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Tuesday, 09 February, 2021

Automotive Aftermarket in China: Growing competition calls for new strategies

• By 2030, every other car in China will be more than seven years old
• Independent aftermarket is growing massively at the expense of OEMs
• To secure their competitive position, OEMs should adopt dynamic pricing models

China’s automotive market is booming, even now accounting for 31 percent of all new vehicle registrations. At the same time, the average vehicle age is increasing while customers are less willing to pay high prices for spare parts and workshop services. Against this backdrop, manufacturers would be well-advised to further develop their aftermarket services and readjust their pricing policies. These are some of the key findings of the current study “Tapping the China Opportunity”, a joint study by Eucon and Roland Berger analyzing the automotive aftermarket in China.

As the world’s most important growth market, China is currently the automotive industry’s greatest source of hope. Despite losses in new vehicle sales, the Chinese share of the global car parc will grow from 20 percent today to 26 percent in 2030. At the same time, the average vehicle age will increase from 5.3 to 6.6 years. According to the study, this will lead to dynamic growth in the Chinese aftermarket, with annual increases of 7 percent in the next few years alone. However, this development will come at the expense of OEMs: While their market share will fall by 2 percent, that of the independent aftermarket will grow by 11 percent. This is because price-sensitive customers from the volume segment in particular are increasingly looking for alternatives to the more expensive spare parts and workshop services.

“To be able to compete in the lucrative aftermarket business, original equipment manufacturers need to massively invest in their aftersales lifecycle and provide their customers with far more customized offers,” says Alexander Brenner, Partner at Roland Berger.

Digital competitors intensify price pressure

Platforms that offer a comprehensive online and offline service to their customers are creating additional competition in the highly fragmented Chinese market. For instance, the platform QCCR.com, which is part of the Jingu Group, has combined a B2B online portal with offline workshop services. And online giant Alibaba operates China’s largest aftermarket retail platform, Tmall & Taobao. In turn, the leading national spare parts retailer Carzone is scoring with a high-performance supply chain. By 2023, the company aims to establish a network of 50,000 certified workshops, offering car owners high-quality maintenance and repair work at transparent prices.

Pricing policy: OEMs’ unused potential

While on average premium suppliers are able to push through higher spare parts prices in the Chinese market compared to the EU, this is often not the case in the volume segment, the study suggests. Overall, both the price differentiation between the various segments and the correlation between spare parts price and vehicle segment are weaker there. “To successfully meet the challenges of the aftermarket, a holistic pricing strategy should be implemented, where all decisions are based on data-driven analysis rather than gut feeling,” suggests Osvaldo Celani, Managing Director of Eucon. As the study reveals, a value-based pricing approach based on customers’ willingness to pay is the most promising concept.

The complete study results are available for download here.

Founded in 1967, Roland Berger is the only worldwide leading management consultancy with German origins and European roots. With around 2,400 employees in 34 countries, the company is successfully active in all key global markets. Roland Berger’s 50 offices are located in central business locations around the globe. The consulting firm is an independent partnership owned exclusively by approximately 250 partners.

Eucon is a digital pioneer for data and process intelligence. As a trailblazer for digital change, Eucon has been supporting companies in the automotive, insurance and real estate industries since 1997 in digitalizing their processes, leveraging data treasures and implementing digital business models. Eucon has comprehensive market data and in-depth expert knowledge and combines this expertise with cutting-edge technologies such as Artificial Intelligence and Robotic Process Automation to create intelligent automation solutions. With around 400 employees, the company serves 250 customers in more than 80 countries from offices in Europe, North and Latin America and Asia-Pacific.

For more information, please contact:

Roland Berger
Maximilian Mittereder
Head of Corporate Communications & PR
Tel. +49 160 744 8180

Eucon Group
Barbara Greissinger
Head of Corporate Communications
Tel. +49 251 14496-2310