A Turning Point in Automotive Service

A study commissioned by Automechanika, Messe Frankfurt Exhibition GmbH

Prof. Dr. Willi Diez

September 2010

Institut für Automobilwirtschaft (IFA) at the Nürtingen–Geislingen University (HFWU) http://www.ifa-info.de

This publication in its entirety is protected by copyright. Any use beyond the strict limits of copyright law without the permission of the author or publisher is strictly prohibited and punishable by law.

Table of contents
Summary of key results 1. Introduction: Innovative service worlds ................................................. 8 2. Situation and development trends in the automotive service market11 2.1 2.2 2.3 The service industry is reaching the limits of growth ..........11 Increasing workshop rates and parts prices .........................13 Competitive situation: from “peaceful coexistence” to “predatory competition”..........................................................15 2.4 2.5 2.6 2.7 Dealer satisfaction in aftersales business.............................20 Political framework: aftersales focus of BER........................23 Deceptive profit........................................................................24 Interim conclusion I: Automobile service – from the cornerstone of profits to Achilles heel? ................................25 3. A turning point in aftersales – eight trends characterise the market of the future .................................................................................................. 26 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 Trend I: The service market will develop negatively.............26 Trend II: Older vehicles continue to gain in importance ......30 Trend III: Internet exchanges direct customer flows ............31 Trend IV: Intermediaries will change the market structure ..35 Trend V: Polarisation of customer segments........................39 Trend VI: The connected car...................................................42 Trend VII: E-mobility ................................................................45 Trend VIII: Consolidation in the aftersales sector.................48 Interim conclusion II: Trends in aftersales business - the winners and the losers ............................................................50 4. Results of the IFA panel: challenges and opportunities in aftersales business ................................................................................................... 51 4.1 4.2 Objectives and methods .........................................................51 Development of aftersales business......................................53

........................7 Assessment of the competitive situation ............... Conclusion and prospects: new rules of play − old players?.............................................2. 89 .....4......................79 5......2 Authorised dealers and workshops ........2...............6 Workshop chains and specialised markets ..........88 6........................78 5....................................56 Future risks in the aftersales sector .............76 5...............86 5............2.................2 Innovative service formats..............2.......................................................84 5...3 Automotive suppliers.....54 Future opportunities in the aftersales sector ............................8 Specialists.........................60 Challenges................65 5...............5 Workshop systems.........................56 Fields of action in the aftersales sector...........2................58 5........4 Parts wholesalers......5 4............71 5.....4 4.81 5.2.......................6 4.................................................................................................3 Interim conclusion IV: Strategic options in the aftersales market of the future..................2..................1 Car manufacturers ..57 Interim conclusion II: Strengthening the strengths − a promising strategy? ............................... Strategies and fields of action in the service market of the future........................ 60 5......2...65 5...............3 4.......1 5........7 Independent workshops ................................................ strategies and fields of action for the players in the service market ....

Standardised maintenance and repairs will be most heavily influenced by this. a longterm. Technical advances. The scrapping premiums however did not reverse the trend towards older vehicles. Trend III: Internet exchanges The importance of the internet in service will continue to increase in the coming years.Summary of key results A new era has dawned in the aftersales market. but simply interrupted it. fewer miles being driven and changed customer behaviour will again significantly increase the lifespan and length of use of vehicles in the coming years. which has been evident for some time in the new and used car markets. Trend II: More older vehicles in use Germany’s scrapping premium programme in 2009 led to approximately 2 million vehicles older than 9 years being eliminated from service. Online repair exchanges in particular will grow in importance and direct customer flows in much the same way as in today’s used car market and to a certain extent the new car market. the players in the service industry will have to reorient themselves in order to survive. Influenced by new market and competitive conditions. The 1 . irreversible consolidation is inevitable in aftersales in the coming years. The saturation of the German automobile market.3% to 13. This represents a sales loss of around 700 million euros for the service market. new and growing customer requirements and ongoing technological development. has now reached the service industry. aftersales business will shrink 6.2% by the year 2025. Eight trends characterise the service market of the future: Trend I: Declining market volume Considering the stagnating number of cars in Germany in the mid to long term and an additional decline in maintenance and repairs. At the same time.

while more priceconscious drivers with a small budget will lead to the emergence of discount-style service formats. which means that companies from outside the industry in the field of information and communication technology will have a growing influence on the choice of service provider. Framework agreements will give leasing and fleet management companies in particular an increased say in which aftersales suppliers get how many cars and under what conditions in their shops. service and convenience. Trend V: Polarisation of customer segments The trend of “erosion of the mid-range” observable in many areas will also lead to a polarisation of customer requirements in the aftersales domain. More and more vehiclerelated information is provided independently of the vehicle.importance of these online platforms will increase as more and more workshops join them. 2 . The trend “using instead of owning" will position additional innovative mobility service providers between the shop and the customers in large urban areas. Trend VI: The connected car Automotive systems will increasingly open up for new players thanks to increased use of portable end-consumer devices. Trend IV: Increasing importance of intermediaries The shift of demand from private to commercial customers which has been observed in the German market for several years will increasingly affect aftersales business. Well-to-do private customers with a strong affinity for cars will pose high demands on quality.

risks and fields of action for the aftersales business: The authorised dealers and shops surveyed see the increasing technical complexity and the growing number of new technologies in vehicles as the key opportunities for the future of aftersales.850 workshops. The loss of the direct initial customer contact represents a threat to the market position of automobile manufacturers and their contract partners which should not be underestimated. The personal relationship between drivers and their workshops will be further weakened when new. Only onethird consider the trend towards the electric car as an opportunity for the future. access to aftersales for drivers of these vehicles will change. the number of car repair establishments is likely to decrease by a good 25% to only 32. 3 . By the year 2020. Because new marketing models may apply for electric automobiles. This figure is expected to reach an all-time high in 2010. These trends tend to favour independent service providers not bound to a specific manufacturer. with 480 shops becoming insolvent. A considerable increase in the number of automotive shops going bankrupt can already be observed in recent years. Market participants that are not affiliated with a certain manufacturer on the other hand can benefit from the shift in market structures towards older vehicles and intermediaries. user-oriented business models emerge in the field of e-mobility. explorative survey of authorised dealers and workshops conducted as part of the IFA Dealer Panel attempted to identify the opportunities.Trend VII: E-mobility The advent of the electric car and the growing importance of batterypowered electric vehicles in urban areas represent more than just a technological challenge for aftersales. An online. Trend VIII: Consolidation in aftersales The declining market and the described structural changes in aftersales will lead to a significant consolidation in the automotive service industry.

They also fear growing price sensitivity amongst customers and perceive a danger in discount wars even in aftersales. as well as user choosers from the commercial domain. whose systematic menu pricing appeals to price-sensitive customers with a small mobility budget. Other important fields of action include optimising shop processes. The primary fields of action of surveyed authorised dealers and workshops are training employees. offering standardised maintenance and repairs with guaranteed quality to intermediaries via a largely internet-based customer process. To counteract the described development trends.Survey respondents continue to regard claims management by automobile insurers as the greatest risk. The service discounter. which is increasingly proving to be non-ideal in meeting specific customer needs. 4 . The further qualification of shop employees is accordingly high on the agendas of surveyed companies. It also shows their high flexibility and focus on technically complex shop work. The survey shows that the authorised service providers have a relatively good understanding of the risks and challenges in the aftersales market of the future. increasing customer satisfaction and actively marketing services to ensure the shop is used to capacity. the following four promising service formats can be identified for the future: The premium service provider with a strong focus on well-to-do private customers with an affinity for cars. purchasing parts and accessories more inexpensively and reducing shop costs. The service factory. Based on the trend analysis. Today’s automobile service follows the principle of “all-round service”. in the future it will be necessary to offer more differentiated service formats that better cater to specific customer groups and needs.

Because authorised dealers and shops are bound to one or more manufacturers. This does not necessarily mean a single-brand strategy. it could also involve acting as a multiple-brand dealer or service partner. The key is to make the service formats consistent and implement them in a viable business model. Furthermore. The wholesale parts market in Germany is considered to be oversaturated. Because parts wholesalers act as a kind of gatekeeper for suppliers.The mobility service outlet. car manufacturers have a wider range of strategic options compared to other players in the service market. The biggest problem of automotive suppliers is typically a lack of direct access to end consumers. targeting both operators and users of innovative mobility services. so that an active consolidation strategy in this domain is a key strategic option. securing shelf space in the wholesale product range is of tremendous strategic importance. 5 . The service formats described above are already present in the aftermarket in rudimentary form. The main concern of this supplier group is to strengthen its position as the “brand champion” in their respective regional or local competitive environment. they have less strategic room for manoeuvre. This can be achieved by focusing on system components which are less interchangeable with the competition and by increasingly using lowcost locations to remain competitive in simple parts. These trends mean that the established players will have to adjust their market and competitive strategies in the following ways: Thanks to their domination of the authorised system and their size and financial resources. automobile manufacturers can further develop into mobility providers. forward integration through expansion and enhancing brand awareness through shop systems play an important role in the wholesalers’ strategy portfolio. This could help them to counteract the growing power of intermediaries in aftersales and thus secure their parts sales. Additionally. thereby expanding their basis for creating value.

Shop systems should increasingly emphasise their value for money in the future and take advantage of their multi-brand capability as a strategic strength. takeovers and mergers. convenience and price are forcing all players in the aftersales market to have a more professional market profile and customer-relevant processes. however. The growing share of “users” instead of “owners”. which requires a high degree of process standardisation. An important strategic option for this supplier group is to affiliate with an internetbased repair exchange. thereby accelerating the consolidation process 6 . they must expand their range of services to tap customer potential and increase the value created per customer. Increasing market and competitive pressure combined with new automotive technologies are changing the rules of play in the aftersales market. where independent shops can showcase themselves as price-effective local alternatives. All participants in today’s aftersales markets have access to strategic options to prepare for the future market and competitive situation. Thanks to their distinctive profile as experts. centrally managed vehicle fleets. This also provides them with special opportunities to work with intermediaries. At the same time. consolidation is inevitable. Beyond this. This wave of consolidation will reach all groups and lead to a growing number of insolvencies. But it is also clear that in an overall declining market. the increasing importance of large. Ultimately it is customers who are driving forward these changes. specialists have excellent opportunities in business with intermediaries. Interesting opportunities will open up for these suppliers in the “service factory” format. Workshop chains and specialised markets are considered classic aftermarket discounters and should maintain this positioning. The old distinction between the “authorised” and “independent” markets is becoming increasingly obsolete. The small size and limited financial resources of independent workshops leave very little room for strategic manoeuvre. it is becoming increasingly likely that new players will intervene in the market. and the growing demands of private customers with respect to quality.

not only in terms of “old” participants.even further. they will capture a share of the margins achieved up to now in aftersales. 7 . either directly or as intermediaries. The “opening of the automobile system” and the trend towards electromobility will mean that companies from outside the sector will enter into the automotive industry's chain of value creation and will influence the direction of customer flows. but “new” ones as well. In so doing. The automotive chain of aftersales value creation will undergo a restructuring process in the years to come.

according to the motto “enjoy being at the dentist”. sunny dune landscape. an open fire burns in the waiting room fireplace and in summer you can enjoy the sunshine in a deck chair on the outdoor terrace. The vision was transformed into reality in a practice in the middle of Berlin: “KU 64 .1. Dr. At the same time he developed a unique holistic treatment concept. The entire practice resembles a sandy. In addition to complete dental services. Stephan Ziegler had a vision of transforming the typical fear-inducing dentist appointment into a positive experience. a medical practice that patients enjoy visiting and where they feel good. where it smells of coffee when you enter. lounge music fills the rooms. Ziegler hired renowned architects to design a dental office that transcends the usual standards. Berlin dentist Dr. We go to the dentist either because of pain or a guilty conscience for skipping regular checkups for so long. Introduction: Innovative service worlds Visiting the dentist is an unpleasant and daunting occasion for most people. Whether all patients consider their visit a joyful. KU 64 represents a different kind of dentist visit than we have been used to in the past – not just medical treatment but wellness for the whole person. and the practice has expanded to include cosmetic surgery. a massage can be booked with a naturopath following treatment. but the success of and tremendous demand for this dental practice has confirmed the vision of its founder. The office is open seven days a week and is committed to using only materials that are harmless for people and the environment.the dental office on Kudamm street”. for instance no amalgam or substances containing formaldehyde. 8 . pleasant experience remains open.

