How Valuable is the Aftermarket in Mexico?By Alejandro Enríquez | Thu, 08/20/2020 - 14:03
Q: What are GiPA’s solutions for the automotive industry?
A: GiPA is specialized in aftermarket insights. We are the market leader in the aftersales segment with 34 years of experience. We are aware of what an aftermarket strategist needs, so we do research and offer custom-made studies for our customers, mostly auto parts manufacturers, OEMs, dealerships, insurance and coatings companies.
Q: What are the main elements affecting the Mexican aftermarket?
A: Low sales volumes have an impact on the aftermarket that is seen after a couple of years. However, there are opportunities that are different from previous years. As new models introduced by South Korean brands start ageing, they enter the aftermarket segment. Aftersales growth is also strongly linked to quality: the greater the quality of the spare part, the fewer sales in the aftermarket. For instance, 10 years ago, lubricants needed changing after between 6,000 and 7,000km. The standard is now above 10,000km. The quality of vehicles has also increased. Ten years ago, a vehicle required maintenance or repair services around four times a year. Today, the average is 2.52 times a year.
To grow in the aftermarket, both manufacturers and spare parts wholesalers need to compete fiercely against each other. A great opportunity for auto parts manufacturers is to consider the old vehicle park, which is above 12 years of age on average. More than half of the passenger vehicle park is older than 10 years. These vehicles require more parts from the aftermarket, so producers should listen to the market rather than just expect the vehicle park to grow.
Q: What is the value of the aftermarket in Mexico and how did the pandemic impact it?
A: Calculating the exact value of the aftermarket is difficult but in 2019, it was approximately MX$146 billion (US$6.63 billion). This calculation considers the number of times per year a vehicle is brought into the workshop. In 2020, the value of the aftermarket should decrease between 15 and 20 percent, largely due to COVID-19. Before the pandemic, our expectations pointed to positive growth. An interesting fact is that the aftermarket has grown steadily despite the decreasing number of maintenance and repair services per year.
We have studied in depth the impact of the pandemic on the aftermarket. We developed a tool called DELFOS through which, as with the Greek oracle, companies can make forecasts depending on certain variables. We have also recognized that young executives are aware that at this point they cannot afford to make mistakes, so market intelligence is an essential tool for them.
Q: How can dealership take advantage of aftersales services?
A: The opportunity for OEMs is to extend the period in which a vehicle receives service at the dealership. Most often, dealerships ignore the price of their services because of the quality they provide. However, just like in an excellent restaurant where price is related to the experience, dealerships need to improve their overall user experience. Prices need to be competitive but not the priority. Going to the dealership for a repair or maintenance service is, in essence, not a pleasant experience for anyone. Improvements can include loyalty programs or short delivery times. In these difficult times, dealerships also need to focus on all the necessary health measures to assure customer safety. The most important element for someone when choosing a dealership is proximity.
Q: There is a trend among auto parts manufacturers to focus a greater part of their production on the aftermarket segment. Is this trend likely to continue?
A: Yes, several factors confirm this trend. Different OEMs and Tier 1 suppliers are exploring different product lines for different models. Volume brands, such as Nissan, Volkswagen or Ford, that have experienced greater losses on car sales should focus on the aftermarket. We have pointed out to these volume brands with many years in the Mexican market that they have a good business opportunity with the cars they already sold . Newer brands in the market do not have the same opportunity.
Q: What are the trends in the heavy-vehicle aftermarket?
A: Overall, the heavy-vehicle segment is different from light vehicles given that decisions are driven by pragmatism, which is also reflected in the aftermarket. Heavy vehicles are work tools for individuals and companies, meaning that spare parts are sold primarily based on performance. Our studies confirm that no one is happy about using a cheap or low-quality spare part on their truck. Financing also plays a really important role in the aftermarket. Many small companies or truck drivers need financing to get the spare parts they need to earn money.
Another relevant trend we have seen among fleets, large or small, is companies having their own workshop, which reduces costs considerably. These workshops are focused on quick maintenance services, leaving the more complicated problems to the experts.
Q: How is e-commerce influencing the aftermarket?
A: E-commerce is changing the way aftermarket works. However, Mexico is not at appropriately positioned to participate in a digital aftermarket. Newer technologies are revolutionizing the industry but most of the aftersales services are done using traditional means. Brands need a balance; they need paper catalogues but they also need to be present in the digital world. In terms of digitalization, the app that has revolutionized the aftermarket the most has been WhatsApp given the communication channel it enables. YouTube has also played an important role in terms of training.
Workshop managers in Mexico are mostly built on empirical knowledge, which makes it difficult for them to jump to the newest technologies. Mexico’s internet access presents another challenge for small and medium-sized workshops as 80 percent of them have four employees or less.
Q: What is your recent approach toward motorcycles?
A: Many of the companies we already work with are really interested in that segment. This sector has lower volumes than light and heavy vehicles, but we are conducting a special study on this market, which will be published in October. For motorcycles, it is really difficult to calculate the total number of units in the country, which is why market value estimates represent an opportunity.
GiPA is a market intelligence company focused on providing insights on the aftermarket to OEMs, auto parts manufacturers and dealerships. The company is present in more than 30 countries.