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EV Parts Aftersales Products and Services Challenges in 2023

EV Parts, Aftersales, Products, and Services Challenges in 2023

Electric Vehicles Parts, Aftersales, Products, and Services Positioning and Change Compared to Thermic Vehicles in 2023

It is no stretch to affirm that various countries across the globe are moving forward to execute the Paris Agreement, which will demand some fundamental changes. One of the sectors impacted are the automotive & transportation sectors and it requires close attention. Hence our focus on EV Parts, Aftersales, Products, and Services Challenges in 2023.

The most dominant source of energy is oil. On the other hand, electrification has long been perceived to play an active role in the decarbonization of the sectors. For this reason, the shift from thermic vehicles to electric vehicles accelerates…

 

Aftersales and Aftermarket Auto Parts Supply Chain

To facilitate their competition in this ever-growing industry, the aftermarket auto parts businesses must promptly embrace commercial excellence, Pricing, digitalization, and supply chains optimization.

Besides its aging park, the average age of the cars that are present in the Europe and the United States is as high as 11.8 years. In addition, it is reported that the number of vehicles with the age range of 6 years to 11 years will rise by 27%.

This represents an exciting update for the automotive parts sector. As many of the cars moving on the road become out of warranty, their owners tend to be reluctant to visit dealers for repair. However, you will find a lot of them that remain in good shape and valued as a good investment in parts and repairs.

There are also major challenges and changes that are facing the aftersales and aftermarket auto parts industry. As technological advancements promise to change the features and functionalities of vehicles, increasing competition and e-commerce are changing the channels for delivery and sales. The companies that enjoy success will acquaint themselves with the ways to make the most of these changes not only to retain market share but also to capture it and reduce costs.

The changes that are experienced in the aftersales and aftermarket auto parts supply chain will only accelerate as they show no sign of slowing down. A good reason for this is the growing adoption and popularity of apps like Lyft and Uber. As the number of consumers that rely on these services rises, it is highly possible that the number of car owners will not increase. Rather, they will prefer to call on these services when they need to commute.

Apart from this, the popularity of autonomous vehicles may also result in more cars fleets. There will be a need for the aftersales and aftermarket supply chain to move away from serving a variety of SME’s, consumers with Do-it-yourself products and toward working with certain fleet managers.

More importantly, the growth of the electric vehicle market is worth considering. According to JP Morgan forecasts, it has been predicted that electric and hybrid electric vehicles will contribute to roughly 30% of vehicle sales by 2025.

Even though thermic vehicles, which depend on fossil fuel are likely to not go away any time soon, they will eventually contribute to a smaller portion of the market. The significant change is only likely to raise the challenges that are experienced in the aftermarket supply chain. The complexity of cars will become even higher. As the accumulation of vehicle parts rises, this will become an issue when electric cars start sharing the road with thermic vehicles powered by Internal Combustion Engines (ICE).

Yet, there are opportunities and challenges that these changes in the aftermarket auto parts supply chain present. Aftersales department of Importers, Nationals sales and OEM’s can provide a greater customer experience through proactive and predictive repair capabilities. This will be achieved while reducing the costs of inventory. Engaging in the adoption of effective omnichannel strategy, adequate parts and services pricing strategy, gives a lot to gain. This could include adopting the combined use of the brick-and-mortar internet to reach out to customers while delivering world-class repair services. By embracing new technologies, businesses can enjoy much success.

How can the OEMs, importers and national sales companies prepare for battery electric vehicles in the aftersales market?

It is expected that revenue related to Aftersales is expected to fall by more than 50% of what Original equipment manufacturers (OEM) and importers currently make close to a quarter of their total profit through aftersales. Yet, as the four megatrends in the industry – related to connectivity, autonomous, shared mobility, and electric (CASE) – keeps emerging, they are expected to improve the way they generate aftersales profit.

For this reason, it is imperative for OEMs and importers to begin to plan for the adoption of electric vehicles (EVs). After all, this trend can have the biggest effect on aftersales, especially in the short term. It is worth pointing out that the sales of EVs across the globe hit one million units in 2017. This represents a 54% increase over what was experienced in 2016. Yet, this would only grow beyond 2 million units in 2018.

With this in mind, it should be stressed that the growth of EVs will have a major effect on the entire market. Besides, OEMs’ and importer’s core aftersales / aftermarket business will be significantly impacted. Businesses that rely greatly on aftersales revenue from vehicles older than three to seven years are at significant risk. Only very well executed strategies will help contain the profitability levels decrease from aftersales. While several ways exist to reduce the risks of potential losses like pricing, commercial excellence and market intel, some OEMs might even feel the effects of their failure to act.