The philosophies behind these two service concepts could not be more different. at Ryanair. It originates from a logic based not on creating a positive experience but on a completely rational cost-benefit analysis: One doesn’t fly Ryanair to enjoy oneself but to reach a destination as quickly and cheaply as possible.Segueing into another example: “Ryanair is serious about standing-room seats on flights” was the title of an article in the Neue Zürcher Zeitung on 2 July 2010. but also on how it is deployed. the question is “What can we eliminate to make flying even cheaper?” The idea of removing the passenger’s seat in exchange for a lower ticket price only initially seems absurd. a trip to the workshop is not necessarily associated with positive emotions. Can the automotive industry learn something about service from these two examples? Like a visit to the dentist and in contrast to buying a new or used car. but the event-focused dental concept and the bare-bones flight services from A to B are both highly successful. Whereas the Berlin dentist office’s approach is “What can we additionally offer to appeal to the patient even more?”. The fundamental principle is in fact the exact opposite of that of KU 64. At the end 9 . Ryanair is another pioneer in service innovation. The goal of the company is to offer air travel as cheaply as possible. Apparently the success of a strategy does ot rely on the “idea” behind it alone.

more comfortable car than before and would be pampered in an atmosphere of luxury and convenience. perhaps automobile service is in fact facing its first real revolution. Automobile service as an event would mean that in the end. Thus there are only two approaches for satisfying customers: either impart an additional emotional value to visiting the workshop or reduce the process to its most basic. Following many years of evolutionary development.one receives one’s car back. Automobile service as an experience involves more than a quick chat. simple maintenance at a low price. 10 . These two approaches have not been carried to their logical conclusion in the automotive industry. Neither maintenance nor repair is a truly enjoyable experience. the customer would have a nicer. i.e. the obligatory cup of coffee from the machine and a competent customer service agent. today’s service formats operate in a kind of grey area between tersely friendly customer service and supposedly clever discounters without any substantial price advantage. Discount automobile service would mean that costs are systematically saved along the entire process and the price is at least 50% less than the competition. Discount automobile service in turn is more than a shop with bargainbasement design and fixed prices. How will the automobile service world look in ten or twenty years? The event experience on one hand and discounters on the other? Who will operate these kinds of shops? Who are the pioneers who will initiate this change? Who will not survive this transition? Perhaps the turning point in automobile service will be much more extreme than we can imagine today. Instead. Conventional service formats and concepts may have to be fundamentally reconsidered and reshaped in light of these trends and challenges. which either drives like it did before or like a regular car once again.

7% (Figure 2).1 33. following a record year in 2008 (EUR 35.8 30.5 billion in 2009. considering that the number of orders in the industry has decreased significantly since 2003 from 91.5 million.6 million to 74.2.4 34. This development is in sharp contrast to the growth of the service market in past decades.5 33.1 34.2 34. The service market has been at a nearly constant level since 2003 with only minor fluctuations up and down (Figure 1) Whereas sales in the service market were EUR 34.1 The service industry is reaching the limits of growth If one considers how the service market has developed over a relatively long period of time.2 29.4 30.4 30.8 billion in 2003.5 billion) they fell to only EUR 34.9 31. 11 .8 34.5 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Figure 1: Service market volumes (incl. Situation and development trends in the automotive service market 2. a decrease of 18. Maintenance Wartung 40 35 Service volumes in billion euros Repair (wear parts) Reparatur (Verschleißteile) Accident repair Unf allinstandsetzung 35. it is easy to see that turnover in the service industry is reaching its limits of growth.8 34.8 30. replacement parts) Source: DAT/ZDK/Institut für Automobilwirtschaft 2010 This comes as no surprise.5 30 25 20 15 10 5 0 29.

6 150 100 50 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0. this means a significant decline in turnover generated in the maintenance business.2 0. it is evident that the fields of maintenance and repair work were equally affected by this.4 0.08 to 0.2 0.87 (-19. Overall.95 90 85 80 75 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Figure 2: Development in maintenance and repair orders (in millions) Source: DAT Report 2010 Looking at the individual sub-segments. the cost per maintenance event increased only slightly during the same period from EUR 215 to EUR 228 (Figure 3).0 0. At the same time.8 0. The average number of maintenance events per vehicle and year decreased in the period from 2003 to 2009 from 1.0 1.4 0.0 Figure 3: Cost per maintenance event and maintenance frequency Source: DAT Report 2010 12 .4 1.0 0.2 1. In EUR 400 Maintenance costs Wartungsaufwand Maintenance frequency Wartungshäufigkeit 1.4%).6 0.8 350 300 250 200 0.4 1.2 1.

6 0. Many drivers avoid what they subjectively see as unnecessary maintenance and repairs in order to reduce operating costs.2 Increasing workshop rates and parts prices The fact that the decline in maintenance and repair work has not impacted turnover more strongly up to now primarily has to do with the increasing prices for repair shop work and replacement parts.2 1.62 in 2009 (-27.4 0.9%). which has also led to a reduction in the frequency of taking the vehicle to the shop.8 0. improved vehicle quality and fewer kilometres being driven mean car owners do not have to visit the workshop as often. The cost per repair has also gone down in this segment. The price index of the German Federal Statistical Office shows a 25% increase in prices for maintenance and repair work between 2000 and 2009.8 0. In EUR 350 Repair costs Reparaturaufwand Repair f requency Reparaturhäufigkeit 1. 2.0 1 300 250 200 0. from EUR 185 in 2003 to only EUR 172 in 2009.86 in 2003 to 0. This figure is 13 .2 1.2 0.6 150 100 50 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0.0 Figure 4: Cost per repair event and repair frequency Source: DAT Report 2010 The reasons for the declining development of maintenance and repair events are well-documented: longer maintenance intervals.0% (Figure 4).2 0 0.4 0. where the number of repair events per vehicle and year decreased from 0.The development of the repair business is similar. Another factor is a growing sensitivity to the cost of ownership. a decrease of 7.

4 2004 104.8% vs.1st half Hj 2010 of 2010 Consumer price index Verbraucherpreis-Index Replacement parts and accessories Ersatzteile und Zubehör Figure 6: Development in prices for replacement parts and accessories Source: Institut für Automobilwirtschaft (IFA) 14 .3 104.1 120.1 109.9 113.3% as previously mentioned.0 103.9 117. Shop price increase in the first six months of 2010 also outpaced consumer price growth compared to the same period in the previous year (3.4 112.2 103. when replacement part prices increased much more quickly (2.und Reparaturarbeiten Verbraucherpreis-Index Consumer price index 1st half 1.9 2000 index = 100 2004 2005 2006 2007 2008 2009 Maintenance and repair work Wartungs.9% in the same time frame. This trend continued in the first half of 2010.1 2003 103.0 108.3 2000 2001 2002 102. +9.2 103.4 102.4 2001 2002 106.7 112.4 118. 128 126 124 122 120 118 116 114 112 110 108 106 104 102 100 2000 127.5 115. which increased 1.5 110.0 112.2 110.0 114.4 118.3% vs.1 104.5 115.5 2003 106. Hj of 2010 2010 Figure 5: Development in prices for maintenance and repair work Source: Institut für Automobilwirtschaft (IFA)/Destatis The situation is similar for prices for replacement parts and accessories (Figure 6): Following a modest increase in the years 2000 to 2005.3%) (Figure 5).5 106. 1.3%) compared to the same period in the previous year than consumer prices. which only went up by 15. from 2006 to 2009 replacement part prices increased significantly more than overall consumer prices (+12.9 117.0 101.significantly higher than the increase in general consumer prices.1 104.9 125.3 106.2 109.6 115.6 Index 2000 = 100 114 112 110 108 106 104 102 100 2005 2006 2007 2008 2009 1.8 108. 120 118 116 115.7 102.5%).1 102.3 111.

The only decrease occurred in the number of primary and secondary dealers. In stagnating markets.Whether this above-average growth in shop prices will continue is questionable.000 in 2005 to 13. Both the weakening market development and the continuing large number of service providers have intensified the competitive situation in the service business. but also attempted to drive profits by raising prices. Many former authorised dealers took advantage of this opportunity to remain in the network of their manufacturer. car owners are likely to be less and less accepting of this pricing policy. which fell from about 15. An even larger increase was observed in the number of branch shops. Apparently in the past. growth is only possible by eliminating the competition. while many independent shops have become authorised as service partners for one or more brands. Other authorised dealers have added additional service brands to their portfolio. Overall the number of authorised service providers increased 4. with only partial success.626 establishments (Figure 7). which tripled in the same period of time. according to which essentially only a "qualitative selection" in service is possible (BER 1400/2002).3 Competitive situation: from “peaceful coexistence” to “predatory competition” In growing markets. In light of the stagnation of real income and increases in other vehicle operating costs. the scenario of “predatory competition” is increasingly becoming a reality.785 in 2010 (+26. As the growth curve in the service business flattens out. 2. shops not only passed on increasing costs. to their customers.4%) 15 . especially personnel expenses.4%). The attempts by automobile manufacturers and importers to consolidate were countered by the liberalisation of the authorised service market by the Block Exemption Regulation. Car manufacturers and importers have tried to adjust not only the number of their dealers but also the size of their service networks. This mainly resulted from the increase in pure service establishments from 9.3% between 2005 and 2010 to reach the level of 25.362 at the beginning of this year (11.324 in 2005 to 11. companies can still expand despite losing market share.

000 500 0 2006 2007 2008 2009 2010 800 1.087 156 9.3 Figure 7: Authorised service establishments Source: Institut für Automobilwirtschaft (IFA) The number of independent suppliers has remained nearly constant since 2005 at just over 20.785 25.567 13.1 +26.626 -11.4 +4.362 479 11.100 1. Number 2.500 1.000 1. but also the number of associated establishments.000 1.200 Figure 8: Development in workshop systems Source: Automobilwirtschaft 1/2009 The competitive situation has also intensified as a result of new strategies amongst both authorised and independent suppliers.500 2. most shop systems plan to further expand their networks (Figure 8).000 2.500 1.000.800 2. To reach the “critical mass” necessary for survival. Not only has the number of shop systems itself risen strongly. However there is a strong trend towards expansion amongst workshop chains and workshop systems.500 2.500 1.4 +207.324 24.Number of establishments Primary and secondary dealers Branch shops Service shops Total 2005 2010 Change in % 15. Whereas in the past a 16 .

. in recent years automobile manufacturers and their authorised shops have increasingly attempted to penetrate segments II and III. financing repairs). 25% 20-30% Approx. in particular through customer loyalty programmes such as flat-rates that bind owners to a specific shop for up to four years. at times going so far as to establish a second range of more cost-effective parts (Figure 9). Brand Citroën Ford Hyundai Kia Renault Toyota Name of 2nd parts range EUROREPAR Motorcraft Uni Fit Unifit Parts MOTRIO OPTIFIT Available since 2006 The 1980‘s 2006 July 2009 1999 Approx.g. 25% Product groups Primarily wear parts All wear parts Wear parts Wear parts Typical wear parts Key maintenance components and high-priced replacement parts Figure 9: 2nd parts range of selected car manufacturers Source: AUTOHAUS 13/2009 Independent suppliers are also increasingly trying to expand into the newer car segment.more or less “peaceful coexistence” was the norm. They do this by enhancing their existing locations and offering an expanded range of services oriented toward those of the authorised shops (e. providing replacement vehicles. where the authorised workshops focused on newer cars and the independent shops on older cars. 20% Approx. 17 . 35% Approx. 30% Approx. But car manufacturers have also become more flexible in parts pricing. 2000 Cost savings Approx. and in some cases even by selling cars and offering their own flat-rates (Figure 10).

e. the importance of this segment in particular has grown in recent years. i. Only in segment IV. it is apparent that automobile manufacturers and their authorised shops have succeeded in increasing their market share since 2005 in nearly all sub-segments (Figure 11). has the market share for authorised shops decreased.Figure 10: Customer loyalty strategies of independent service providers using the example of ATU Source: ATU 2009 If one considers the individual vehicle age segments in the maintenance and repair market. Consequently. independent shops have increased their overall market 18 . .Share in % Under 2 years 2-4 years 4-6 years 6-8 years More than 8 years Total Authorised shops 2005 2009 90 82 63 60 33 55 91 86 77 71 29 53 Other shops 2005 2009 7 11 24 28 46 30 4 12 17 25 55 37 Figure 11: Performance of maintenance and repair work according to vehicle age Source: Institut für Automobilwirtschaft (IFA) Interestingly. vehicles that are 8 or more years old.

The German market for wholesale parts is considered to be “over-distributed”. a significant consolidation is expected in wholesale parts in the coming years.share over the course of the past decade. which means that there tend to be too many parts wholesalers competing with one another for the size of the German market. which have increasingly entered the parts market (Figure 13). Their share of the maintenance and repair market between 2003 and 2009 for example increased from 23% to 36%. 19 . At the same time. the market share of authorised shops decreased from 61% in 2002 to 53% in 2009 (Fig 12). 60% 50% 40% 30% 20% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Authorised shops der eigenen Marke Vertragswerkstatt of own manufacturer Other automotive shops sonstige Kfz-Werkstatt Figure 12: Market share of maintenance and repair work Source: DAT Report 2010 Increasing competition in the parts business also plays a significant role in the competitive situation of the aftersales market. This situation has tended to intensify in recent years rather than weaken. Correspondingly. due to greater activity on the part of car manufacturers in supplying nonauthorised dealers and to the activities of large groups of dealers.

