Introduction
With the rise in technological advancements globally, the automotive sector is poised to be a center of transformation in the years to come. There have been major technological advancements in electric vehicles, autonomous driving, connectivity, digital sales, the increased used car market, and a special focus on safety measures has transformed the automotive sector in India. For any industry to thrive, it is crucial to adapt to changing market dynamics. The automotive aftermarket sector in India has adapted to the rising demand for technological innovations and the growth path of this industry has been set in stone.
The COVID-19 pandemic got the whole industry to a slump which impacted the entire value chain and associated industries. Despite this, the Indian auto industry has registered a rapid growth rate by embracing new age technologies and adapting to recent market trends.
A key contributor to the country’s economic growth, the automotive sector in India adds 7.5% to the GDP and stands tall as a major contributor to the manufacturing GDP with a staggering rate of 49%. The Indian auto industry witnessed a remarkable growth of 23% and added a 2.3% share to India’s GDP. With current projections, it is estimated that this industry will contribute about 8% to the country’s GDP by 2026!
There are multiple contributors to this sector achieving phenomenal statistics such as various government schemes have added a push to the current automotive sector.
The Future Growth and Market Size
The automotive sector in India is estimated to reach $14 Billion by 2028, according to research conducted by ACMA and Earnst and Young.
The growth of the Indian aftermarket is pushed by a rapid increase in the vehicle park, which currently stands at $340 Million and shows a growth at a CAGR of 8% in the next 5 years.
Composition of The Aftermarket
Aftermarket for any industry comprises anything and everything that happens post the sale of a product. The automotive industry aftermarket comprises various components such as engine parts, suspension and braking parts, transmission parts, rubber components, cooling systems and filters, tyres, and consumables such as batteries, coolants and lubricants.
There are thousands of such components which together comprise the aftermarket in terms of the parts. When we talk about the service sector in the aftermarket industry, it comprises various workshops, service centers, and also includes companies that provide aftermarket software solutions. These aftermarket software solutions cater to specific needs of manufacturers.
The rising demand in the aftermarket industry has not just made an impact on the parts and components industry but the aftermarket software solutions as well. A vehicle has thousands and thousands of parts which need to be managed efficiently. And not just the parts, the communications between the manufacturers, dealers and suppliers have to be streamlined and effective. With the vehicles becoming more complex now, the warranty structure also needs to be robust. Such technological aspects are catered to by aftermarket software solutions.
What Are the Trends in The Aftermarket Industry
The automotive sector in India is set to benefit from globalization which is bringing forward new opportunities for the mobility sector. There is a special focus on vehicle technology that are deemed efficient, reliable and safe. The next few years will see newer verticals and opportunities for component manufacturers in the automotive industry. As India grows into the third largest passenger vehicle market, the automotive value chain should prepare for a changing landscape and global trends that are going to reshape the automotive sector.
New technologies and major changes that accompany them will be crucial factors in the way auto part manufacturers and suppliers will operate in order to maintain a strong position in the future. The auto parts market is bound to be affected by shifts in vehicle technology. Learning from past disruptions in other industries, we know that not having the requisite strategies to cope with these disruptions can lead to decline not just for individual, established corporations but also for whole sub-industries. But, as much as experts agree that significant changes are ahead, a big picture of all trends and ideas to face them needs to be urgently developed.
Aftermarket Consumer Needs are Changing
The passenger car vehicle base today stands at a healthy number of over 29 million units and is set to grow at a consistent pace over the next 8-10 years. Synchronized with a growing GDP, the Indian households are witnessing rising disposable incomes. The rising potential of rural India opens doors for new opportunities and possibilities of growth for both the new and used car market. With this, the vehicle service market has seen a steep growth due to a rise in demand.
Various car and taxi aggregators are also contributing towards a higher average running per year, thereby increasing the service needs. This brings forward opportunities for skilled technicians and opportunities for workshops to utilize new technologies to cater to this rising service demand. These workshops and service centers will also need to ensure they follow standard operating procedures to ensure quality standards and adhere to service timelines which would help them stand out of the competition.
Automobiles are Lasting Longer
With the advancements in technology, the vehicles have become robust and durable and the average age of the vehicles has seen a rise in the recent few years. Since 2002, the average age of cars has increased by nearly 16%, from 9.78 years to 11.33 years. More impressively, just over 10% of that growth occurred in the past five years. Some of the major factors contributing to this are the coming up of the organized used car market, improvements in the vehicle build quality and original equipment standards, greater emphasis and awareness about vehicle maintenance.
