggregators that join customers with service suppliers of roadside help, automotive wash and components alternative.”
Wanting forward
“All these tendencies have pushed aftermarket suppliers within the UAE and Saudi Arabia to adopting a service-oriented enterprise mannequin that prioritises customer support,” Pandey acknowledged. “This has seen the profitable development of recent channels for buyer engagement and gross sales of spare components, and plenty of suppliers have boosted their gross sales by means of on-line channels in the previous few years.”
In the meantime, shifts are additionally anticipated to happen between the OEM’s and various suppliers. With so many extra vehicles approaching the highway, OEMs will “not have the ability to accommodate all demand for upkeep and spare components”, which means that third occasion suppliers will have the ability to develop their footprint.
“Based on a current survey we performed, 94% of car drivers contemplate third-party aftermarket companies, implying a major variety of prospects are prepared to make use of companies from an outdoor workshop for automotive upkeep.”
Pointing to this mounting alternative for various gamers, Pandey concluded, “Nearly all of respondents opted for workshops inside their cities for automotive washing, filter examine and tyre change, and workshops outdoors their cities for servicing of batteries and brake pads. The selection of workshops outdoors cities was attributed to decrease price and better pace and high quality of servicing.”