This development conveys the growing relevance of aftersales for automobile manufacturers: apparently the support provided to dealers by manufacturers in this area is increasing.059 authorised dealers in Germany.93 (German school marking system.87. scale from 1-6. Whereas in 2009 car dealers rated their satisfaction with manufacturers in the aftersales field as 2.Figure 13: Automotive dealer groups as wholesale parts suppliers using the example of the Dello Group from Hamburg Source: Dello 2010 2. 1 being the highest). this score increased in the survey conducted at the beginning of this year to 2. Automobile dealers are more satisfied in particular 20 . satisfaction of German car dealers with their manufacturers in the aftersales business has increased in recent years.4 Dealer satisfaction in aftersales business According to data from the Schwacke "Brand Monitor" conducted by the Institut für Automobilwirtschaft (IFA). The survey included 1.

99 2.10 2.40 2. this appears to be a trouble spot for dealers as evidenced by the overall below-average satisfaction with this factor (Figure 14).93 2.17 2.40 2.10 3.87 2007 3.37 3. When ranked according to brand.77 Figure 14: Satisfaction with the car manufacturer or importer in the aftersales domain Source: Schwacke MarkenMonitor 2010 Satisfaction of authorised dealers is also below-average when it comes to manufacturer pricing for parts threatened by competition.80 2.with the support provided to better utilise shop capacity.90 2. 1 = very satisfied.00 2.10 2.40 3. but only just ahead of BMW dealers. This is apparently another critical issue for authorised dealers competing with independent service suppliers. with a score of 3.87 2. two additional premium brands.50 3.80 2.90 2. 6 = unsatisfied Prices for parts threatened by competition Margin bonus system for parts and accessories Manufacturer delivery system for parts and accessories Support from manufacturer to better utilise shop capacity Handling of warranty claims and goodwill repairs for new cars Average satisfaction in the aftersales domain Average satisfaction overall 2005 3.86 2.20 3. 21 .34 3.28 in 2009.93 2006 3.91 2008 3.93 2. The rear of the ranking is brought up by the two French manufacturers Peugeot and Renault (Figure 15).50 3. whose score increased significantly in the past year.19 3.89 2.03 2.30 3.17 in 2010 compared to that of 3.04 2.40 2.13 3.83 2010 3.28 2.03 2.96 2. Nonetheless.90 2009 3.91 2. Toyota dealers lead the top 10 list of satisfaction with manufacturers.90 2.97 2. Positions 3 and 4 are held by Mercedes and Audi.39 2.

Rank 1 2 3 4 5 6 7 8 9 10

Brand Toyota BMW Mercedes Audi Skoda Opel Volkswagen Ford Peugeot Renault

2010 2.47 2.48 2.52 2.59 2.64 2.65 2.83 2.84 3.10 3.10

2009 2.41 2.69 2.30 2.82 2.89 2.55 2.85 2.92 3.39 3.13

1 = very satisfied; 6 = unsatisfied

Figure 15:

Satisfaction with the car manufacturer or importer in the aftersales domain according to brand
Source: Schwacke MarkenMonitor 2010

Toyota partners are also the most satisfied with support in utilising shop capacity, another very important factor for authorised dealers. Mercedes comes in second place here, although satisfaction compared to the previous year has decreased significantly. BMW in contrast was able to increase the satisfaction of its dealers to reach third place.

22

Rank 1 2 3 4 5 6 7 8 9 10

Brand Toyota Mercedes BMW Skoda Audi Ford Volkswagen Opel Peugeot Renault

2010 2.48 2.70 2.77 2.89 2.97 3.00 3.03 3.08 3.13 3.23

2009 2.63 2.39 3.03 3.30 3.26 2.83 3.28 2.70 3.44 3.21

1 = very satisfied; 6 = unsatisfied

Figure 16:

Satisfaction with support in utilising shop capacity
Source: Schwacke MarkenMonitor 2010

2.5 Political framework: aftersales focus of BER Block Exemption Regulation (BER) No. 1400/2002 provided new impetus to the aftermarket, if not to the extent which its authors in the EU Competition Commission had imagined. Many of the new regulations included in BER No. 1400/2002 had relatively little effect. For instance, authorised dealers have hardly made any use of subcontracting, which comes as no surprise considering the high profitability of the service business. Nor were there any major shifts in market share in the parts business between car manufacturers and independent parts sellers. Car manufacturers have made certain compromises in the pricing for parts threatened by competition, while suppliers have not always completely tapped the opportunities arising from the new legal situation due to reasons of convenience.

23

BER No. 1400/2002 has had a significant impact on multi-brand service however. Because car manufacturers could only select qualitatively above 30% aftermarket share, authorised dealers in particular used the opportunity to add a second or third service brand to their portfolio. Economically this often made sense, because the barriers to entering the market are lower for brand-specific investments than for new car sales, and earnings in service are significantly higher than in parts trade, so that the initial investments could be quickly amortised. But the automobile manufacturers have also used the multi-brand service to a certain extent to close gaps in a service network. The new BER No. 461/2010 in effect as of 1 June 2010 is not likely to cause major changes in the service business, as the regulations for the aftermarket remain practically unchanged. Undeniably positive for all players in the market is that this regulation is valid for a significantly longer period of time, providing for legal certainty and investment security through 2023. The statements of the Commission members responsible for the regulation indicate that they will be closely monitoring compliance with the rules of competition and will intervene if they are violated. Aftersales remain an area critical to competition in the eyes of the EU Commission. This perspective is likely to tend to favour independent service providers, which can expect special protection. This without a doubt leaves less room for strategic manoeuvre for car manufacturers, although the importance of this factor for future competition in the aftermarket should not be overestimated.

2.6 Deceptive profit The workshop and parts business is considered an especially profitable segment in the automotive market. After all, one-half to two-thirds of the total contribution margin 3 in the German automobile business was and continues to be generated in aftersales. With profits of 18.5% for workshops and 16.4% for parts and accessories, aftermarket sales were considerably more profitable than the +4.2% achieved in the new car business, even during 2009 at the high point of Germany’s scrapping premium program (Figure 17). Thanks to its cross-subsidisation of the vehicle business, aftersales contribute very significantly to the financial stability of many car dealerships. 24

According to the Institut für Automobilwirtschaft (IFA). in light of the largely saturated automobile market.2 0. This raises a number of other questions.2 16. not expansion. According to data from the IFA Institute. This corresponds to approximately 15% of the total profit of a car dealership. some 50% of profit in the aftersales market depends on the oil business. Wanner & Partner 2010 But the outstanding profitability in aftersales should not conceal the fact that it is based on a single. This is about to change.9 100. who up to now could expect continuously increasing sales volumes.1 100.0 2008 28.3 3. This is a historically new situation for all those involved.9 15.0 Contribution margin 3 of each department revenue (in %) New cars Used cars Replacement parts / accessories Workshop 2009 4.9 33.Source of contribution margin (in %) New cars Used cars Replacement parts / accessories Workshop Other departments Total contribution margin 3 2009 43. precarious source: the oil business. as it has for decades? The automobile service market in Germany is facing a decline which is not reversible. But will the automobile business really be able to achieve such high profits in the future that the pressure on aftersales business will be lessened? Do authorised dealerships need a new business model not only for the new car market but also for the service business? 25 .8 0. But now the development is reversing: all signs point to contraction. Dr.8 28. the price that private customers are willing to pay for an oil change today is EUR 36.2 28. Anders.4 18.5 2008 2. It is natural that many drivers are sensitive to price-based advertising for oil.0 5. well below typical shop prices at authorised service providers. Authorised dealers rely on high profitability in aftersales to compensate for insufficient returns on new and used vehicles.35.7 17.8 4.7 Interim conclusion I: Automobile service – from the cornerstone of profits to Achilles heel? Can and will automobile service in its current form secure the economic viability of today’s market players in the medium and long range.7 0.7 Figure 17: Profit structure in the manufacturer-authorised business Source: Rath. 2.2 23.

the strain will undoubtedly be less here than in new and used car sales. Increases in hourly rates and prices for replacement parts must also be taken into consideration. or will they also have to consolidate? And are they even capable of consolidation? Considering the still comfortable margins in aftersales. A turning point in aftersales – eight trends characterise the market of the future 3. the development of the service market is determined by two factors: The number of existing passenger and estate cars and The annual maintenance and repair demand per vehicle.In this situation of contraction. 26 . Their data come from the statistics of the German Federal Department of Motor Vehicles (KBA). Is the aftersales business facing a major turning point? 3. an “aggressive” and a “conservative” model. economic and societal factors. But this could dramatically change in the coming years under the influence of various technological. These two figures are estimated taking into consideration relevant economic and technical factors. or will they have to affiliate with a workshop system? Can they afford the investments in technical equipment and human resources necessary to remain at the cutting edge of technological development? And will the workshop chains and fast fitters be able to secure the medium and long-term “critical network size” necessary for their survival in a declining market. whereby two scenarios each are developed. the DAT report and their own model for calculating the annual maintenance and repair demand per vehicle. Will the classic independent establishments be able to survive independently as cross-brand all-rounders. things are equally as dramatic for independent service providers.1 Trend I: The service market will develop negatively Purely mathematically speaking. The Institut für Automobilwirtschaft (IFA) has been generating predictions for the German service market based on these factors for many years now.

) per car (hrs.6 46.50 190.2 4. h 158.939 mill.1 4.96 186.5 mill.76 183.865 mill.04 64.26 183.70 € 68. the service market potential based on sold hours for maintenance and repair work will decrease by 19.4 46.7 45.7 h 3.7 4. Both scenarios presume an additional but moderate increase in hourly rates. 2025 48.0 3.99 58.9 h 2. hrs. € 10. h 139.9 3. h 143.1 mill.364 12.8 179.1 mill.) 42.6% to 25.21 193. 3.2 4.677 10. h 133. depending on the scenario (Figure 18).3 h 3.39 € 71.438 mill.4 44. This results from a stagnating number of existing cars accompanied by an additional decline in demand for maintenance and repairs per vehicle and year. €) 10.58 € 72.8 43.533 11.2% by the year 2025.04 58. as mentioned above.0 45. € 10.3% to 13.03 65.721 mill.942 12.According to the 2010 IFA prediction.424 10.35 Market potential for market sales2 (mill. Given the assumptions described here.728 mill.2 h 2.804 11. € 10.93 57.1 46.95 € 10.8 mill. h € 68.1 mill. temporarily deregistered vehicles Only maintenance and repair.05 € 74. € 9. 2020 48. 50.2 4. How strong this serious decline in turnover in the aftersales business will be depends.83 € 74. the potential for increasing prices in the aftermarket is expected to be relatively small.8 mill. without VAT.6 mill. 50. € 10.00 62.1 mill. Assumption and results of the prediction Jahr 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Annual repair and Total potential for repair Number of existing maintenance demand and maintenance work2 Average hourly rate(€) cars 1 (in millions) (mill.75 64. without sales of parts and accessories 27 .7 mill.243 12.60 177. Considering the growing intensity of competition and the increasing price sensitivity of drivers.50 192.2% by the year 2025.0 h 2.48 192. on how hourly rates and parts prices change.3 4. no warranty/guarantee/goodwill work. service market sales are anticipated to decrease by 6. h 148.8 h 152.020 mill.072 11.4 mill.3 4. no body/paint work.2 4.00 61.4 mill.6 46.963 11.4 mill.85 188. Existing cars incl.79 60.450 Prediction Conservative Aggressive Conservative model model model Aggressive model Conservative model Aggressive model Conservative model Aggressive model Conservative model Aggressive model 2015 47. 1) 2) 48.8 44.78 65.

The range of aftersales products and services however is more diverse than in the new vehicle market.Service market prediction (hours) 205 Total market for repairs and Gesamtmarkt für Reparatur‐ und  maintenance in mill. Moreover. friendliness and expertise also play an important role for customers when visiting the workshop.500 Conservative scenario Defensiv-Szenario Aggressive scenario Of f ensiv-Szenario 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Figure 18: IFA prediction for the service market Source: Institut für Automobilwirtschaft (IFA) Analogous to the development in the new car market.500 12. In this respect.und maintenance in mill. The first signs of this are already manifesting themselves (Figure 19).000 9. 2025 28 . discount wars can be at least partially avoided through individual customer service.500 11.000 10. € 12. the declining aftersales market brings with it the risk of discount wars as well.000 Total market for repairs and Gesamtmarkt für Reparatur. soft factors such as trust. Stunden 195 185 175 165 155 145 135 125 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Conservative scenario Def ensiv-Szenario Of f ensiv-Szenario Aggressive scenario 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Service market prediction (wage hours in €) 13. where primarily standardised products are sold.000 11. € Wartungsarbeiten in Mio. hours Wartungsarbeiten in Mio.500 10.

