How Digitization Has Birthed A New Look Automotive Aftermarket

It’s been more than a year to the day from when the first Covid-related lockdowns were announced in Europe and much has changed since then in the $300 billion European automotive aftermarket. Transformed by the twin tsunami of digital disruption and shifting consumer behavior, the aftermarket is now a hub of new business models, innovative start-ups, revenue generating on demand services, and transformative digital processes. With so much churn, what contours is this new digitally shaped aftermarket assuming, how are processes evolving, and how are traditional rules of consumer engagement being rewritten?

Speed, Transparency And Convenience – Traits The Aftermarket Is Not Known For (Yet)

What’s clear is that start-ups and traditional companies in the automotive aftermarket have already embraced digitization to introduce various use cases and streamline processes within the value chain. The objectives have ranged from making processes more transparent, convenient and efficient to strengthening vertical integration.

Along the repair and service journey, we’ve seen a variety of providers propelling digital processes to the next stage, whether at the garage or end-customer level. Especially during the pandemic, there was a significant ramp-up of digital initiatives, some sustainable, some nothing more than short-lived band-aids.

Digital transformation has also been playing out among channel and lead specialists. This space was marked by record growth rates during the height of the pandemic, as underscored by the success of companies like Web1on1 and RAPID RTC. The use of chat bots or pre-filtering of meaningful leads, reinforced by external expert staff working remotely, allowed dealerships to be “online” and available beyond regular opening times.  

At the same time, new automotive-related fintech companies have made digital signings even smarter. For instance, the issue of getting in client approvals for repairs that go beyond the initially agreed quote, was already an issue before Covid. Today, companies like Xtime or Pixelconcept allow for this pain point to be easily overcome, replacing the inefficient task of dialing after customers.

Processes such as this are not just a nice-to-have convenience. More and more of these services have gateways to integrate the spare part or service sell. Considering a fast growing eRetailing market that is worth $40-42 billion globally, companies need to re-evaluate how their own digital sales channels can benefit from this development. 

Is Booking A Car Repair Online – Not Just The Appointment – Mainstream Now?

On the client-facing side, customer-initiated appointments for car service repair surged to all-time highs during the lockdowns. Here, customers could pick from one of two alternatives: the mobile servicing or the online appointment booking option.

Today, especially for booking, the independent aftermarket is increasingly connected via workshop portals that aggregate garage offerings on their web platforms. These portals don’t just offer customers the ability to book various services, they also allow them to choose from between multiple quotes and fix on a price prior to the garage visit.

Service aggregators like WhoCanFixMyCar, AutoButler or Vroomly have reported a remarkable surge in page hits, recording more than 100% increase in many cases. Today, the service aggregation market in Europe boasts a brokered service value of more than $800 million, a figure that is continually on the rise. However, the market is still very volatile. For instance, well-known companies like Caroobi have exited, making space for newcomers like Castrol-featured Carama, that has already amended its market strategy.  

To my thinking, vertical integration of spare parts revenues, the integration of fleets, and a data-enriched quoting mechanism will be key to driving sustainable growth in the service aggregator market. For anyone who might question the success of this business model, here’s my one word answer – Tuhu. The Chinese company has achieved phenomenal success, although it will be interesting to see whether it can retain its Covid-era customers. I say this because repeat customers tend to be more far more crucial than first timer users as the second and third invoices tend to be larger than first time billings.

Another interesting development has been of service aggregation going the mobile and on-demand route. The examples that come to mind here are mechanic- rather than garage-centric business models like that of Yourmechanic or ClickMechanic.

In general, the topic of mobile servicing has received a fair amount of traction during the pandemic with completely contact-free car servicing, such as that offered by Daimler-backed Repairsmith.

Simultaneously, providers with a car care background like Spiffy or mobile glass servicing like Autoglass started moving beyond their niche to build more comprehensive mobile servicing portfolios. Overall, the mobile servicing business model could represent a $3 billion opportunity globally by 2025. 

Mobile And On-Demand Servicing – A Facilitator Of Two Hot Aftermarket Segments

I believe two scenarios could amplify such developments and take it up several notches. First, the emergence of dedicated mobile servicing start-ups for electric vehicles only, like Tesla’s Mobile Service Support. The advantage here would be lower associated infrastructure requirements, higher efficiencies, and lower costs than traditional repair setups.

The second scenario in the mobile servicing environment would again evolve around electric vehicles but, more particularly, on servicing passenger vehicle fleets on a mobile basis. Just imagine automatically servicing company cars with mobile units at the company’s front door. An interesting proposition, regardless of whether COVID-19 and social distancing continue to be an issue.

Overall, the automotive aftermarket has made some bold, digitally-driven moves over the course of last year. Of course, in Europe, where there has always been a strong bond between the mechanic and the drive, digital still remains a side show. But where I think true progress has been made, courtesy the pandemic, is in the greater receptivity to several digital processes.

I’m convinced that it is only a matter of time before car repair gets booked digitally and performed on-demand. Of course, the big question now is whether companies close to the independent aftermarket, like service aggregators, will be able to outpace OEM-driven initiatives.

This article was written with contributions from Moritz Bedenk, Senior Consultant with the Mobility group at Frost & Sullivan.

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