Indian automotive aftermarket : USD 5 Billion (McKinsey 2010 Report)
According to McKinsey & Company 2010 report, the automotive aftermarket for parts in India is a large and growing market that spans manufacturers, distributors, retailers, service providers and garages.
The total size of aftermarket sector is currently estimated at USD 5 billion to USD 6 billion with 34% car after-sales market (with additional Rs. 8000 crore to Rs. 12000 crore car servicing). Interestingly, there are only 4 states (Maharashtra, Andhra Pradesh, Delhi and Tamil Nadu) contributes 40% share. The market is expected to grow at a rapid 11% per annum.
CURRENT MARKET: FRAGMENTED
According to report, current market structure is fragmented. The value chain in India remains highly fragmented and there is a significant level of intermediation required for parts to reach end customers. The production of parts is split between original equipment manufacturers (OEM), original equipment suppliers (OES) and generic manufacturers. While OEM’s may rely on their own distribution networks, with parts being sold through directly-owned or franchised dealers, the independent channel has grown in significance in recent times. Original equipment suppliers have the advantage of being able to both directly supply OEMs, as well as go through independent distributors.
REPORT ANALYSIS AND SUGGESTIONS:
The report suggested the player must undertake specific initiatives to ensure margins remain at current levels. According to suggestions, the independent garages and multi-brand dealers must capitalise on India’sageing car-parc. Market interviews and analysis indicate that owners of older vehicles often migrate to independent service networks for cheaper and faster service. The lower cost of servicing at independent garages is influenced by primarily three factors – the ability to source generic parts at a lower cost than OE spares, the ability to reach scale in smaller locations through servicing multiple brand vehicles, and the lower overhead cost structure compared to OEMs. Given that the auto market in India has been growing rapidly for the last few years, both generic manufacturers and independent garages and service providers must position themselves to capitalise on this trend. With OEMs more focussed on vehicles in their warranty period, offering higher levels of service for older cars will be necessary for independent players to attract customers. This means they must build a reputation for reliability by focusing on standardisation and quality, while adequately preparing for increasing complexity in vehicles
Here are some suggestions:
Owners of older cars migrate to independent service networks for cheaper and faster service. As the car-vintage matures in India,independent garages must:
1. Build trust: there is low confidence is quality and reliability.
2. Bring in standardisation to prevent migration to OEM service providers.
3. Prepare for increasing complexity in vehicles with adequate training.
Lastly, the report concludes with some overall structure of the aftermarket and opportunities in India.
The Indian automotive aftermarket is at an inflection point – vehicle parc is increasing, parts are getting more complex, customers are more price sensitive, and global suppliers are expanding their sourcing and distribution presence in India. Scaling up capacity to service the growing demand will be a challenge for Indian companies across the value chain, especially with margins likely to come under pressure. Overall, the industry revenue pools will significantly increase, and players who adapt their business models to the changing scenario, are likely to emerge as winners.
Source Report: Full report can be read at:
http://www.scribd.com/doc/48556401/AutoServ-Opportunities-in-the-Indian-Automotive-Aftermarket-Final
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