Figure 19: Discount mania in aftersales Source: Institut für Automobilwirtschaft (IFA) 29 .

17 and 18-year-old cars are also apparent. it will be at a significantly lower level than before 2009. according to an analysis from the German Federal Office of Economics and Export Control (BAFA). The average age of scrapped cars was 14. Further improvements in vehicle quality and fewer kilometres being 30 . The scrapping premiums in Germany caused an estimated loss of 700 million euros in service sales. As shown in Figure 20. not stopped. 10-year-old cars in particular were scrapped.2 Trend II: Older vehicles continue to gain in importance The average age of existing vehicles in Germany has decreased following junking of some 2 million cars in 2009 as part of a federal scrapping program. In other words.3. the long-term trend toward longer vehicle retention and usage has merely been interrupted by the scrapping premium program. 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 >30 29 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 2009 2010 8 7 6 5 4 3 2 1 Figure 20: Effects of scrapping premiums on the structure of existing cars in Germany Source: KBA/Institut für Automobilwirtschaft (IFA) While the trend towards longer retention and usage will continue in the coming years.4 years. but relatively large decreases in 13.

13.84 mill. It can be expected that drivers will increasingly use the internet to find a shop not only for buying parts and accessories but also 31 .05 mill. temporarily deregistered vehicles Figure 21: Age structure of existing vehicles in Germany Source: KBA/Institut für Automobilwirtschaft (IFA) This development poses both opportunities and risks for service suppliers: The opportunity lies in providing not only services to improve the functionality and reliability of older vehicles but also to retrofit and modernise individual technical components. 8.78 mill.0 mill. Segment II: 5 – 7 years 9. Already today. 3. the aftersales market must definitely focus more on existing cars in the future. In light of anticipated medium and long-range stagnation in new car sales. whereby competition for segments II and III in particular is likely to be fierce amongst authorised and independent service providers alike. 15. 8. 13. Segment IV: >11 years 11.22 mill.44 mill. Figure shows existing cars in individual age segments as of 1 January of the year in question Existing cars incl. 13.07 mill.32 mill.83 mill.05 mill.33 mill.01 mill.3 Trend III: Internet exchanges direct customer flows The internet will take on a greater role in information and thus customer acquisition in the future. 9. The risk in this development is that customers will migrate to the do-ityourself segment. 9. 9.30 mill.92 mill. 8.8 mill. cars older than 11 years account for one-third of existing vehicles (Figure 21). 12. which normally means the permanent loss of the customer. 2001 2003 Segment I: ≤ 4 years 2006 2009 14.25 mill. 15. Segment III: 8 – 10 years 9.driven mean that age segment IV (cars older than 11 years) will significantly increase in the future.

Four fundamental business models for repair exchanges can be distinguished today: Pure directories of workshops Repair job descriptions from customers and offers from shops Auctions for the most inexpensive shop offer (reverse auction) Combinations of the first three models. 32 . Price comparison will play a particularly important role.for upcoming maintenance or unexpected repairs.

Figure 22 gives an overview of various repair exchanges and their respective business models. + services finder (advertised fixed price offers) + customer job descriptions for all types of repairs eBay Motors Workshop finder (address database) Free for searchers.00 per month + potential additional costs for enquiries. Name.de  Job descriptions for all types of car repair Driver enquiries free.90 to EUR 99. www.90. listing shops in shop finder also free.de  Business model Job descriptions for repairing cars in accidents Costs Currently still free for private persons and workshops. thereafter fee required according to current price list. otherwise various packages for full use for + services finder (advertised fixed price offers) EUR 5. For workshops: shop finder only is free. text message service and commission. + services finder (advertised fixed price offers) www.de  Workshop finder (address database) www.freie‐werkstatt24.motoso. Free Free 33 .repcar. address www. Free test for first 4 weeks.de  Workshop finder (address database) reparaturFUXX Workshop finder (address database) Free for drivers. Free for workshops for 2 months. 5 service packages for workshops ranging from EUR 4. www.autoservicefinder. EUR 2. but base fees and commissions (for bidders and customers) have been announced for the future.autoreparaturen.de  Workshop finder (address database) Free for private users.90 or EUR 78.00.

+ customer job descriptions for all types of repairs (reverse auction) www.de went online in 2008.my‐hammer.blauarbeit. Today. no additional fees.com Search engine for websites Free Figure 22: Selected online workshop exchanges Source: Institut für Automobilwirtschaft (IFA) Purchasing a shop service is of course much more complex than buying a new or used car. more than 2. Case study: Autoreparaturen.70 per quarter for access + fees of EUR 2-4% when job awarded. All enquiries are forwarded to shops within a radius of 5 to max.de  Reverse auction Job posters: completely free. every driver receives a free account in the 34 .99. but to create an intelligent machine to connect shops and potential customers.de  Reverse auction Job posters: completely free. according to the company. www. The goal of portal founder Sebastian Cyran was not to offer just a simple list of addresses of all workshops in Germany. Service providers: (e. www. Service providers: three packages for EUR 9. Shop enquiries from drivers are generally free of charge. the local shops contact the driver with their estimates. automotive shops) package prices from EUR 149.99 (all net prices). Internet users will focus on this domain accordingly.g. A few days or sometimes even just hours later. 40 kilometres from the driver’s place of residence.de The workshop search portal autoreparaturen.werkstattsuche.000 car owners use this service. Customers can describe the required services for their cars and upload up to two pictures. EUR 24.70 to EUR 299. After sending a shop enquiry.99 or EUR 39. But offers for standard repairs and maintenance in particular can be easily compared.000 workshops and over 10.

where estimates and messages from the shops can be read and managed.de for at least four weeks for free.de search portal. The former B2C business of aftersales is thus increasingly becoming a B2B business. The fee-based account for car workshops has a number of advantages.4 Trend IV: Intermediaries will change the market structure The structural shift in the new vehicle business away from private customers towards commercial customers also has implications for aftersales. often on behalf of customers. In other words. they not only decide who gets how many repair jobs. Their user account gives shops their own internet site where they can present themselves and their services online. but also under what conditions. The account is easy to use. The share of independent service providers increased over the same period of time from 27% to 43%. They typically own large fleets of vehicles which they acquire. 35 . 3. These companies act as intermediaries between end consumers/users and the workshop. Their market share in this once highly lucrative market segment has fallen from 62% in 2000 to currently only 52% (Figure 23). workshops can test an account at autoreparaturen. as incoming enquiries can be managed without additional work. manage and direct.www. Significantly more cars have been registered in recent years by fleet management and leasing companies as well as car rental companies. Before deciding on a membership.autoreparaturen. This information is also sent via email and text message. The power of the intermediaries is apparent in a highly attractive aftermarket sub-segment where authorised dealers have suffered severe losses: the accident repair business.

Despite counter-strategies by the car manufacturers. significant volumes of auto body and paint work have apparently been “directed away” from authorised shops.70% 60% 50% 40% 30% 20% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Authorised shops of own manufacturer Vertragswerkstatt der eigenen Marke Other automotive shops sonstige Kfz-Werkstatt Figure 23: Market share in the accident repair business Source: DAT Report 2010 The reason for this is the “active claims management” of automobile insurers. In addition to general maintenance and repair work. The classic intermediaries such as leasing and fleet management companies typically work with a selected network of shops or shop chains based on framework contracts. this affects primarily the parts business. For the manufacturers. Intermediaries exert pressure not only on workshops but on car manufacturers and aftermarket suppliers as well. 36 . The customer discount for using the service card of an intermediary is on the order of 10%-15%. Case study: Service management at LeasePlan LeasePlan works with a network of manufacturer-authorised shops for maintenance and repair. LeasePlan claims that their customers can reduce their maintenance costs by up to 10%. with which special hourly rates and replacement parts prices have been arranged. tyres and glass are special areas of emphasis here.

LeasePlan maintains a network of workshops for dealing with accident damage. says LeasePlan. which grant LeasePlan customers special conditions.LeasePlan also cooperates with selected tyre partners. Figure 24: Fleet service using the example of LeasePlan Source: LeasePlan 2010 Another important factor that will increase the future significance of intermediaries in automobile service are changes in the mobility behaviour of people in Germany. Preferred tyre brands include Michelin. Increasing urbanisation is a key driver of mobility behaviour. A persistent trend towards urbanisation can be observed in Germany: whereas the 37 . Finally. but the usage patterns and profiles will be different than in the past. Dunlop and Bridgestone. The automobile will retain its key relevance for individual mobility. Goodyear. The centralised repairs save customers an average of 15%.

to 34-year-olds reported doing without a car. In the same survey. Ecological reasons play a role for 46% of those who want to do without a car. including an above-average number of younger people (Figure 25).population in large cities grew by nearly 3% between 1999 and 2008. 38 .in % „I will do without a car or am considering it in the next 6-12 months” Reasons: Save money Ecological reasons All respondents 18-34 Age group 35-54 Over age 55 Place of residence City Country 29 35 27 24 31 26 88 46 90 50 90 46 77 30 87 41 89 52 Figure 25: Doing without a car in Germany Source: Europcar/Ipsos 2009 It comes as no surprise then that alternative usage concepts are gaining in importance. The main reasons cited for doing without a car are economic aspects (88%). It is also very apparent that younger people are more likely to do without a car than older people. 35% of 18. The number of car sharing users for example has increased continuously in recent years – although this figure was admittedly low to begin with (Figure 26). while this figure was only 27% in the age group of 35. A growing number of people are saying that they want to change their mobility behaviour. .to 54-year-olds. the overall German population decreased slightly during the same time period. 29% of participants in a 2009 survey stated the desire to do without at least one vehicle in the household. The share of persons in the city who said this (31%) was noticeably greater than in the country (26%).

One example is Deutsche Bahn (German Rail). Price topped the list of criteria for selecting a workshop. it will lead to a further shift of the customer structure away from classic private customers towards commercial customers. 2009 But more and more commercial providers are now offering innovative mobility services.Car sharing members Car sharing vehicles As of 1 January of each year Figure 26: Development of car sharing usage in Germany Source: Bundesverband Car Sharing (BCS). which provides its train passengers with motorised mobility through its “Flinkster” car-sharing service. 3. cited by nearly 30% of respondents. affecting all shop types. Price was followed by other important criteria including quality and reliability of work as well as of parts (Figure 27). whether authorised or independent. 39 Car sharing vehicles Car sharing members . because the respective mobility providers take over the service. If one assumes that innovative mobility concepts in urban areas will increase in importance.5 Trend V: Polarisation of customer segments The strong increase in total cost of ownership (TCO) in recent years has led to growing price sensitivity amongst drivers. Likewise highly successful is the Car2Go mobility concept. For workshops this will mean a loss of current customers. especially for inner-city transportation. currently being tested by Daimler in Ulm/Germany and Austin/Texas.

6 29. drivers were asked to estimate the price of a service that costs EUR 500 at an authorised VW workshop. As mentioned.3 5 10 15 20 25 5.4 0.7 1.3 7. For instance. 40 .5 0. The results show that price perception depends strongly on the respective supplier (Figure 28).Preisniveau Price Qualität &Quality and reliability Arbeiten Zuverlässigkeit der of work Quality of parts / original parts Qualität der Teile/Originalteile Örtliche Nähe der workshop Local proximity of Werkstatt Schnelligkeit der Reparaturen/Wartezeiten Speed of repairs / waiting time Quality of advisement Qualität der Beratung Terminverfügbarkeit Appointment availability Hours of operation Öffnungszeiten Termineinhaltung Meeting deadlines Sonstiges Other 0 1. The estimated price at German service provider ATU is nearly 18% below that of the VW shop.4 2.9 30 in35 % Figure 27: Criteria for selecting a workshop Source: puls Marktforschung GmbH/Deutsche Post AG 2010 The strong price sensitivity of customers tends to be a disadvantage for brand workshops. these are not actual prices but estimated ones that reflect the price image of various suppliers.5 26.4 24. while that of independent establishments was even 25% lower. which continue to have a “high-price image”.