Electric Vehicles expose business plans to short-, medium- and long-term impacts

The environmental advantages that electric vehicles have over Internal Combustion Engine (ICE) vehicles are obvious. After manufacturers have made a significant investment in the technology, any growth achieved in the sales of electric vehicles can be widely accepted. Yet, it should be stressed that a significant negative impact is made on OEM’s core aftersales business by the emergence and wide recognition of electric vehicles and other industry megatrends.

As customers embrace any new technology, this will impact profitability and revenues. In 2019, electric vehicles enjoyed a milestone with a 10% market share of new car sales, indicating that the effect may be felt sooner.

Short term impact

The core aftersales business of various OEMs’, importers and national sales companies originates from new and almost new vehicles. It is possible that these vehicles have a manufacturer’s warranty, and additional factory service products, and are serviced in a dealership, which drives retention and loyalty. Besides this, most of these vehicles are owned by the initial owner who might have nurtured a relationship with the dealer. As a result, they are more likely to visit again.

For passenger car brands, overall customer retention in the segment can be around 70%. This business is exposed to the risk of having electric vehicles grow. It must also be noted that electric vehicles are designed with fewer moving parts and serviceable items. This implies that the revenue that is produced through the parts per sale is often less than the petrol equivalent.

It is also safe to posit that customers will expect fewer service requirements, due to the advancement of this new technology.

The rise of electric vehicles promises to negatively impact the core aftersales business of OEMs and importers. Besides this, the emergence of CASE trends – as mentioned earlier – will ensure that the number of new vehicles sold will expectedly drop. Any reduction in the volume of new vehicles will have a direct impact on the total sales potential in the aftermarket.

Furthermore, when there is a shift in market dynamics from personal ownership to fleet, there could be more pressure placed on price. Beyond the core business, OEMs gather significant revenue from aftersales on vehicles, which are older than 3 years. Yet, this market is very competitive. It is highly contested by Importers and national sales companies’ networks, specialist service chains and franchised.

Importers, franchise dealer, OEM’s need to build a strong market intelligence and customers value analysis to understand with precision how to retain their customers. Besides, efforts need to be made to stimulate ownership of official OEM products, including aftersales value-added services like warranties and service plans. Groups of customers are becoming often more conscious of costs and value. As a result, there is a risk that they shop around or they may visit anywhere that is more convenient. In fact, some consumers may rid themselves of constant servicing altogether.

Medium to long-term impact

When the medium and long impact is placed into consideration, the profile of the older vehicle segments will also be influenced by any change in the vehicle technology as electric vehicles enter the market of used cars. This will ensure that there is a replacement of petrol and diesel vehicles.

The total aftersales revenue on electric vehicles that are older than three years will be significantly less than the revenue on a thermic vehicle. This implies that the potential available revenue will reduce. There is often lower customer retention experienced by most OEMs when their vehicle reaches a particular age. This often allows them to set a target for growth in the area. They do so via rising market share at the expense of various independent specialists.

Yet, it must be noted that it will not be a walk in the park to achieve growth in this way. Indeed, present OEM and importers business models are not often geared to cost-based. The level of customer retention experienced by OEMs just echoes their ability to offer a level of competition within it. The transition towards a value based, competition-based, even dynamic model helps to maintain profitability level.

The deeper penetration of the CASE megatrends into the older vehicle segments will ensure that market growth will be unlikely. The result of this is a higher level of competition. As revenue growth keeps becoming harder to achieve, the huge specialist chains, which once depended on older cars, may start willing to achieve growth by considering the new car market.

Block exemptions regulations, which were only introduced in 2010, will ensure that servicing of a vehicle can be done by the owner in any given workshop without necessarily invalidating the warranty. Even though these regulations were passed to raise the level of competition, as well as the advantages the consumers will enjoy, these benefits have not been taken by the specialist chains. Yet, as specialists start considering new cars as an opportunity for growth, this will likely change.

New Aftersales Opportunities for EV Vehicles

The Electric vehicle market has gathered a significant number of start-ups. Yet, it is not a stretch to suggest that their potential revenue from aftersales cannot meet the same level, which established OEMs have achieved without a strategy shift in pricing & commercial practices. For this reason, it is important to adopt a new business model, which does not rely only on cost. After all, this is capable of providing new entrants and start-ups the freedom to make good choices – based on customer needs – on how the aftermarket is served.

