Professional Documents
Culture Documents
1 Executive Summary 4
7 Conclusions 34
Upstream Downstream
Parts Services
Capgemini Consulting
6
higher margins. As can be seen in Aftermarket Revenue and In 2007, the aftermarket business
Figure 3, the Western European Profits accounted for about half of the
aftermarket is more or less flat, while Innovative services such as telematics profits of European automotive
attractive growth rates exist in and mobility service bundles offer OEMs/OESs, compared to 26% for
emerging markets such as Eastern additional opportunities to generate new car sales and 18% for car
Europe. The average growth rate per business and revenue improvements manufacturing. In the aftermarket,
year is estimated at about 1% in and account for a growing share of the turnover for car and parts
Western Europe, whereas in Eastern the aftermarket. These services are manufacturers has increased to about
Europe it is about 5.3% per annum increasingly embedded into new 63 billion euros and operating profits
over the past seven years. Among technologies. In addition to more grew from 13 billion euros to 16
Western European markets with a complex parts, they can compensate billion euros, compared with the
total aftermarket volume of for the declining share of traditional previous year.3 In 2009/2010 this is
approximately 165 billion euros, parts, repair and maintenance expected to level off due to the effects
Germany has the highest sales with services during a car’s lifecycle due to of the vehicle scrapping programs,
48 billion euros and thus contributed higher general quality and reliability such as the Abwrackpraemie in
about 30% of the overall Western of cars and parts. Considering the Germany, on the service and parts
European aftermarket sales in 2008. total revenue stream of a typical 13- business in the major markets in
year car lifetime,1 only 37% of the Western Europe. In addition, the cost
total revenue stems from the new car of warranty is expected to increase
sale. The aftermarket business over the next three years.
accounts for the remaining 63% in
Western Europe.2
Automotive aftermarket retail value in billion EUR Automotive aftermarket retail value in billion EUR
in Western Europe a in Eastern Europe b
180.0 10.0
163.6 165.4
157.9 158.8 158.8 158.7 160.7
160.0 9.0 8.6
8.2
8.0 7.8
140.0 7.4
64.0 64.8 7.1
62.0 62.3 62.2 62.0 62.6 6.7
7.0 3.3
120.0 6.3 3.1
3.0
6.0 2.8
100.0 2.7
2.5
5.0 2.4
80.0
4.0
60.0
99.6 100.6 3.0
95.9 96.5 96.6 96.7 98.1 5.1 5.3
40.0 4.4 4.6 4.8
2.0 3.9 4.2
20.0 1.0
0.0 0.0
2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007 2008
a) Based on data from Germany, UK, France, Italy, Spain, the Netherlands, Belgium, Norway, Portugal, Sweden, Austria/Switzerland
b) Based on data from Poland, Hungary, Czech Republic
1 The automotive passenger car lifecycle model splits the average use of an automotive passenger vehicle over a period of 13 years into three phases. The first phase runs from
one to four years of the car’s age, mainly through the warranty period of the car. Phase two describes the years from four to seven. Finally the third phase describes the years
from seven to typically 13. This model is relevant for the management of the automotive aftermarket business as it can be used to describe the usage patterns of end
customers in their consumption of parts and services over the different phases. Typically, the older the car gets, the more sales of parts at OEM-owned retail and franchised
dealerships decrease in favor of independent retailers. OEMs are continually seeking solutions to minimize this situation as the parts business offers attractive margins.
2 Capgemini Consulting, internal research
3 Capgemini Consulting, internal research
8
The Russian car market, in general, rates to be higher than 5% and half Competitive Situation in the
was expected to surpass the German expect growth rates to climb up to Aftermarket
market in 2008. Within the first six 10% to 15% within the next three Similar to market potential and
months of that year, about 1.64 years. The total volume of the market growth, the current and
million new cars were registered in Chinese aftermarket is about 5.1 future competitive situation in the
Russia, resulting in 100,000 billion euros.8 aftermarket differs depending on the
additional cars compared to region.