Question: A workshop service that costs EUR 500 at an authorised VW shop would cost this much in a …. shop, according to the car driver (index value / in €)
€ 500 € 675 € 491 € 478 € 442 € 411 € 375

135

100

98

96 88 82 75

Independent workshop

Figure 28:

Price perception of drivers depending on service provider
Source: ABH Aftersalesmonitor

But one should not be too quick to generalise from these average values, because the frequently cited phenomenon of “erosion of the mid-range” has long since reached the automobile service market without the relevant market players drawing the right conclusions. Authorised shops for instance continue to offer a largely uniform level of service for their customers, without considering whether certain services are even desired or whether other target groups might want an even greater level of service. Workshop systems and chains for their part attempt to upgrade their service programme without realising that they may lose a share of their customers as a result, especially the price-sensitive ones. A McKinsey survey from 2008 identified five buyer groups with different requirements for automobile service: Demanding drivers Premium service users Car enthusiasts Value for money seekers and 41

Pragmatists. A key characteristic differentiating these various groups is the significance of price (Figure 29).
Demanding Drivers
Selection of shop is important I love cars A low price is important Special customer orientation is important Local proximity of shop is important Have little time, doesn‘t matter which shop -100

Premium Service Users
13 3 -33

Car Enthusiasts

Value-forMoney Seekers
16

Pragmatists

35 38 -7 9 -22 -62
0 100

-3 37 2 -32

-49 -42

21 11 -37 6 22 -25 -50 0 50 -100 0 -11

8

39 3 20 -50 0 50 -50 0 -2

14 41 100

50

Highest Value

Lowest value

Figure 29:

Customer profiles in aftersales
Source: McKinsey CARE Initiative 2008

Automobile service in the future must accommodate these different customer requirements, meaning that new formats must be developed with clearly differentiated levels of service and convenience.

3.6 Trend VI: The connected car The automotive system is increasingly becoming part of a larger, networked communication system, made up of numerous transmitters and receivers. The purpose of this networking is not only to support the driver in performing his driving functions in the way that the familiar advanced driver assistance systems do (proximity warning system, lane change assistant, parking assistants etc.), but also to help him to manage his personal and professional life tasks. This gives rise to a new form of connectivity in the sense of involving driver and vehicle in different services and functions (Figure 30).

42

House/Home Control of home technology Monitoring functions at home

Office/Workplace Phone and e-mail communications Vehicle and fleet management

OEM/OES/ Dealers

Service partner/ Road assistance

Internet Navigation/Traffic information Entertainment Travel management

Infrastructure/Car2Car Emergency systems/ emergency call Proximity warning system Road surface

Figure 30:

Connectivity changes the IT structure in vehicles
Source: Institut für Automobilwirtschaft (IFA)

Achieving such connectivity requires the creation of an open electronic communication platform in the vehicle that enables the simple, secure administration and control of the pertinent data. Apart from this, the human machine interface (HMI) must be simple and intuitive for the driver. An important trend for both automotive manufacturers and their suppliers is also becoming evident in the growing extent to which drivers are using such portable devices as mobile phones or PDAs in their vehicles. As far as the user is concerned, the advantage of such devices is not only that they offer a means of storing his personal data; they can also be updated more easily and less expensively than on-board systems. Navigation systems are typical examples of this. Younger drivers, in particular, use smart phones for this function with navigation software, which can be downloaded from the internet free of charge in some cases. All that is needed in the vehicle is a holder for the device concerned. The separation of navigation device and vehicle facilitates continuous updating of the navigation software (and makes it less expensive). The navigation software can of course be enhanced by other functions, such as recommended service bases.

43

for example. this could lead to a situation in which service-relevant information migrates to the network operators for these portable terminal devices. If the automotive system were opened up. thereby reducing the parked-up time of the vehicles. This would mean that the results of the onboard diagnostics that are possible today would be available to third parties and could be used for customer management. these external devices are also being used to store vehicle-related information concerning the state of the vehicle and possible fault situations in the vehicle. However. The information that is relevant for maintenance and repairs would enable the driver's chosen workshop to plan and make arrangements for possible visits in advance. it would have the potential to reorganise the competitive situation in the aftersales sector and make it easier for new service providers to enter the market. 44 . Figure 31 shows a service process sequence that would be possible if service-relevant information is stored in a device rather than in the vehicle. As far as aftersales business is concerned.One consequence of this development is that automotive manufacturers lose control over the information and communication systems used in the vehicle as they have to establish an open communication platform in order to enable the integration of such portable devices into the on-board network.

The introduction of binding CO2 limits in 2012 will launch the first stage in the reduction of automotive CO2 emissions.7 Trend VII: E-mobility The challenge of substantially reducing global CO2 emissions will continue to be at the top of the agenda of the political decision-makers.Authorised dealer Data stored in the vehicle Authorised workshop Authorised dealer Information stored in a device Recommended workshops Figure 31: Opening up the automotive system . however. This could affect traffic in the areas of high population density in particular. This is another aspect that is contributing towards the growing 45 .consequences for customer management in the aftersales sector Source: Institut für Automobilwirtschaft (IFA) 3. The limit of 90 g/km CO2 targeted for 2020 is likely to require more extensive alternative drive concepts. restrictions on the use of such vehicles must be anticipated in the future as well. which must be observed by the entire vehicle fleet by the year 2015 by means of further developed conventional powertrain technology. Apart from additional tax burdens for vehicles with high CO2 emissions. It will probably be possible to achieve the limit of 120 g/km CO2.

Remote diagnosis is also possible if the vehicle data are transferred to the service base online. a growing number of electric vehicles as a proportion of the total vehicle population will result in a diminishing volume of maintenance and repair work.5 hours of work. which means that maintenance work is focused on the battery and the power electronics. i. While maintenance operations no longer include changing oil and air filters or spark plugs. Case study: e-workshop service for the Tesla Roadster One of the few series-produced electric cars is the Tesla Roadster. There is a good chance that the use of electric passenger vehicles will spread rapidly. are not so important. This is due to the fact that electric vehicles have around 90 percent fewer moving parts as vehicle with internal combustion engines. however. there is more work involved in checking the power electronics.pressure on the automotive industry to introduce new drive concepts into the market. achievement of the German government's objective of having a million electric vehicles on Germany's roads by 2020 will very much depend on whether it will be possible to reduce the battery costs to a sustainable level. A major service is due on the vehicle once a year or every 20. A notebook with diagnostic software is used for this.000 km and each one requires 6. On the whole. Battery-powered electric vehicles will gain significance in the medium and long term in the light of the increasing eco-political requirements to be met by passenger vehicles. which weighs 450 kg. The Tesla Roadster is equipped with a rechargeable lithium ion battery. The growing market penetration of electric cars has far-reaching consequences for the aftersales sector as purely battery-operated electric cars require a great deal less maintenance and repair. their limited range. Nevertheless.e. particularly in areas of high population density where motorised individual transport imposes a high ecological burden and the system-related drawbacks of electric cars. and has a range of around 500 km. 46 . There is no need for the usual wear-related maintenance activities. The proportion of repairs attributable to worn parts is also correspondingly low. of which around 1000 vehicles have been sold worldwide so far.

We must assume that they will be offering complete packages. the Tesla workshop merely requires a lifting platform. It is already obvious. This means that additional qualifications are needed for workshop personnel. and no exhaust gas extraction systems. No oil traps are needed. for example. Situated in the centre of Munich. which could develop with the electric car. Figure 32: Service at Tesla Motors Source: Tesla 2010 The requirements profile for workshops and mechanics has changed with the advent of the electric cars.Investments in the workshop are also reduced due to the discontinuation of many maintenance routines. for instance. The business model centring on a charge scheme for vehicle use and battery replacement developed by Better Place would also thrust the workshops into the role of simple service providers for the operators of such systems. 47 . and this would sever the direct links between the workshops and the end customer. This particularly applies to the handling of highvoltage equipment as the voltage in an electric vehicle may be 400 V or more. Tesla works in cooperation with a network of body specialists. but also in terms of new business models. including aftersales service. The growing importance of electric cars in the aftersales market is not only relevant in terms of the modified vehicle engineering. that the electricity supply companies will become very deeply involved in the electric car business. a tool trolley and a headlight beam adjustment device. who repair any body damage.

Figure 33: RWE Mobility e-package with service promise Source: RWE Mobility 2010 3. The first specialised workshops are located in North-Rhine Westphalia. the vehicle can be repaired and maintained within the existing Fiat dealer network. which RWE purchases through the general Micro-Vett importer for Germany. for example. The vehicles are modified Fiat models. RWE and Karabag are building up specialised knowledge of the electric motor and the battery within the service companies. The vehicles are repaired and maintained by all Fiat dealers. but are only available as part of the package. RWE and Karabag are also building up the specialised knowledge required to service the electric motor and the battery within the service companies. A pronounced 48 .8 Trend VIII: Consolidation in the aftersales sector The retrogressive development in the market and the structural changes in the aftersales business described above will lead to a noticeable consolidation with respect to the number of car workshops. These vehicles cannot be purchased individually. The company offers an e-package that includes a quick charging station and an RWE automotive electricity agreement. Reliable service In virtually all cases.Case study: RWE Mobility RWE is one of the first electricity supply companies to market electric vehicles. as well as the vehicle. which has trained its personnel to provide a reliable breakdown service for electric cars on the roads within the pilot region. The customer receives a statement of account for the charging station rental fee and an itemised bill for the supplies of green electricity. The German automobile club ADAC is another partner in the NRW pilot project.

increase in the number of insolvencies has already been evident in the car trade in recent years. the number of car workshops will decline from 43.Kraftwagen Motor vehicle maintenance and repair Figure 34: Insolvencies in the automotive trade between 2002 and 2010 Source: Destatis 2010/Institut für Automobilwirtschaft (IFA) The average number of vehicles serviced by a workshop increased by 43. corresponding to a reduction of over 25 percent.8 percent to 950 passenger and estate cars between 1997 and 2009. This clearly emphasises the way in which economic manoeuvrability is gradually being constricted in the aftersales sector as well. i. If we realistically assume that this trend will continue.Rep.e.Kraftwagen Handel in motor vehicles Instandhaltung u. and particularly in this area. 800 700 600 500 400 319 373 340 304 384 369 589 563 519 608 633 571 546 480 687 690 346 362 300 200 2002 2003 2004 2005 2006 2007 2008 2009 2010 * * Forecast Trading m. As shown in Figure 34. 49 .800 in 2009 to 32.850 in 2020 (Figure 35). there has been a distinct increase in the number of insolvencies in the motor vehicle service and repair sector since 2007 and this figure is going to reach a new all-time high this year with an anticipated 480 business failures.v. that a workshop will be capable of maintaining and repairing an increasing number of vehicles by virtue of the technical developments.

the winners and the losers The trends described above are going to exert a lasting effect on the service market and constitute points of reference for strategies developed by the players in the market.9 Interim conclusion II: Trends in aftersales business . Figure 36 summarises the relevance of the trends for the various market participants.Index 220 200 Vehicles per Workshop Number of car workshops Index 110 100 90 80 180 160 140 120 100 80 1997 2000 2005 2009 2015 2020 70 60 50 Figure 35: Development of the car workshops in Germany Source: Institut für Automobilwirtschaft (IFA) 3. negative or neutral evaluation with respect to their positions in the market. whereby the directions of the arrows indicate a positive. Number of vehicles per workshop Number of car workshops 50 .

can benefit from a number of trends.Original Equipment Manufacturer Authorised workshop Original Equipment Supplier Parts wholesaler Workshop systems/ chains Independent workshops Specialists Trend I: The service market will develop negatively Trend II: Older vehicles continue to gain in importance Trend III: Internet exchanges direct customer flows Trend IV: Intermediaries change the market structure Trend V: Polarisation of customer segments Trend VI: The connected car – opening up the automotive system Trend VII: E-mobility Trend VIII: Consolidation in aftersales Figure 36: Relevance of the market trends for selected market participants Source: Institut für Automobilwirtschaft (IFA) The overview clearly shows that the underlying conditions for aftersales business are likely to become more difficult for the contractually bound players. who finally decide whether they take advantage of opportunities or are caught up in the potential risks with their strategic responses to these challenges. It will be the players themselves.1 Objectives and methods An exploratory survey was carried out as part of this study in late July / early August 2010 in order to identify the future challenges and opportunities in the aftersales sector in a practice-oriented manner. particularly including workshop systems and chains. Results of the IFA panel: challenges and opportunities in aftersales business 4. 51 . whereas independent suppliers. The purpose of this was to bring the development trends described above face to face with the appraisals of trade professionals and to obtain points of reference for their future strategies and fields of action. however. 4.

It may therefore be assumed that the obtained results have a high relevance. 54 percent − recorded a maximum of 30 workshop events.500 addresses. The questions were communicated to and answered by the dealer panel participants online. whereby their composition approximately corresponds to the basic population in terms of the represented brands. which indicates that 42 percent of the surveyed companies employed between 1 and 10 people. As far as the workshop throughputs were concerned. 52 .e. most of the companies − i. The profile of the survey participants is shown in Figure 37. The survey period extended from the end of July to the beginning of August 2010. N = 98 authorised dealers and workshops took part in the survey.The IFA Dealer Panel that was used for this contains more than 3. most of which belong to authorised dealers and workshops.