In fact, they could start becoming more innovative by working hand-in-hand with specialist chains to facilitate the required maintenance. Furthermore, there is also an opportunity for new entrants to run a mobile service network, which is akin to mobile repair services that are related to white goods.

Is it possible for OEMs and Importers to keep up with the change?

It has already been emphasized the rapid growth and acceptance of electric vehicles in the automotive industry. For this reason, there will be a significant impact on the aftersales market. To survive, it is important that massive strategic changes, relating to major up-front commitments, must be made.

This implies that there is a need to adapt to the changing consumer and B2B customers’ needs while powering improvements and good models that drive emphasis from products to services. A large OEM will require more time to change strategic direction, 3 years, an importer can realize it within 14 months. There is a good chance that there could be a change in the market at a pace that might become hard – or impossible – for OEMs to keep up with

In addition, it must be stressed that revenues related to aftersales are more likely to fall over the next 20 years in most scenario’s. Besides this, it will become more important to raise the digital experience to achieve retention and success in the core aftersales business of OEMs.

Furthermore, the importance of older vehicle segments cannot be ignored since they will become a crucial strategic opportunity. However, there will be a need for a massive effort as the level of competition only promises to keep rising. The efficiency of the parts supply chain will bolster the profitability of the entire operation. For this reason, the adoption of new technologies can be imperative.

OEMs and importers, as well as their partners, understand and embrace the fact that the world is changing will ensure that the future of the automotive industry will be essentially evolving. As a result, businesse must be ready and willing to evolve too.

Replaceable Parts of an Electric Vehicle

As the world embraces the independence of fossil fuels that electric vehicles provide, the popularity of these vehicles cannot be ignored. However, to keep these vehicles running, it is important to carry out auto maintenance – even if less of this is required, with respect to thermic vehicles. Replacing auto parts is not uncommon, and for this reason, it is worth discussing the replaceable parts of an electric vehicle, as well as their functions.

Electric Drive Unit

An Electric Drive Unit (EDU) is designed with 3 main modules. These include the gearbox, the power electronics, and the electric motor. All three modules must work in harmony to ensure the easy movement of the vehicle.

What this electric drive unit does is that it offers dynamic driving behavior, as well as fun and comfort while saving costs and delivering efficiency in the overall system. It also helps to convert electric energy into motion. The source of energy used can range from charging stations to conventional electricity.

Front Motor, Rear Motor 

When the driver applies the accelerator in an electric vehicle, electricity is supplied to the stator by the battery in the car. Then, the rotor turns and helps in providing mechanical energy that can turn the gears of the car. As the gears start rotating the wheels start turning too. Without the need for burning fossil fuel, this process happens very fast.

High Voltage Cables

The reason for the distinction between low and high voltage cables is safety. Since electric vehicles require the use of high voltage batteries, high voltage cables are necessary to channel power from these batteries to different systems throughout the electric vehicles.

Heat Pump Assembly

The idea of the heat pump is that it prevents the heat that is created by the battery of an electric vehicle from going to waste. They do so by absorbing the excess produced by the electric vehicle’s battery to enhance the efficiency and driving range of the car.

High Voltage Battery

A high voltage battery is a rechargeable battery that can power the components of an electric vehicle. While electrical components in an electric vehicle can be used in transforming electric current, the presence of a high voltage battery can be used in accumulating this energy.

High Voltage Busbars

In electric vehicles, high voltage Busbars are enclosures that are reserved for the distribution of local high current power. These components are used to connect high voltage devices at electrical switchyards and low voltage devices at battery banks.

Charge Port

The charge pot is quite useful as the point for charging electric car batteries. This port is often connected to an external power when the vehicle’s battery is being charged.

Amongst the OEM front running EV Audi, VW, Porsche, Lucid, Tesla, BMW, Mercedes, Volvo, Fisker.

Conclusion

The use of electric vehicles is on the rise. After all, there are fewer mechanical and moving parts in electrical vehicles, when compared to regular vehicles. These parts do not wear out easily, and this means that less maintenance is needed. Many OEM’s, importers and dealers are concerned about electric vehicles being a potential disruptor for the future as their volume keeps rising. A forward-looking approach integrating pricing best practices, market intelligence, commercial excellence and supply chain optimization is key. The presence of these electric cars will most likely cause the aftersales revenue generated by OEMs to decline. The world keeps changing – so can we.

EV Parts Aftersales Products and Services Challenges in 2023

Key Contact

Baydhir Badjoko, CEO The Consultants bvba

+32 3 297 55 78 | badjoko@theconsultants.eu

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