This increase in average age of vehicles is not limited to just passenger vehicles but other light vehicles such as commercial pick-up trucks and light vans also witness an increased life span. While this growth is expected to level out before the end of this decade, longer-lasting cars present a great boon for aftermarket auto parts manufacturers, as older vehicles require more repairs and maintenance, thereby necessitating more aftermarket parts.
Distributor Consolidation
This has been particularly witnessed in the international market with few big distributors holding a dominant position in the need to reach critical mass and leverage economies of scale. In the medium to long term, we also see this as a possibility for the Indian market. We will witness many large distributors utilize aggressive growth strategies, including takeovers of smaller businesses with strong dealer networks and manageable services.
The use of digital channels by the Indian consumers have increased which is both the same in research and purchase. This will set a focal point for innovation and will lead the way for newer business models to thrive in this digital aftermarket space. It will be interesting to see how the adoption of e-commerce channels for purchasing spare parts unfolds. Within manufacturers as well, it is both interesting and important to utilize digital channels to optimize and streamline the levels of operational excellence and show agility towards adopting new and disruptive technologies.
Personalized Customer Experience
Today, the consumers have not just become aware, but have adopted a research-led purchase trend. In such cases, businesses have to adapt to changing conditions of the market and personalize the user experience. This shift in the paradigm has been brought about by the need to have a diversified offerings for various aftermarket services a customer might need. We have seen a rise in personalisation and vehicle modification in the Indian subcontinent. With this trend, businesses need to adopt diverse strategies based on insights accumulated through data collection.
By utilizing technologies such as machine learning and data analytics, it becomes clear as to what the trends and forecasts portray. This can help in designing packages for consumers based on service, maintenance, modifications, etc. A consumer today feels valued when a business considers his pain points and collates them into a packaged offering. This enables customer satisfaction and reduces the downtime for service delivery. When businesses offer greater transparency and clarity in communications, the consumer would prefer to associate with such businesses.
The Rise in Electrification of Vehicles
The market for passenger vehicles in the country will evolve in the context of several larger trends, some specific to India, and some relevant globally. These include favorable macro-economic and demographic trends like the automotive sector currently contributing 8% to India’s GDP. The Automotive Mission Plan 2016-26 sets an aspiration to increase the contribution to 12%. Electrification has just started to take off in India. Factors such a government support in manufacturing batteries and also declining prices are a major enabler in this segment’s growth. As we continue with the discussions about the pros and cons of electric vehicles, we cannot overlook the fact that they are the need of the hour, reducing the dependency on fossil fuels and bringing down pollution levels.
The pros and cons of electrification continue to evolve. Reduction in emissions and decreased dependency on oil imports are clear advantages of electrification. The level of adoption of electric vehicles will determine its impact on the automobile industry. According to industry experts, people carriers like buses, two- and three-wheelers, luxury passenger vehicles and light commercial vehicles could see maximum penetration by 2030. We can already see this electrification in action in public transport and commercial vehicles.
The adoption of electrified vehicles in public transport will definitely bring about a positive impact on the current mobility value chain. This has also given rise to many new and innovative manufacturers of two and four-wheelers and battery manufacturers. India has transformed into a leading hub of providers of such services. Even the established market players in the mobility market have adopted this rising trend of electrifying their offerings. Some are focused towards bringing innovative technologies while reducing the environmental impact of vehicles.
Ensuring Safety
The attention to high-end safety equipment in cars has garnered greater attention these days. The aftermarket industry today is focused towards developing enhanced safety solutions to not only ensure the passengers but also the pedestrians’ safety is also considered.
These solutions assist in blind spot detection, lane changing, and collision mitigation. While a select few would have previously opted to include them in their cars, they are now starting to become the standard on the market.
Additionally, a 360-degree built-in camera driver and voice recognition have been added to the in-car infotainment system to improve driving experiences and prevent road safety problems. In the upcoming years, the Indian aftermarket will see a host of inventive offerings such as intelligent parking services and self-driving travel itineraries, advanced remote locking, a more accurate and prompt collision alert system, breakdown alerts, and so on. These new technological solutions will lead to personalized experiences with connected services and later into autonomous driving.