2 Development of aftersales business The first block of questions aimed to obtain an assessment of the developments in aftersales business over the last three years.Number of facilities Workshop throughputs Number of facilities Employees Employees Employees Employees Employees Employees Employees Employees Employees Figure 37: Profile of the survey participants Source: IFA Händlerpanel 2010 4. 53 . The results of the survey provide a positive picture on the whole (Figure 38).

. glass repair and replacement specialists and other authorised workshops serving the same make of vehicle.1 4.0 59. This generally positive picture is put into perspective by the moderate development in the employment situation.4 18.4 20.4 2. although only one percent of respondents described the increases as being substantial.9 21.4 19. with 21 percent recording increases in the number of workshop employees and slightly more than 20 percent recording decreases. due to the fact that more items are replaced rather than being repaired. Thirty-seven percent of 54 . The number of respondents reporting increases and reductions in employment figures almost balanced one another out.0 0. Fifty-eight percent of the survey respondents stated that the number of productive employees in the workshop had remained constant. such as ATU.4 17.0 1. 4.8 43. This corresponds with the trend towards greater growth in parts sales than labour sales that has been recognisable for some time now.0 Figure 38: Development of workshop business over the last 3 years Source: IFA Händlerpanel 2010 Forty-five percent of the survey respondents said that the number of labour hours sold had increased over the last three years.3 Assessment of the competitive situation Asked about their strongest competitors in workshop business. A similar development is evident in the utilisation of workshop capacity.4 34. the vast majority of authorised dealers and workshops mentioned workshop chains.2 17.1 2. for instance.2 40.0 4. with around 43 percent of respondents stating that it had increased during the period under review.7 30.6 58. An appraisal of parts sales produced even more positive results: more than 60 percent of respondents saw an increase in parts sales during the last three years.In % - Increased considerably Increased Constant Decreased slightly Decreased considerably How have your parts sales developed? How has the utilisation of workshop capacity developed? How has the number of sold labour hours developed? How has the number of employees in the workshop developed? 3.1 1.

4 24.5 Figure 39: Competitive situation in the aftersales sector Source: IFA Händlerpanel 2010 One astonishing aspect is the high percentage mentioning authorised workshops for the same make of vehicle. ATU) Glass specialist Independent workshop with workshop system (e.3 6.6 18.6 42.respondents considered these to be the most important competitors (Figure 39).g.6 22. Fast fitters.3 33. such as Pit Stop are therefore only regarded as being important competitors by a relative low percentage of respondents.g. High rates were also achieved by the specialist firms.1 14. on the whole − apart from intra-brand competition − workshop systems and chains are the main rivals for the authorised workshops.4 14.6 29.2 6.7 32.In % Particularly strong competition Strong competition Moderate competition Weaker competition Weak competition Workshop chains (e.7 6.1 5.5 17.3 20. Intra-brand competition obviously plays a significant role in the aftersales sector. tyre specialists and Bosch service centres also rate relatively highly among the potential competitors.5 29.6 30. The classical independent workshops.7 32.9 14.2 35. Automeister) Other authorised workshops with the same brand Independent workshop without workshop system Tyre specialist Bosch service Fast Fitter (e.6 24.7 31.3 8.0 31. 55 .5 22.4 16.2 14.1 21.4 21.5 33.1 4.1 12. particularly including the glass repair and replacement shops. .4 11.1 6. whereby there is a conspicuously high proportion of respondents who state that this group is the strongest competitor by far (14. as well as in the new car business.4 25.1 0.3 percent). This means that.g.0 1. however. Pit Stop) 6.7 29.3 21.

4 Figure 40: Future opportunities in the aftersales sector Source: IFA Händlerpanel 2010 All the same.4 2.1 0.1 20.5 Future risks in the aftersales sector The list of potential risks in the aftersales sector is clearly led by the claims management of the car insurance companies.2 9.5 39.0 11.8 38.4 Future opportunities in the aftersales sector The authorised workshops consider the growing technical complexity and the − closely related − increasing number of new technologies in the vehicle to be their best opportunity both today and in the future. just under a third of the respondents regarded the trend in the direction of electric cars as being a positive development for their workshop business.2 9.2 29.6 14.1 5.1 58.7 29.7 41.1 55.1 3.0 4.6 20.2 4.4 15.2 39.9 9.6 30.7 23. More than 80 percent of the 56 .4. Even so.8 27. while the additional demand for information and communication technologies also met with a high level of approval.3 6.4 12.1 32. 4.0 0.6 1.2 19.0 1.6 35.0 1.Figures in % Very huge opportunities Huge opportunities Moderate opportunities Fewer opportunities Few opportunities Growing technical complexity of the vehicles New technologies in the vehicle Growing importance of older vehicles Need for additional IT and communication technology in the vehicle Purchasing spare parts in the free parts market Trends towards the electric car Marketing of parts and accessories via the Internet Growing demand for accessories Growing demand for tuning 32.3 4.8 8.1 8.4 29.2 21. more than half of the survey respondents also see opportunities in the growing importance of older vehicles.6 21.2 5.7 32. . The contractually bound providers in the service market are therefore obviously relying on their high level of brand-specific technical competence (Figure 40).8 46.0 27.

3 13.3 19.2 3.8 4. 4.0 0.authorised dealers and workshops surveyed regard this as a high-level risk.5 30.6 1.9 44. Almost 80 percent of respondents are expecting customers to be more sensitive in terms of prices and 68 percent are dreading discount wars.5 11.9 percent of respondents rating it as a very high-level risk (Figure 41).4 25.7 32.0 1.7 53.6 23.1 Figure 41: Future risks in the aftersales sector Source: IFA Händlerpanel 2010 Workshop prices are also giving cause for concern. Extensions to maintenance intervals and the decline in repair needs are also high on the list of concerns.1 8.1 6.1 14.5 31.9 26.5 23.1 35.0 7.5 33. the emergence of new suppliers and service exchanges on the internet are regarded as being more minor risks.5 25.2 5.1 42. 57 .3 24.9 40.1 5.1 6.5 16. the authorised dealers and workshops surveyed regard the qualification of employees as being the most important field of action. with 45.9 34.0 5.6 Fields of action in the aftersales sector In accordance with the perceived opportunity potential with respect to growing technical complexity and the increasing importance of new technologies. Over 90 percent of respondents consider this to be an important or very important field of action (Figure 42).2 9.Figures in % Very high risk High risk Medium risk Lower risk Low risk Claims management systems of the car insurance companies Customers‘ increasing price sensitivity Extensions to maintenance intervals and the decline in repair needs Discount wars in the service sector Stagnating vehicle population Lower service requirements for electric vehicles Appearance of new competitors Service exchanges on the Internet 45. .7 42.4 18. The propagation of electric vehicles with lower service requirements.0 0.7 22.1 1.

however.0 2.Figures in % - Very important Quite important Indifferent Less important Unimportant Employee qualifications Improving customer satisfaction Active service marketing to ensure the utilisation of workshop capacity Optimisation of workshop processes More cost effective purchasing of parts and accessories Reducing costs in the workshop Taking on additional brands (multi-brand service) 63.0 1.7 24.7 Interim conclusion II: Strengthening the strengths − a promising strategy? The results of the explorative survey show that authorised dealers and workshops think according to proven strategic patterns: opportunity potential is seen in continuously growing technical complexity.5 27.. Multi-brand service. Will the strategic focus on technology and personnel qualifications be enough to secure the future? The survey respondents also have a relatively clear picture of the major risks and challenges.8 43.0 17. 4.5 18.2 22.5 percent of them regarding this field of activity as being important or very important.1 7.0 2.1 23.9 18. increasing sensitivity to prices among customers 58 .1 8.9 33.2 9.4 12. does not appear to be a significant strategic option for the majority of respondents.1 0.0 7.0 0.6 35.3 46. requiring more highly qualified personnel in order to exploit it.7 1. with only 23.3 64. More cost-effective purchasing of parts and accessories also achieved an approval rate of over 70 percent.9 44.8 3.1 38. at least: the power wielded by the insurance companies in the accident repair sector.4 5.0 46. on the other hand.5 41.0 1.0 1. such as improving customer satisfaction.5 1.4 Figure 42: Fields of action in the aftersales sector Source: IFA Händlerpanel 2010 Other fields of action have high priority ratings as well. active marketing of services to ensure the utilisation of workshop capacity and the optimisation of workshop processes.0 0.9 26.

as shown by the trend analysis in this study.and the sagging maintenance and repair markets. The respondents regard all of these factors affecting service business as being real threats − and they are right to do so. The high priority given to the various fields of action by the authorised dealers and workshops demonstrates great willingness to take action and is an expression of the knowledge that there will be fundamental changes in the aftersales market in the years ahead. whether authorised or independent. This ascertainment is where the theoretical analysis and practical experience come together. in order to retain long-term competitiveness in this changing environment? 59 . Which strategic conclusions must be drawn by the service providers.

It is therefore necessary to generically develop pioneering service formats from future market conditions and base these on stable business models. who buys a vehicle and then drives it to the workshop to have the necessary maintenance and repair work done. The advantage of this concept is that a wide service range is offered to each customer at the respective service location. The actual users have nothing to do with service under normal circumstances. After all. who are trying to introduce differentiation into the all-round service model that is dominating the market today. The situation is further aggravated by the fact that the customer structures are changing. who administer complete fleets of vehicles and are therefore responsible for deciding where the vehicle is taken for service. however.1 Innovative service formats More differentiated service formats that are better oriented to the pertinent groups of customers and their needs will be required in future to do justice to the development trends described above. It is also increasingly non-ideal. however. every customer should be addressed and satisfied by more or less the same level of service and support. four innovative service formats with future potential can be identified (Figure 43): the premium service provider the service discounter 60 . If these two criteria − differentiated customer needs and changed usage profiles − are followed to their logical conclusion. as the business models behind the various service concepts are irreconcilable. This has been recognised by a growing number of market players. Strategies and fields of action in the service market of the future 5. They soon come up against limits in many cases. The classical private customer. Current car service concepts − offered by both authorised and independent service providers − pursue the "all-round service" principle.5. given the increasingly diversified needs of the customer. This customer is being replaced by intermediaries. or follow the advice of their mobility service providers. is gradually becoming less important.

High Value Premium Service Provider Mobility Service Low Cost Service Discounter Service Factory Owning Using Figure 43: Innovative service formats in the automotive service sector Source: Institut für Automobilwirtschaft (IFA) 61 .the service factory and the mobility service outlet.

customer magazine etc. which expands the "wants" section of the service range instead of simply satisfying the "needs".These four different formats are characterised in the context of the pertinent groups of customers and the business models on which they are based in Figure 44. who have a high affinity with their vehicles and are willing to pay the prices. Orientation to this group of customers may be based on a strategy of qualitative rather than quantitative growth. rims & tyres. according to customer requirements ("wants") Order-dependent pricing Maximising the scope of products / services per customer / order High level of internal service depth Qualified employees Use of original parts Loyalisation of purchasing customers Personal recommendation Customer support by means of classical media (letter.permanent contact person Brand-exclusive service with comprehensive convenience and support spectrum Active sale of supplementary products / services. including accessories. 62 . The success of this service format depends on the development of particularly lucrative segments in the service sector combined with well above-average support. including placements in service exchanges Customer acquisition and support model Cost-optimised service processes organised at an industrial level Use of subcontractors in specialist areas Quality of parts in accordance with customer requirements Personal key account management Internet-based handling of business processes Internet-based customer processes Subcontracting on a case-by-case basis Internet-based marketing for urbane target groups Customer club as part of "closed" user pools Figure 44: Innovative service formats: overview of business models Source: Institut für Automobilwirtschaft (IFA) The preferred target group of the premium service providers are private customers and user choosers. The areas of high-quality car care. recreation and accessories offer an ideal means of addressing these customers. including ongoing vehicle care Charge model for vehicle use (packages) Revenue model Menu pricing for basic and supplementary products / services Value-added model Maximising the workshop throughputs Focusing on standard repairs Trained employees High proportion of identical parts Focus / price advertising in daily newspapers/supplements Active search engine marketing. service corner Permanently low prices guaranteed fixed prices Service Factory Intermediaries (leasing and fleet management companies) Relationship to the fleet manager / pool manager Standardised maintenance and repair work in accordance with the manufacturer's specifications with guaranteed quality Framework agreement with quantity-dependent discount schemes Mobility Service Outlet Operators or users of innovative mobility concepts Mobility provider as the contact person for service Comprehensive mobility concept with integrated service. user choosers Personal relationship with the customer . Business model Customer focus Relationship to the customer Value proposition Premium Service Provider Wealthy private customers. infotainment & entertainment. tuning.) Service Discounter Price-oriented private customers Internet-based customer relationship.