Germany. However, the Russian In general, India is a rather neglected
automotive market has been heavily market for Western European car In Western Europe, the competitive
hit by the financial crisis, leading to a manufacturers. The country is still intensity is currently at a rather high
decline of more than 50% in the last dominated by three car level, according to the respondents.
months of 2008.7 The total after sales manufacturers, namely Maruti They categorized the market as being
market volume in 2008 was Suzuki, Tata Motors and Hyundai, one of the two most challenging in
estimated at about 8.2 billion euros. which account for 75% of the market terms of competitive activity (the
The expected growth rates are on share. Aftermarket volume is about 2 other being China). All participants
average similar to Eastern Europe. billion euros, but the aftermarket were almost certain that Western
However, in our research share for Western European Europe can be considered a mature
respondents were split about equally companies is relatively small.9 The market, and on average they expect a
in expecting that the growth rates growth rate in the Indian aftermarket moderate increase in the competitive
would be up to 5%, 5% to 10%, and is lower than in China, but still intensity.
between 10% and 15%. This equal exceeds most mature markets. In our
split indicates uncertainty about how research 70% of the participants The picture for Eastern Europe is
much the Russian aftermarket will expect the aftermarket in India to different. Here, it was noted that on
grow. grow between 5% and 10%, and average the current competitive
24% anticipate growth rates between intensity is somewhat moderate but
The Chinese aftermarket has already 10% and 15%. Only 6% assume a with future increases anticipated.
achieved relatively high volumes and growth rate of less than 5%. This can be seen in Exhibit 4, which
this success story is expected to shows the positioning of the markets
continue. The vast majority of the in terms of their estimated
companies surveyed expect growth competitive intensity.
6% 60% 26% 8%
Eastern 2.3
Europe 0% 100% 0% 100% 0% 100% 0% 100% 1 4
0% 9% 65% 26%
China 3.2
0% 100% 0% 100% 0% 100% 0% 100% 1 4
Capgemini Consulting
7 Ibid
8 Datamonitor, 2008 – 2012 Global Aftermarket – Recession and Growth Beyond, 2009
9 Ibid
10
Achieving Competitive of customization, proximity to
Advantage customers and offering services for
When it comes to the parts business, attractive prices play an important
the way to achieve competitive role as well. This is even more
advantage is very similar across important during times in which
markets, according to the findings. customers are increasingly buying
Regarding business opportunities for parts on the Internet or from
car manufacturers, parts sales are independent repair centers.
tightly linked to their respective car Outstanding service quality, quick
sales. Moreover, price is the response and reaction times, and
dominant factor especially in highly branding of service can no longer be
competitive markets. Both factors can considered as differentiating factors.
be seen as hygienic factors though Furthermore, companies unable to
the main differentiating factors are live up to these commodity
parts availability and originality of requirements will fail.
spare parts. When respondents were
asked about the service business, it Eastern Europe is similar to India
became clear that factors that with regard to branding and
differentiate the service offering vary innovative services. These are not
significantly for each market. differentiating factors. The same
applies for service quality and quick
In Western Europe, the main factors response and reaction times. As long
for differentiating the service as prices are attractive, customers are
offerings are innovative services, the satisfied with relatively low service
high emphasis on specific customer levels and more or less standard
requirements and customization of services, according to respondents.
services. In line with the importance Customization of services is also of
Capgemini Consulting
12 In addition to the results described in this study please also refer to Capgemini Consulting, Cars Online 08/09:
Besides a very high Internet affinity for online car and after sales research, both Russian and Indian consumers
are rather ambitious in selecting their after sales services.
12
4 Investments Into Key Initiatives in the Aftermarket
82%
78%
80% 80%
60% 60%
40% 40%
Capgemini Consulting
Key initiatives to exploit the potential of the aftermarket Amount of investments in aftermarket initiatives
Capgemini Consulting
14
Exhibit 9: Companies’ Preparedness for Regional Market Developments
% of companies
100% 10% 9%
20% 16%
8% 26% Does Not Apply
80% Rarely Applies
20% 19%
51% Largely Applies
60% 30% Fully Applies
63%
40% 43%
62%
25% 36%
20%
10%
15% 18%
8% 11%
0%
Western Europe Eastern Europe Russia China India
Capgemini Consulting
15
5 Performance in the Aftermarket
Performance in Western Europe and in emerging markets Average performance in Western Europe and in emerging markets
% of companies % of companies
100% 2%
6%
Western Europe 3.7
30%
80% 31%
40% Medium
67% 27%
25% China 1.7
20% Good
18%
17% India
17% 2.3
11% 7%
0% 4% High
Performance
Western Eastern Russia China India Prone Medium Good High
Europe Europe to Issues Performance
Capgemini Consulting
16
6 Management Approach for Winning the Aftermarket
13 Asian joint venture Maruti Suzuki is a main facility for obtaining driving licenses in India (e.g., 500,000 mostly
commercial driving licenses are sponsored by Maruti Suzuki).
