The changing face of the Aftermarket

A visit to Automechanika Frankfurt provided Neil Pattemore with a perfect physical manifestation of how the sector is changing

Published:  17 December, 2018

Arguably the world’s largest and most successful aftermarket show was recently held in Frankfurt – Automechanika.
    
If you didn’t go, you missed something very impressive, but there will be various reports about what was there and details of specific exhibitors and their latest product or service in this most noble magazine.
    
However, although I spent most of a week at this exhibition, what intrigued me was not just the enormous variety of exhibitors, with their corresponding products, services and new ideas, but the wider question of why it is so successful and why so many visitors – over 130,000 this year - attend this bi-annual show out of their busy schedules. Most importantly, well over two thirds of these are senior business managers or business owners with 96% stating that they were “very satisfied’”with their visit to the show. Doesn’t this start to tell you something very important?
    
It starts to show why exhibitions are so important, especially at this moment in the history of the aftermarket, and why it is increasingly important to attend this type of show. Let me explain.

Evolution
For over a century the aftermarket has continuously evolved and primarily provides consumers with competitive choices about the diagnosis, service and maintenance of the vehicles – generating healthy competition and impressive innovation along the way. If evidence was ever needed as to how important this is, then Automechanika shows this in abundance. Whole halls (several on three levels) exhibit specific sectors of the aftermarket and the Automechanika organisers help the visitor by keeping all similar products or services in a dedicated area or hall. Believe me, this really helps when planning what you want to see and how to find it, but equally reflects the needs of the visitors who plan their visits almost like a military operation. However, there were some important differences with this year’s show as there was an interesting dichotomy. For the first time, there was a significant retrospective view with older (classic) vehicles in a dedicated hall and at other stands around the show. This was to illustrate that growing skills gap in what is a lucrative and resurgent market, but was also clearly based on the B2B opportunities that servicing and maintaining these cars can create.
    
From the opposite perspective, there was much evidence of new technologies and the rapid revolution that is taking place towards the garage of the future. Perhaps these two elements summarise nicely the question of why so many senior people go to this show – it enables them to understand the threats and opportunities in relation to their businesses and equally, flowing from this, where and when investment in their businesses should take place. This leads into how their businesses can remain competitive, which can be a combination of exploiting new digital technologies to create higher workshop efficiencies, implementing improved tools and equipment or understanding how improved work methods using internet and cloud based solutions can reduce the costs.

Competition
On the other side of the equation is the wider competition issue of how to remain in the position to offer competitive choices to the consumer, as the ability to remain competitive could be under severe threat from changes to the vehicle design, access conditions and new competitors entering the market.
    
Automechanika represents the epitome of the aftermarket’s success, but is viewed by the vehicle manufacturers as a rich opportunity to encroach into the aftermarket sector and ‘take back’ what they consider should be rightfully theirs.
    
As I have written about before, this is part of the connected car and allows the vehicle manufacturer to control all remote access to the vehicle. You may consider that this is not your problem, as you repair vehicles when they come into your workshop, but what is happening now is that the start of this repair process starts with vehicle manufacturers’ applications embedded in the vehicle, monitoring what faults or service requirements are needed and then proposing via the in-vehicle display a location and price where the service or repair can be conducted – the driver just clicks  the icon and ‘voila’, the appointment is made at the nearest main dealer. You can’t compete if you can’t make a competitive offer as you don’t know what is needed and cannot contact the driver at the time the vehicle manufacturers are making their proposal.

Access
So, the aftermarket is evolving, but in a way that may not be obvious until it is too late. Independent service providers can manage their businesses to remain competitive with each other, but there is a distortion with which they cannot compete and with a competitor who wants to control the whole aftermarket value chain and its corresponding profit margins. Without being able to communicate with the vehicle, access its data and use the in-vehicle interface to communicate with the driver, all independent service providers (workshops, parts suppliers, data publishers – i.e. the complete aftermarket value chain) will be unable to offer competing offers, as they will not be able to pre-diagnose the vehicle and identify the parts or technical information required before the vehicle comes into the workshop.
    
This remote access can reduce workshop costs by 50% and the corresponding competitiveness of any service you may wish to provide.
    