The focus here should not be restricted to the owners of older vehicles alone. with a high standard of quality but little in the way of personal touches. The mobility provider takes on the workshop service for the user in this business model. The success of this service format is determined by permanently low prices communicated in a believable manner. It is the group of new car buyers in particular.„Needs“ Maintenance and repair Automotive glazing Tyres / rims High-quality car care Infotainment and entertainment Recreation and accessories Tuning „Wants“ Figure 45: From "quantitative" to "qualitative" growth in the aftersales sector Source: Institut für Automobilwirtschaft (IFA) Service discounters have their sights set on the private customers with limited mobility budgets. The mobility service outlet format is emerging from the trend towards integrated mobility services in densely populated areas. The service factory concept is oriented to the growing trend towards fleet vehicles. extra charges for all special services and a good and perceivable standard of quality. where a growing number of customers want to lower their running costs. 63 . which are not required by the targeted group of customers. The success of this model depends on a carefully calculated charges scheme for the total service offered. A consistent process standardisation concept is the success factor in this case. This is ultimately a service process organised at an industrial level. whose primary aim is to drive economically and reliably.

Efforts must be concentrated on identifying customer requirements and transposing these into service. 2 = high. 4 = low Figure 46: Aspiration profiles for various service formats Source: Institut für Automobilwirtschaft (IFA) 64 . The success of each service format will be determined by the consistent implementation of the pertinent value proposition in a service profile that focuses on the respective target group.Although the service formats described above are not identical to the individual players who are active in the service sector today. support and convenience packages as part of a service engineering concept. they should be used as points of reference for the development of the market players' strategies. Figure 46 shows the divergent aspiration and performance profiles for the four service formats mentioned above. 3 = moderate. Premium Service Provider Service Discounter Service Factory Mobility Service Outlet 1 Permanent contact person 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Proximity Brand expertise Use of original parts Pick-up and return service Low prices Generous goodwill policy Flexibility with respect to unforeseen repairs Appointments made at short notice Internet-based order acceptance 1 = very high.

The quality of aftersales service is part of the brand image and brand awareness.5. 65 . Furthermore.1 Car manufacturers Aftersales business has strategic importance for the car manufacturers from four points of view (Figure 47): Parts business is an important source of profitability for the OEMs Good aftersales business is a stabilising factor for the dealer network Aftersales business accounts for 50 % and therefore a high proportion of customer satisfaction and the associated loyalisation of the customers.2.2 Challenges. they must make a contribution towards safeguarding the service business of their authorised workshops as the stability of their respective sales and dealership organisations depends on them. Profitability of parts business Stability of the dealer network Car manufacturer Aftersales service as part of the brand image Element of customer satisfaction Figure 47: Strategic relevance of aftersales business from the OEM's point of view Source: Institut für Automobilwirtschaft (IFA) What consequences do the trends outlined above have for the car manufacturers? The car manufacturers' most important strategic objective should be to safeguard the profitable parts business. strategies and fields of action for the players in the service market 5.

The parts pricing policy for parts that are vulnerable to competition will be more competitively oriented in the tightly contested segment II.g.Thanks to their domination of the authorised system and their size and financial resources. This is backed up by warranties and extensions of warranties into age segment II. As far as segment IV vehicles are concerned. The strategies and measures adopted by car manufacturers today are oriented to the customer loyalty curve and the age-segment breakdown based on this (Figure 48). There is no doubt that the further expansion of customer retention in the direction of older vehicles will continue to be an important field of action for the car manufacturers. support and accessories. It begins by exploiting the customer relationship to the most profitable extent possible by means of a comprehensive spectrum of assistance. service and parts range) Segment III Segment IV Figure 48: Competitive strategies and fields of action in the authorised system Source: Institut für Automobilwirtschaft (IFA) 66 . Active marketing of parts to independent workshops Exploiting the customer relationship Competition-oriented price policy Retain customers by means of guarantees and flat rates Segment I Segment II Service in line with the current market value (e. car manufacturers have a wider range of strategic options compared to other players in the service market. This also includes the use of 2nd parts ranges. the car manufacturers want to continue their participation by actively marketing parts to independent workshops. Vehicles in age segment IV should be primarily bound to authorised workshops by means of service programmes that are in line with their current market value.

The adopted strategies are associated with high costs and/or reductions in proceeds for the manufacturers.000 kilometres and all maintenance services for up to 10 years or 100. Very long-term customer loyalty strategies have been in place in the service sector in other countries. however. for many years now. The Mercedes "Swiss Integral" programme includes all repairs for up to 3 years or 100. We must therefore assume that they will attempt to strengthen their grip on older vehicles by means of more farreaching loyalty offers in the years to come. for example.The competitive strategies for older vehicles practiced so far have certainly proved effective. Figure 49: Mercedes Swiss Integral as an example of long-term service ties Source: Mercedes-Benz Switzerland It therefore comes as no surprise to hear that some manufacturers are thinking about offering integrated product & service packages according to the "service inclusive" principle (Figure 50). Opel's recent decision to offer a "lifetime warranty" for the new models is another step in this direction. such as Switzerland. as shown above.000 kilometres (Figure 49). 67 . There has been an upward trend in the market penetration of authorised workshops for older vehicles.

The value proposition of a mobility provider is simple: he provides the customer with carefree mobility in accordance with the customer's wishes and requirements. There are basically two models: the customer receives a vehicle for exclusive. The customer's relationship with his car is confined to the pleasurable aspects. The customer does not need to worry about the acquisition. long-term use. financing or maintenance of a new vehicle. The scope of services offered by the mobility provider depends on the respective usage. simply using and driving it. or the customer receives a vehicle for shared. or the sale of the old vehicle. 68 .e.Figure 50: Retaining customers by means of "service inclusive" as offered by the BMW Group Source: Automobilwoche journal dated 14 July 2008 One very far-reaching strategic option for car manufacturers is to develop their service business model into a mobility provider concept. temporary use with other customers. i.

Around 60 percent of these 69 . service and maintenance of the vehicle. The value-added model of the mobility provider depends on how he organises the service provision process for the user. It goes without saying that the effects on the aftersales sector will be very much determined by the question as to who finally grows into the mobility provider role. the second relates to the rental principle. such as regular care. he would offer all of the services himself or via a network of affiliated companies. size and financial power alone. Most of these are leasing companies or car rental companies. which cover both of the fundamental usage models as part of their mobility service. The concept has been in place since the autumn of 2008 and has around 18. This may take the form of a fixed monthly charge or a mileage-dependent charge (or a combination of both) according to the pertinent usage model. If the model is a fully disintegrated one. their leasing companies and the large car rental businesses. the potential of the financially powerful electricity supply companies must not be underestimated when it comes to the electrical mobility sub-segment. However.While the first model corresponds to the leasing principle. The car manufacturers. Case study: Daimler's Car2Go and Peugeot's Mú Car2Go is a mobility concept that enables users to move around the city without their own cars. as well as their know-how and experience in organising and controlling large pools of vehicles. A mobility provider's business model description clearly shows that there are already players in the automotive market who could grow into the mobility provider role.000 registered users. the mobility provider would merely be the brand holder and would offer all of the services through suppliers. There are certain tasks. maintaining and selling the vehicle. The whole point of the mobility provider's revenue model is that he receives a fee for providing. have the greatest chance of taking over the leadership of the system by virtue of their high profile. These services are performed by the mobility provider for the rental model. which must be performed by the user with the first model. If the mobility provider has adopted a fully integrated value-added model.

The flexibility philosophy is underlined by the easy accessibility of the vehicles on foot. which are parked at various locations throughout Ulm and Neu-Ulm and are equipped with a keyless entry system (card reader). The acceptance and economic feasibility of this concept are currently being investigated as part of a pilot project at the Berlin-Brandenburg branch of Peugeot. The customer can monitor the costs incurred and the distances travelled on the Car2Go. He then enters his PIN into the telematics unit with touch screen. the distances travelled and the prices. the rental durations. online or spontaneously in passing if a user comes across a parked vehicle that has not been booked.are between 18 and 35 years of age. which means that the customer is charged 19 euro cents per minute as long as he is logged into the vehicle. taxes. the user can log into the booked vehicle and open and close the doors. Car2Go is based on a fleet of 200 Smart Fortwo cdi cars. Charges are only levied when the car is actually in use. which are stored in a prepaid card and are then cashed in to purchase the various services. removes the ignition key from the glove compartment and can set off on his journey. the vehicle may be left in any free public parking spaces or the "Car2Go parking spots". this means that a customer can use Mú to rent a 70 . service. the specific differences are obvious: the pick-up and return stations are flexible and may be chosen by the customer. The user purchases mobility points. with the "all-inclusive" price per minute covering all of the costs for fuel. where he can view all of his journeys during the previous month with details of the departure and destination addresses.de portal. It should not be necessary for a user to walk for longer than three minutes before reaching a vehicle. A car may be booked by telephone. In concrete terms. from bicycle and car through to air travel and hotel bookings. insurance etc. Compared with the classical rental car system. The "Mú by Peugeot" mobility concept is based on the idea of covering a person's entire mobility needs. The simplicity of the cost structure is another factor. When no longer required. with a single mobility card. Following a one-off registration process and the purchase of a Car2Go chip (single fee of 19 euros).

service business plays an important role in stabilising the authorised dealership sector. The potential strategic profile of the car manufacturers in the aftersales sector is shown in Figure 51.car. the authorised dealership business model relies on wellfunctioning workshop and parts business to a very great extent. Apart from this. Considering the unsatisfactory gross proceeds in the new and used car sectors. a bicycle.2. The iOn electric car should also be available for rental within the framework of the Mú concept starting in autumn 2010.2 Authorised dealers and workshops Aftersales business is of existential importance to authorised dealers. as shown above. Challenges Diminishing maintenance and repair volume for newer vehicles Parts sales jeopardised by the authorised workshops' loss of market shares Opening the car system Strategies Extending customer loyalty Establishing different service brands Further development to become a mobility provider Fields of action Increasing market penetration with flat-rate products Bundeling products and services („service inclusive“) Developing a second service and parts range Active network policy and a review of the service formats Establishing and intengrated. use-based business model Figure 51: Strategic profile of the car manufacturers Source: Institut für Automobilwirtschaft (IFA) 5. such as a roof box for the family holiday. While new car business is subject to extreme fluctuations 71 . a motor scooter or accessories.

Authorised workshops must adopt a strategy of positioning themselves as the brand champion in the regional competitive environment. This does not necessarily mean a single-brand strategy. service business is characterised by a relatively continuous development (Figure 52). There are many facets to the implementation of a brand champion strategy. Aftersales turnover in billions of euros 66 64 62 60 58 56 54 52 50 20 18 16 28 26 24 22 New car sales in billions of euros Development of turnover in new car sales Umsatzentwicklung im Neuwagenverkauf Umsatzentwicklung im After Sales Development of turnover in aftersales business Figure 52: Importance of car service: a stable factor in the car dealership sector Source: Institut für Automobilwirtschaft (IFA) Authorised dealers and workshops have less strategic room for manoeuvre due to their contractual obligations. for example.in some respects. It is quite possible for an authorised dealer or an authorised workshop to make a name for itself as a multi-brand service centre. One example of this is Autohaus 72 . This means. Although authorised workshops should use their respective manufacturer's range of services and support as the basis for their own activities. It ultimately boils down to the development of an integrated service philosophy and the implementation of this philosophy. they may also supplement these by means of expedient measures at the point of service. augmenting the customer loyalty programmes devised by the manufacturer with offers to store summer / winter tyres.

Case study: Autohaus Kunzmann – The New Service Dimension Autohaus Kunzmann is the Mercedes-Benz representative in Aschaffenburg. their consistent implementation at every level has led to the well aboveaverage success of Autohaus Kunzmann in the service sector. 73 . a car dealership that has been exceptionally successful in its activities for many years now.620 new and second-hand cars. The brand slogan alone − in itself unusual for a car dealer of this size − draws attention to the highly service-oriented company philosophy: Autohaus Kunzmann – The New Service Dimension.Kunzmann. Although each of these elements may not seem particularly innovative in itself. Kunzmann is one of the TOP 100 dealer groups in Germany with eight sales and service facilities. Having sold 4. The essential elements of the service concept are as follows: Customer management in sales oriented to relationships rather than transactions Active service marketing with special offers all year round Multi-brand service as a result of taking over VW service agreements (cars and commercial vehicles) Internet-based marketing of parts High personnel qualifications.

de 74 .kunzmann.Figure 53: Autohaus Kunzmann – The New Service Dimension Source: www.

structures and processes Integrated service concept Multi-brand service Active internet marketing Low-cost sourcing and active marketing of parts Service formats Premium Service Provider Mobility Service Outlet (as part of a manufacturer concept Figure 54: Strategic profile for authorised dealers and workshops Source: Institut für Automobilwirtschaft (IFA) 75 .Figure 54 shows the strategic profile for authorised dealers and workshops. Challenges Reduced utilisation of workshop capacity due to the diminishing maintenance and repair volume for newer vehicles Loss of direct customer contact due to intermediaries and repair exchanges Dependence on the dealers' service and parts strategies Strategies Positioning as brand champion in the regional market Fields of action Optimisation of sites.