14 Mahindra & Mahindra’s daughter company First Choice, India’s largest multi-brand used car provider, offers a
broad choice of good quality used cars and services such as different warranty packages for engine and
transmission (e.g., silver service level: three months and 5,000 km warranty, or gold service level: 12 months –
three months for free plus nine months – and 12,000 km warranty).
Stage 7: Global
Stage 3 Aftermarket Champion
Aftermarket Stage 6
Champion
6%
67% 0% 17%
4%
Western Eastern
Russia China India
Europe Europe
% of participating companies
Mature Markets Emerging Markets % assigned to this stage
Capgemini Consulting
Distribution
Planning Sourcing Marketing & Sales
Reverse Logistics
Cooperation
Control Autonomy
Supplier/Manufacturer Wholesaler Retailer Repair Shops/Customer
Distribution
Planning Sourcing Marketing & Sales Reverse Logistics
Capgemini Consulting
20
6.2 Aftermarket Model for Exhibit 13: Comparison of Operational Excellence Levers Between Explorers and
Western Europe Aftermarket Champions
30% 25%
Medium Dense Very Dense 26%
Wholesaler Locations
20%
0%
Standard Best of Breed Individual Software Combination
Explorers Aftermarket Champions
(Low performer) (High performer) Explorers Aftermarket Champions
Capgemini Consulting
Exhibit 15: Comparison of Organizational Design Lever for Explorers and Aftermarket Champions
35%
32%
30%
30% Explorers
26% (Low performer)
25% 23%
Aftermarket Champions
(High performer)
20%
21% 13%
15% 16%
13% 14%
10% 12%
5%
0%
Central and local Central, Central, decentralized/ Central, decentralized/ Central, decentralized/
wholesalers decentralized regional warehouse regional warehouse, regional warehouse,
warehouse and and wholesalers wholesalers and wholesalers and
wholesalers dealers workshops
Capgemini Consulting
22
is time consuming and difficult to integration to manage relevant data.
manage, whereas the potential Contrary to this, “increasing the
benefits, which are increased market penetration by setting up local
transparency and commonly organizations” can be linked to the
implemented decisions, do not seem lever of distribution and supply chain
to outweigh the disadvantages. network definition.
Therefore, through well-planned
change-management activities Aftermarket champions and explorers
focused on the organizational design, differ essentially in the strategic
explorers should take steps to reduce initiatives. These are listed by their
their control and allow more discriminating power and with Key Finding
flexibility.15 This helps enable local decreasing priority:
adaptation of centrally made High performers win by regularly
1.Adapting the service offerings to
decisions. local requirements innovating new services that can
2.Improving the relationship with be customized to local
Strategic Initiatives
wholesalers requirements and by running
Besides the performance levers, the
strategic initiatives introduced in 3.Improving the relationship with intense loyalty programs for both
chapter 4 play an important role in dealers and workshops the wholesale and retail levels.