Subscription Models on The Rise
Subscription-based services can be seen everywhere, from your online video platforms to mobile services, almost 90% follow the same idea. This has also been a practice in the service segment for the mobility market. There are multiple businesses such as GoMechanic, that provide a subscription for a certain price that provide service and maintenance of vehicles at the convenience of the customer. These subscription services cover pick-up and drop-off as well which differentiates them with the general annual maintenance plans provided by multiple service centers.
With strict competition in today’s time, these companies offer flexibility in terms of their service and also employ customer-centric strategies to alleviate satisfaction. These services offer a hassle-free experience to customers as they cover the regular maintenance and replacement of parts. Today, most people have lifestyles that give little or no flexibility in terms of experimenting with various service providers. They want to buy one and stick with them.
Optimizing Supply Chain
The automotive supply chain can have better scalability and profitability through strategic implementation of new technologies and innovative business strategies. The warehouses managed the product registration manually and this would cause errors that would lead to delay in supply of such products is an example of how the need for implementing new technology and innovation is essential.
This time of technological innovation has made possible situations where by utilizing real-time data, businesses can improve their decision-making and also cater to the customers needs in an efficient manner. In the same way, the automotive industry is gaining steady traction powered by the customer's need towards the installation of advanced components to improve the safety and appearance of vehicles. The integration of technology into vehicle safety has been transcendental. Safety, online retail, personalization, Connected, Autonomous and electrification, online retail, and supply chain automation are all going to be key drivers of this change in the dynamic Indian aftermarket sector.
Auto Parts Manufacturers to Drive E-Commerce
The post COVID era has seen a boom in e-commerce. There have been businesses solely focused towards an e-commerce business and have achieved marvelous feats. The aftermarket isn’t going to remain behind in such a race. Marked by greater awareness and accessibility, the digital revolution in the industry has given tier 1 auto parts manufacturers a chance to sell directly to their customers as opposed to the previous trend of multiple middlemen like distributors, wholesalers, retailers, mechanics, etc. There has been a rise in service providers who provide such e-commerce portals for customers to choose their product/service and have expanded further by enhancing their service offerings, keeping in mind the customer satisfaction and flexibility.
Apart from this, many have chosen to use pre-built cloud platforms to make it easy for customers to buy auto parts from different brands online like Amazon, Flipkart, and Boodmo. However, some companies are now developing their cloud platforms to make things even more convenient for their customers. This has helped in breaking down the limiting geographic barriers and expanding sales across markets. Direct selling also means that consumers are more aware of the products that they are buying. The increase in online retail stores is certainly helping enhance the customer experience, thereby creating a friendly customer-brand relationship based on trust.
Mar-Tech Integration to Enhance Customer Engagement
The marketing technology industry has experienced a growth that has no comparison. The last decade has been all about new trends shaping the martech industry with special focus on digital tools - enabling businesses for a cohesive, connected experience. These strategies have driven growth, customer engagement and also brought customer awareness. Aftermarket businesses are leveraging such technologies and strategies that are focused towards data and enable them to strategize for the future, while maintaining customer-centricity.
Data is going to reshape decades to come and aftermarket businesses need to evolve their marketing strategies to adapt to such trends. Creating a cohesive experience for customers has also been a future-forward approach for businesses and they have implemented such practices in terms of digital sales channels, online showrooms, integrating chatbots on their websites and adopting customer communication channels such WhatsApp to drive better customer engagement and personalized services.
Conclusion
The aftermarket industry in India is experiencing a boom in terms of the growth of the automotive market, demand for vehicle service and customizations, and enhanced focus on safety and similar equipment. Today, aftermarket businesses have narrowed their focus down towards embracing digital transformation and leveraging new technology to implement innovative solutions. These innovations have brought about ripples in the entire value chain of the mobility market and have brought forward new players that are shaping the future of the Indian aftermarket industry.
We are experiencing new battery manufacturers, electric vehicle manufacturers and service providers with new and innovative approaches to solve traditional challenges. The supply chain also took a severe hit during the COVID era which brought about the onset of e-commerce in the aftermarket. Multiple businesses launched digital sales platforms and online portals to ensure the customer experience isn’t hampered. These businesses also integrated advanced technologies such as AR and VR to offer a seamless experience to customers. Even with the service sector, there are many businesses that offer flexible service options for vehicles, especially since we have seen a steep rise in taxi aggregators and commercial vehicles.
All of these together are reshaping the industry as a whole and are taking us all towards a bright and prosperous future which, although is more competitive but, brings the entire value chain together to elevate the customer experience. We are excited to see how all this unfolds in the years to come.
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