Automotive fleets across the globe are aging rapidly, with the average vehicle age in the U.S. reaching 12 years; a trend that has spurred the automotive aftermarket industry into action in recent years.
Expanding the life cycle of a vehicle has many benefits, from better safety to optimized performance to greater financial returns for owners. This has become even more evident in the COVID-19 pandemic era, with used car sales witnessing a tremendous surge as customers sought solutions that would allow them to avoid mass transit through the use of economical personal vehicle options.
This shift has unearthed several growth opportunities for the automotive aftermarket, which is set to exceed USD 855 billion by 2028 as per a Global Market Insights Inc. research report.
Business entities across the industrial spectrum from e-commerce companies like Amazon to multinational conglomerates dedicated to automotive innovation like 3M Company have set a high standard for aftermarket product sales, through expansive portfolios, consistent availability, and speedy delivery.
Advancements in science and technology have become crucial elements in the growth of the automotive aftermarket industry, with the support of strong business entities like the 3M Company. Innovation has long been leveraged as a strong growth enabler by the firm, in line with its customer-first business strategy. This is evident from the introduction of numerous breakthrough aftermarket auto products over the years, covering everything from collision repair products to vehicle exterior enrichment and protection solutions.
For instance, in November 2021, MOPAR Middle East inked a strategic collaboration with 3M Gulf covering aftersales care, services, and parts across its body & paint shops in the Middle East. The partnership, the first of its kind for the Middle East automotive industry, was aimed at facilitating the supply of high-quality auto aftermarket products and services to MOPAR body and paint shops. Through this collaboration, the companies would cover the aftermarket requirements for Jeep, Ram, Dodge, Chrysler, Fiat, Alfa Romero, and Fiat Professional, among others in the Middle Eastern region, and also target the addition of a PSA network in the future.
In addition to its focus on innovation, the 3M automotive aftermarket has always veered strongly towards sustainability, with its ongoing environmental stewardship dating back decades, from the creation of the Pollution Prevention Pays program to the 2025 Sustainability Goals introduced in 2015. The company has continued to make immense strides in this endeavor until as recently as February 2021, when it announced plans to make around USD 1 billion worth of investments for the acceleration of new environmental targets over the next two decades. These include the achievement of carbon neutrality by 2050, reduction in water use at 3M facilities by almost 25%, and the return of high-quality water to the environment following use in production operations.
3M’s automotive products are contributing to the healing of the global environmental ecosystem, building on the diverse technological and scientific prowess of the 3M Company. Through the development of materials like glass bubbles which are integral for light-weighting and assembly in next-gen vehicles and battery technologies, 3M automotive products are helping to improve battery range and better fuel economy in general.
The automotive aftermarket is an essential faction of the automotive industry. In recent years, auto aftermarket products have started to gain significant acceptance and preference for manufacturer or OEM parts, as consumers start to become more aware of the benefits of these products. One of the most prominent advantages aftermarket products have over manufacturer products is price point; on average, OEM parts cost nearly 60% more than the average price of an aftermarket product of comparable value.
In this scenario, the automotive aftermarket industry is on track for commendable growth, especially from the replacement parts segment which held an almost 80% revenue share in the industry in 2021, as per GMI estimates. To run efficiently, cars are required to have auto parts in optimum working conditions. In case of a breakdown, the availability of the necessary, functional auto replacement parts has become critical, something major automotive entities have started to pick up on.
To illustrate, in December 2021, Continental, a leading auto components and systems supplier introduced a new website covering all its OE-quality aftermarket replacement products, innovative specialty vehicle solutions, and diagnostic equipment, to serve as a central point of access to all its brands.
Bolstered by the presence of automotive giants like Daimler, Continental, and Delphi to name a few, the European automotive industry is one of the strongest sectors across the globe, making it a lucrative region for the automotive aftermarket industry. In recent years, auto aftermarket products have been observing a significant rise in demand, which is a major reason why mobility firms like D’Ieteren Group are vying for expansion. With the acquisition of Parts Holding Europe from Bain Capital in the works, the company has recognized the potential for growth in the Europe automotive aftermarket for truck and automobile parts, encouraging it to plan its investments accordingly.
Meanwhile, LKQ Europe announced plans to introduce an Innovation and Service Center in Katowice, Poland in mid-2021, to help the company power its innovation and digitalization strategies and set the tone for the aftermarket of the future.
The North American automotive aftermarket is facing a similar growth trajectory, with service and repair shops in the region anticipating a tremendous boost in business and envisioning an optimistic future. According to a survey conducted by DesRosiers Automotive Consultants among members of the AARO (Automotive Aftermarket Retailers of Ontario), over half the respondents reported an increase in sales in 2021, while over 3 out of 5 retailers predicted a positive outlook for the future.
Automotive aftermarket industry statistics like these have also encouraged American contenders like BorgWarner Inc.’s Delphi Technologies Aftermarket to demonstrate new technologies and expand aftermarket product portfolios in pursuit of a major objective – to facilitate the growth of customers’ businesses, generate lucrative revenue prospects for garages and auto part distributors across North America.
The Asia Pacific automotive aftermarket is poised to register a commendable CAGR of nearly 7% through 2028, based on GMI projections, with India, China, and Japan emerging as major contenders in the region.
European entities like Groupe PSA are paving the way for tremendous progress in the auto aftermarket in India, by making strides through its local entities like PCA India, which inked a distribution agreement with GoMechanic to introduce the Eurorepar range of high-quality multi-brand aftermarket products in India.
Additionally, the expansion of the Indian automotive aftermarket industry is being pushed by domestic entities like SpareIt, which is one of the largest aftermarket platforms in the nation. By identifying specific gaps in the auto aftermarket supply chain, such as the high reliance of manufacturers on the conventional supply of spares, SpareIt is using technology to empower suppliers and garages in India through practical solutions spanning purchase to sales to logistics to credit.
All in all, the automotive aftermarket seems to be headed towards a promising future. Powered by an ever-increasing offline to online transition, and a strong focus of industry contenders on providing consumers with a wider variety of auto products, it is likely that the automotive aftermarket could play a key role in the evolution of the automotive ecosystem over the years ahead.