managing the aftermarket business of 4.Improving and extending the
the study participants. In most cases, service offering
the strategic initiatives are
contributing to multiple levers at the These strategic initiatives are driven
same time – a straight one-to-one by nearly all aftermarket champions,
relationship could not be identified. whereas only a few explorers focus
For example, “adapting the service on them. Others – such as increasing
offering to local requirements” mainly the market penetration by setting up
affects the sales and marketing local organizations; optimizing the
process, but it might also involve the planning processes among central,
repair center infrastructure necessary regional and decentralized
to provide local services and the IT organizations; and establishing
89%
Adapting the service offerings to local requirements
31%
78%
Improving the relationship with wholesalers
23%
81%
Improving the relationship with dealers and workshops
34%
74%
Improving and extending the service offering
29%
53%
Establishing cooperation to achieve competitive advantages
44%
Capgemini Consulting
15 Change-management activities play an important role in transformation projects and should be thoroughly
planned. Often those activities are given lower priority than functional-oriented work streams. For further
information please also see: Martin Classen/Felicitas von Kyaw, “Warum der Wandel meist misslingt” (“Why
change mostly fails”), Harvard Business Manager, December 2009
Exhibit 17: Required Changes for Adapting the Service Offerings to Local Needs
78%
Innovating new services
21%
67%
Downsizing the service offering to local requirements
43%
61%
Upgrading the service offering to local requirements
37%
71%
Adapting service levels
52%
71%
Adapting service quality
52%
Capgemini Consulting
24
chain as well as of different phases of
the customer lifecycle16 in the service Exhibit 18: Required Changes for Improving the Relationship with Wholesalers
creation process. Furthermore, those
companies will be favored that spend 56%
effort on matching up these Setting up programs to improve wholesaler loyalty
14%
requirements with centrally offered 68%
“prepackaged” service solutions. Improving service level to better satisfy wholesalers
28%
Also, it is advisable to set up a
Setting up programs to support wholesalers in improving 56%
standardized innovation process that the service quality and service level 28%
systematically develops service
78%
innovations in an effort to change Improving the information exchange with wholesalers
56%
management’s mindset in favor of
57%
services. Finally, companies have to Improving the usage and adaptation of integrated
IT systems for wholesaler relations 46%
search for new service innovations
0% 20% 40% 60% 80% 100%
based on technological developments
Aftermarket Champions Explorers
and new IT opportunities.
Capgemini Consulting
The relationship with wholesalers
still offers improvement potential,
since it is the second most important
initiative. Recommended changes Concluding this line of reasoning, The relationship with dealers and
include setting up strategic programs high performers seem to successfully workshops seems to require even
to improve wholesalers’ loyalty and invest in business concepts that help more improvement. Here, the trend
improving the service level to better to both improve wholesalers’ loyalty to source at least parts from third
satisfy their needs. These changes as well as the service level to fulfill parties has an immediate negative
seem to increasingly be important to their needs better and faster. Both effect on the OEM’s business. To help
successfully market both services as elements have an immediate effect on turn this trend around, loyalty and
well as parts due to their relationship the OEM’s business, since on the one service level improvement programs
to retail. Therefore, pushing the side the wholesaler feels tied to the are on the aftermarket champions’
wholesalers’ business and increasing OEM and on the other side the OEM agenda already.
their loyalty towards the own brand gives the wholesaler more freedom to
seems to have an immediate positive do business, from which the OEM Information exchange programs also
effect on the OEM’s results. finally participates as well. Explorers support this aim. In contrast to
need to improve in this area. programs on the wholesale level,
It is also recommended that
companies improve the reaction time
towards wholesalers’ needs, which Exhibit 19: Required Changes for Improving the Relationship with Dealers and
means an immediate benefit since Workshops
again own business is positively
Setting up programs to improve dealer 68%
influenced as well. Fewer changes are and workshop loyalty 18%
necessary in setting up service
73%
quality and service level programs to Improving service level to better satisfy
dealers and workshops 27%
support wholesalers in business with
71%
retail and for improving the Improving the information exchange with
dealers and workshops 38%
information exchange with
wholesalers. Improving the usage and Setting up programs to support dealers and workshops 67%
in improving the service quality and level 46%
adaptation of integrated IT systems
for wholesaler relations seems to be Improving the usage and adaptation of integrated 53%
IT systems for dealer and workshop relations 48%
of low importance. Because IT
integration with a focus on the 0% 20% 40% 60% 80% 100%
supply and distribution chain has Aftermarket Champions Explorers
been on companies’ agendas for quite
a while, the level of perfection can be Capgemini Consulting
considered relatively high.