This is not a ‘let market forces rule’ scenario, but is a real threat to the ability of the whole aftermarket to continue to offer consumers competitive choices and is an excellent example of the ‘primary market’ being able to dominate the ‘secondary market’ – a similar situation to the famous Microsoft Explorer case, where once you had made your choice of a PC, the only choice for an internet search engine was from Microsoft. To address the problem of monopolistic control in the aftermarket, we need the same support from the legislator as they enacted with Microsoft – ensure that there is the ability to implement a competitive choice and let the consumer choose.
    
Only if legislation supports this basic principle of undistorted competition, will the Aftermarket be able to continue to do what it does best – make innovative, competitive and appealing offers to vehicle owners as well as putting on a great show – in every sense of the word.
xenconsultancy.com

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    The aftermarket represents over two thirds of the vehicle repair and maintenance sector in the UK and the UK government must ensure that this vibrant, innovative and competitive sector can not only continue how it operates today. The sector must also be able to develop future business models as evolving vehicle technology impacts the different ways of accessing the vehicle, its data and the customer.

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    Empowered
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    Clearly, much new EU legislation is on the way and it is vital that the UK Government ensures that these important RMI provisions are ‘carried over’ in the vehicle Type Approval, as well as in other related legislative requirements, after Brexit.

    The future of the aftermarket is rapidly moving into being part of the wider digital economy – and the aftermarket cannot survive in this ‘shark infested’ sector without legislative support – so support the aftermarket associations – they have done good work so far, but there is still much work yet to be done.

    xenconsultancy.com

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    Having just spent three weeks touring New South Wales, while delivering two training events, firstly in Sydney then Canberra I thought it would be interesting to compare how our two different, but also similar markets operate.

    The visit began several months ago with an invitation from a good friend Bob Whyms, Australia’s prominent Porsche specialist in Sydney. The offer comes as part of a training group called Australian Aftermarket Service Dealer Network (AASDN). This is a group of totally independent service and repair independents across the whole of Australia.

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    It is important to understand the incredible geographical constraints yet obvious bond they share for their independence and mutual respect. If I may reflect on our very own Autoinform event in Harrogate in November, where I am sure all attendees would recognise the same sentiments from the AASDN group.

    I was also privileged to visit several businesses in both Sydney and en-route to Canberra. The BWA Porsche specialist host and first training venue, based in the western suburbs, provides genuine expertise in depth from Bob and now also his son Craig. This ranges from servicing to performance upgrades.

    BWA provide a parts service across Australia importing directly from Germany. They also provide a comprehensive machine shop service, which supports their engine remanufacture and performance business. Bob and I had fun reflecting on Bosch D Jetronic and other early evolutions of fuel injection, grumpy old men and all that!

    I was then treated to a visit to a highly respected Mercedes tuning expert close to the airport. Then finally, a very talented young technician specialising in DPF cleaning. The focus on training included ignition diagnostic technique, common rail and direct gasoline injection.

    It was both a pleasure and privilege to share the enthusiasm from the entire audience, their knowledge and interaction was mutually appreciated.

    In a far too brief visit to Dubbo, my good friend Paul gave me an insight into the more remote reaches of the trade. I was equally impressed with the dedication and superb workshop facilities. I also experienced several near-misses from kangaroos!

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    I should give special mention to  my incredible visit to the Bathurst 1000 race. It is an institution among fans and an incredible two-mile hill town circuit, constructed from urban roads. AASDN host a VIP lounge for their members.  Imagine that at Silverstone! It only takes commitment and support with a little cash.

    One week down, heavy rain and in the good company of Alan, a diesel shop owner, we travelled down the coast, whale watching in Huskisson Bay. Then onto Canberra, via AASDN committee member Alan. Despite having just lost his home and all his possessions from a bush fire, Alan remarkably still provided accommodation in his temporary rental home.
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    The evenings from both events was spent socialising in steak houses chatting over mutual challenges. From my experience the vehicle market share was quite diverse, lots of Asian cars, and a remarkable number of VWs. It was a surprise to learn that that both Ford and Holden have ceased production in Australia due to a lack of competitive pricing. I was told of a delegate who attended the Canberra event who heard of my visit two days before the Friday start, purchased a flight, closed his workshop and travelled from Perth to attend. It is a 3,000km journey. To put that into some local UK context, I once had a conversation with a parts distributor in Kent several years ago, when a training event had to be relocated from Canterbury college to Ashford, 17.5 miles away. He cancelled the whole event without asking the delegates. The reason? He said, “they won’t travel that far.”
    I see little differences between our two cultures. I find the same dedication and passion. Sadly for the UK, they seem to have more of it.





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