16 The characteristics of representatives of different stages of the customer lifecycle have been laid out in Capgemini’s Cars Online study and can be used as valuable input for
the service innovation process. This should help to develop services suitable to both extend phases of the customer lifecycle as well as to move customers between particular
stages of the lifecycle: Capgemini Consulting, Cars Online 08/09
Exhibit 20: Required Changes for Improving and Extending the Service Offering
83%
Innovating new services
18%
Supporting wholesalers to improve 82%
service quality and level 24%
Improving the adaptation of existing service offering 78%
towards local customer needs 23%
Improving the service quality through offering 75%
customer-specific solutions 24%
Improving the service quality through professionalizing 73%
product-related services (e.g., inspection, maintenance, spare parts) 31%
Improving the service quality through offering different service 66%
levels (e.g., basic, extended, premium) 38%
Improving the service quality through professionalizing customer 52%
support services (e.g., consulting, training, financial solutions) 43%
Improving the service quality through better qualifying 29%
own service personnel 23%
Concentrating on premium services 43%
56%
Capgemini Consulting
26
Exhibit 21: Profiles of Operational Excellence Levers for the Emerging Markets
Priority Priority
Low Low
Low High Low High
Marketing & Sales Potential Potential
Sourcing
China India
Distribution High High
Planning
Reverse Logistics
Priority Priority
Group of Aftermarket Champions
(High performers)
Group of Exploiters
(Low performers)
Low Low
Group of Explorers Low High Low High
Potential Potential
(Low performers)
Capgemini Consulting
17 The following initiatives are relevant for Western Europe: Adapting the service offerings to local requirements,
improving the relationship with wholesalers, improving the relationship with dealers and workshops, and
improving and extending the service offering.
28
their efforts in this market according Exhibit 22: Network Structure in the Emerging Markets
to the current market maturity stage.
Density of the network structure
They seem to hold back until this
market really becomes attractive. Low Medium Dense
In early market entry phases, Percentage of companies concentrating on the outlined concepts
Capgemini Consulting
30
Strategic Initiatives Participants also were asked to
Companies often face limited evaluate the ability to fully
financial and personnel resources. participate in the market growth in
Thus, it is important for them to the various emerging regions. Here,
understand which strategic initiatives aftermarket champions and explorers
they should invest in to best allocate responded differently. Most explorers
people and budgets. indicated they were not really
prepared for exploiting the growth in
Exhibit 24 illustrates that each region these markets whereas aftermarket
requires a different set of strategic champions said they were fully
initiatives. This map can serve as a prepared. This explains why in
basic investment guide since the general the importance of the
priorities of the various initiatives can implementation of the following
be identified. strategic initiatives is relatively high
across all four emerging markets.
Further evidence arises from the
preparation for exploiting the market
growth in various emerging regions.
G 3 B G 3 B
2 2
1 1
F C F C
Exploiter AM Champion
E D E D
Explorer Explorer
Scale: 1 = very low to 4 = high
Legend China India
A Improving and extending the service offering 4 A 4 A
Capgemini Consulting
32
Finally, in India the focus of the dealers and workshops, which is
participants is to shape an voted second by the aftermarket Key Finding
established platform from which to champions. And of course their push In the beginning, explorers
conquer additional market share. The in these investments is very different
should consider a tight
first three initiatives again are typical since they basically invest with an
market share stabilization strategies average prioritization factor of 2.6, partnership model to leverage
and only the fourth is somewhat compared with 3.2 for the economies of scale and build a
more expansion oriented: aftermarket champions. strong execution model.
1.Improving the relationship with
wholesalers Summarizing, the study indicates
that, on the one hand, explorers are
2.Improving the relationship with
well advised to follow up on
dealers and workshops
initiatives that help stabilize their
3.Improving and extending the market position, as aftermarket
service offering champions on average paid the most
4.Adapting the service offerings to attention to balancing their effort to
local requirements both stabilize increased market share
as well as to expand their footprint.
As can be seen, a similar situation On the other hand, explorers already
applies for India as for Russia. The set basically the right focus because
picture is again a mixture of the initiatives they paid the most
stabilization as well as expansion, attention to regularly are chosen by
although the focus shifts to more aftermarket champions as well. The
stabilization-related topics when biggest difference in this case is the
considering the first three initiatives. consequent push that is required to
Only the last one focuses on market implement these initiatives. It’s clear
acquisition. Furthermore, the that explorers have to improve quite
intensity to follow up the initiatives a bit in order to become aftermarket
is almost 10% lower in India, champions and reach a higher
compared with Russia. Explorers position in CHAMP.
might need to rethink their
investment behavior since their
highest priority is on improving the
relationship with
33
7 Conclusions
Capgemini Consulting
34
Exhibit 26: Summary of the Aftermarket Approach in Emerging Markets
• Run and control dense networks of dealers and wholesalers beyond first- and second-tier cities
Aftermarket • Adapt standard IT solutions to more dense networks and extended service offerings
Champion • Continually improve the planning, sourcing, distribution and reverse-logistics processes
• Let the local aftermarket management break free from headquarter formalities
• Try to break free from former joint venture partner and invest in own networks of dealers
and wholesalers
Exploiter • Adapt service offerings to specific requirements of each market
• Redesign the marketing and sales processes and consider advanced and adapted
services offerings
• Optimize the warehouse network, parts availability and service level
Strategic Initiatives for the Emerging Markets of Eastern Europe, Russia, China and India
Capgemini Consulting
Typical pitfalls on the way from not entail specific solutions for each
exploiting the aftermarket to region. Across all emerging markets,
aftermarket champion come from it is sufficient to set up standard IT
emphasizing individual IT solutions solutions in the early stages of
and trying to control too many levels exploring and exploiting the
of the value chain. The additional aftermarket. In addition, aftermarket
benefits offered by individual IT champions across all emerging
solutions do not seem to cover the regions have strongly penetrated the
corresponding higher costs. The market and try to control the various
historical development of the value levels starting with central to
Western European aftermarket regional and ending up at a
industry with strong players and decentralized level. For explorers and
fragmentation limits companies to exploiters to catch up they have to
control every level of their value carefully plan their investments due
chain. Instead of trying to penetrate to limited resources and should
the aftermarket with an own adapt the aftermarket champion’s
organization it seems to be more strategies wherever meaningful.
important to cooperate with
wholesalers and dealers. The In any case, these companies should
cooperation should be focused on try to avoid taking the same learning
improving their loyalty by strongly curve as aftermarket champions and
emphasizing a loyalty program. rather try to identify shortcuts or
development leaps. This is a complex
A similar summary can be task.
formulated for the emerging markets.
The main dimensions such as IT, Differences across the emerging
network or organizational design markets can be found in the
have strong global attention and do operational layers. Aftermarket
36
37
Contacts
For more information please contact:
Steffen Elsässer
+49 162 - 2343646
steffen.elsaesser@capgemini.com
Ralf Betke
+49 162 - 2343168
ralf.betke@capgemini.com
38
www.capgemini.com/automotive
www.item.unisg.ch
Argentina India
Colectora Panamericana Este 1925 SEP-2, B-3, Godrej Industries Complex
B1609ECM - San Isidro, Buenos Aires Eastern Express Highway
+54 1147358000 Vikhroli (E)
Mumbai 400079
Brazil +91 22 6755 7000
Rua Samuel Morse, 120 Conjunto 71
04576-060, Sao Paulo Italy
+55 1135250100 I portici del lingotto
Via Nizza 262 int.27
China 10126 Torino
11F, Azia Centre +39 011 65 38 11
133 Yin Cheng Bei Rd.
Lujiazui, Shanghai, PRC 200120 Russia
+86 21 6105 3888 Triangle Consulting/Capgemini
16 Bolshoy Ovchinnikovsky Per.
France Moscow 115184
Coeur Défense Tour A +7 495 980 97 96
110, esplanade du Général de Gaulle
92931 Paris La Défense Cedex Sweden
+33 (0)1 49 67 30 00 Mölndalsvägen 36-38
412 63 Göteborg
Germany +46(8) 5368 5000
Neues Kranzler Eck
Kurfürstendamm 21 United Kingdom
D-10719 Berlin 1 Forge End
+49 (0)30 88 703 0 Woking, Surrey
GU21 6DB
Iberia +44 (0) 1483 764 764
Anabel Segura, 14
Arroyo de La Vega United States
28100 Alcobendas, Madrid 25925 Telegraph Road
+34 (91) 657 70 00 Suite 350
Southfield, MI 48034
+1 248 233 3101
©Shutterstock.com/Diego Cervo (cover & page 33) /Mikael Damkier (page 2)/Sudheer Sakthan (page 5)/Dana Bartekoske (page12)/Buket Bariskan (page15).
Capgemini Consulting is the strategy and transformation consulting brand of Capgemini Group.
The information contained in this document is proprietary. No part of this document may be modified, deleted or expanded by any process or means
without prior written permission from Capgemini. Copyright © 2010 Capgemini. All rights reserved.
Rightshore ® is a trademark belonging to Capgemini.