020 650 Pkw: 6.2. engine management.970 Lkw: 545 No data 2. chassis Clutch. OBD Brakes. securing shelf space in the wholesale product range is of tremendous strategic importance. This can be achieved by focusing on system components which are less interchangeable with the competition and by increasingly using low-cost locations to be more competitive in simple components.830 No data No data 2. emission reduction. Issue: May 2009 There are few automotive suppliers in such strong market positions that they can establish themselves in a broader fashion in the aftersales sector. the aftermarket constitutes an important pillar for sales and revenue. roof systems.160 1. air conditioning. electronics. chassis Electrics. 76 . which is second only to the OEM business. added the Auto Crew workshop system to its Bosch services just a few months ago. lighting. Because parts wholesalers act as "gatekeepers" for suppliers. chassis Air conditioning Auxiliary heaters. air conditioning Steering. air conditioning. chassis Fuel and air supplies.400 No data No data No data No data Ate-Bremsen-Center Boge-Service Delphi-Service-Center Hella-Service-Partner Lemförder-plus LuK-Meister-Service Original-Sachs-Service Prieburg-Service TRW-Auto-Service Valeo-Clim-ServicePartnerkonzept Webasto-Service-Center Webasto-ProfessionalAutohaus Fachbetrieb für Heizung und Klima Continental Teves ZF Services Delphi Deutschland Hella ZF Services Sachaeffler Automotive Aftermarket ZF Services MS Motor Service Deutschland TRW Kfz-Ausrüstung Valeo Service Deutschland Webasto Webasto Webasto und Dometic Waeco Brake systems. apart from extending its product and service range. auxiliary cooling systems Figure 55: Overview of detailed workshop systems Source: asp Werkstattsysteme. roof systems Auxiliary heaters. Forward integration is one approach that is already practiced today by expanding "soft franchise" systems (Figure 55). brake control systems Chassis Diesel injection. engine.5.3 Automotive suppliers As far as automotive suppliers are concerned. auxiliary cooling systems Auxiliary heaters. steering. roof systems. System name System supplier Focal points Number of partners in Germany 1. One of the suppliers who adopt this strategy is Bosch which. chassis Drive. In this area of conflict there are few strategic options available. air conditioning.

Activities that are directly targeted at the end customer will probably remain the exception for automotive suppliers in the future as well. Figure 56 shows the strategic profile for this group of suppliers. however. The separation of aftermarket activities from OEM business could support the market proximity of the automotive suppliers. Challenges Pressure from the manufacturers in the aftermarket business Lack of access to the end customer Competitive pressure due to identical no-name parts Strategies Forward integration by means of soft franchising Development of system components Fields of action Making soft franchises more attractive Re-arranging the distribution channels in the aftermarket sector Separating aftermarket and OEM business Using low-cost locations Figure 56: Strategic profile of automotive suppliers Source: Institut für Automobilwirtschaft (IFA) 77 . It would put them in direct competition with the car manufacturers.

Challenges Blockage strategy of the OEMs Oversaturation in the wholesaler network Strategies Forward integration by means of workshop systems Active consolidation strategy Fields of action Further development of the workshop systems and optimisation of the networks Low-cost sourcing Figure 57: Strategic profile of the parts wholesalers Source: Institut für Automobilwirtschaft (IFA) 78 . the parts wholesale sector in Germany is considered to be oversaturated.5.4 Parts wholesalers Parts wholesalers occupy a very strong position in the distribution structure for spare parts and accessories.2. The strategic orientation of the parts wholesale sector is therefore very closely meshed with that of the workshop systems. As already mentioned above. The strategic profile for parts wholesalers is shown in Figure 57. particularly by virtue of their channelization function and logistics expertise. Nearly all of the workshop systems in Germany are currently backed by parts wholesalers. An active consolidation strategy therefore constitutes a key strategic option for parts wholesalers. so it seems likely that a consolidation will take place in the next few years. who want to safeguard the sales of their parts to the end customers. The takeover of the Pit Stop chain of fast fitter shops by parts wholesaler PV Automotive underlines the relevance of such a forward integration strategy.

5. 1. This means that it would certainly be conceivable to market portable terminal devices for use in cars via workshop systems. Workshop systems address price-sensitive customers with low mobility budgets.614 241 146 *) No data 77/50 20/1 15/- Meisterhaft auto reparatur Premio Reifen. The scope of services may also be expanded by means of an active cooperation strategy. A broader network structure is therefore essential to the success of the workshop systems (Figure 58).000 No data No data 550 Replacement only 10 % improvement Approx. for instance. Nevertheless. They have undergone a dynamic development in recent years. Current number of system partners Ins/Outs 2009 64/14 75/25 120/20 13/7 No data 65/24 No data Target for 2010 650 700 1.5 Workshop systems The workshop systems have full franchise character and are primarily run by parts wholesalers. the brand awareness and prestige of individual systems suffer as a result of their relatively limited level of distribution. The recreation sector.523 1.2. Apart from this. 79 .013 1. workshop systems should also offer financing for accessories and repairs. which is served very intensively by automotive specialised markets.800 265 165 *) **) *) AC Auto Check Ad-AUTO DIENST/AUTOMOBIL AUTOMEISTER AutoCrew Auto Service Partner Bosch-Dienste 1a autoservice *) 585 575 800 83 400 493 1. which means that the pricing policy should be transparent (menu pricing). 3/2010 The workshop systems should be strategically positioned by their value for money and a clear differentiation from authorised workshops. could open up new potential for workshop systems.und Autoservice MOTOO **) including Austria Workshops Figure 58: Development of selected workshop systems Source: AUTOHAUS No.

This is where workshop systems could take advantage of their multi-brand capability. As far as service formats are concerned.The growing importance of intermediaries with their multi-brand vehicle fleets offers a great opportunity for workshop systems. Challenges Safeguarding technological expertise Predatory competition with authorised workshops Pressure due to repair exchanges Strategies Strengthening the market position through value for money Active cooperation strategies to expand the scope of services Fields of action Optimising the price strategy ("menu pricing") Framework agreements with intermediaries Cooperative ventures with IT and communication technology companies outside the trade Establishing independent customer retention strategies Service formats Service Discounter Service Factory Figure 59: Strategic profile of workshop systems and chains Source: Institut für Automobilwirtschaft (IFA) 80 . Figure 59 shows the strategic profile of the workshop systems. the workshop systems could give precedence to the adoption of the "service discounter" and "service factory" formats.

ATU is representative of this entire group of suppliers. ATU has clearly positioned itself as a service discounter and organises its marketing communications accordingly. Unlike the workshop systems. ATU performs a mediating function. 81 . which offered inspections at a rate of 49. a food discounter. accessing customers who own newer vehicles (Figure 60).99 euros at 1.5. In this respect. these two types of operations are characterised by a decidedly centralist management concept. Backward integration is another strategic approach adopted by ATU. which actually means entering the car trade.2. professionalism and cost efficiency.250 branches throughout Germany.6 Workshop chains and specialised markets The strategic positioning and corresponding strategic profiles of workshop chains and specialised markets are very similar to those of the workshop systems. which have included a cooperative venture with Norma. which offers advantages in terms of a homogeneous market presence. ATU is always on the look-out for unusual ways of approaching customers.

ATU is pursuing similar approaches in some respects. 82 . One of the players who has expanded its operations in this area considerably is the Halfords Group.Figure 60: ATU online agency for new vehicles Source: ATU 2010 This group of suppliers also has a very strong orientation towards the recreation and accessories sectors. in which high levels of trade revenues can be made. but also bicycles. tents and many other types of technical recreation products (Figure 61). Halfords not only offers accessories for specific vehicle models.

000 vehicles.com Joint ventures with intermediaries constitute another strategic option for workshop chains. according to data supplied by the company. which add up to a total of 400. ATU now have 2000 customers with large fleets.Figure 61: Halfords – the mobility specialist Source: www.halfords. ATU already boasts a clear-cut profile as both service discounter and service factory today. 83 .

Classical independent workshops are under particular technological pressure exerted by the growing complexity of the vehicles and the diminishing amount of purely mechanical repair work.Figure 62 shows the strategic profile for workshop chains and specialised markets.2. They have therefore been joining 84 .7 Independent workshops Most classical independent workshops are small businesses and their size and limited financial resources leave little room for strategic manoeuvre. Challenges Predatory competition with authorised workshops due to the car manufacturers' customer retention programmes Clear differentiation from workshop systems Price competition with independent workshops Strategies Positioning as a discounter Ensuring a high network density Backward integration by means of car dealership Fields of action Innovative distribution channels Generating trade revenues Establishing own customer retention programmes Service formats Service Discounter Service Factory Figure 62: Strategic profile for workshop chains and specialised markets Source: Institut für Automobilwirtschaft (IFA) 5.

workshop systems or so-called soft franchises in selected fields to a greater extent in recent years. they have to continue to focus on customers who own older vehicles − a market segment that is demonstrating a tendency to grow. In doing so. their flexibility and their proximity to the customer. Possible strategic opportunities also emerge from cooperative ventures with intermediaries. 85 . know-how. they expand their scope of action and can use their favourable cost structures to outdo other competing suppliers. as long as their standards can be met by the workshops. Armed with these strengths. It is very difficult to develop a consistent strategic profile for independent workshops as the members of this group vary considerably in terms of size. It must generally be assumed that more independent workshops will have to team up with workshop systems in order to survive in the market. location and professionalism. The independent workshops' strong points are their decidedly good price image. This essentially serves to acquire know-how and to secure support in marketing. the independent workshops can also make additional groups of customers accessible by cooperating with internet-based repair exchanges. Furthermore.

On the other hand. This is aggravated by the fact that they offer a relative narrow product / service 86 .8 Specialists In this context. workshop chains and specialists Financing Strategies Positioning as all-round service provider in the local area Joining a workshop system and/or using soft franchises Fields of action Employee qualifications Using repair exchanges for local marketing Low-cost sourcing of parts Service formats Service Discounter Figure 63: Strategic profile for independent workshops Source: Institut für Automobilwirtschaft (IFA) 5. They usually hold correspondingly strong positions in their respective market segments. Challenges Falling behind technological developments Predatory competition with workshop systems. it is this very attribute that exposes them to competition from the "all-round" service providers in a special way.Figure 63 shows a possible strategic profile for independent workshops.2. the term "specialists" essentially refers to four groups of service providers: Tyre stores Glass repair shops Electric suppliers Body and paint shops.

specialists have good prospects for framework agreements with intermediaries. A strategy for specialists should therefore involve more intensive diversification relating to their core competence. financing for repairs) Positioning in repair exchanges Service formats Service Factory Figure 64: Strategic profile for specialists Source: Institut für Automobilwirtschaft (IFA) 87 . This may also be realised by joining a soft franchising scheme.range. which leaves them with hardly any means of compensating internal risks. This means. workshop systems and workshop chains Strong price pressure Strategies Extending the range of services (diversification) Active consolidation strategy Fields of action Framework agreements with intermediaries Using soft franchise system to extend the product / service range Supplementary services (e.g. for example. that a mild winter with relatively little demand for winter tyres hits a specialised tyre store to a greater extent than a business that offers a much broader range of products. Figure 64 shows the strategic profile for specialists. This is an area in which they can make best use of their wealth of experience and expertise. Challenges Predatory competition with authorised workshops. With their clearly defined profiles.

They are far more interested in finding a way of surviving in this changed environment in a sustainable and profitable manner. the following overview can only serve as a point of reference for possible courses of action.5. which may offer an expedient means of achieving the pertinent objectives. In this respect. It is obvious that not every player will have the same chance of success by adopting the strategy recommended for him. this way of looking at things is just as irrelevant to industry practitioners. Trend Trend I: Declining market volume Trend II: More older vehicles in use Trend III: Internet exchanges Trend IV: Intermediaries Trend V: Polarisation of customer segments Trend VI: The connected car Trend VII: E-mobility Trend VIII: Consolidation in aftersales OEM/ authorised workshops Customer retention strategy Customer retention strategy Internet-based service processes Forward strategy/ framework agreements Hybrid strategy Automotive suppliers Increasing market penetration Low-cost sourcing Active internetbased marketing of parts Framework agreements Hybrid parts pricing strategy Expanding system competence Securing technical expertise Making soft franchises more attractive Parts wholesalers/ workshop systems Increasing market penetration Focusing strategy Internet-based marketing (search engine optimisation/ placement) Framework agreements Focusing on priceoriented groups of buyers Expanding service range Securing technical expertise Active network and consolidation strategies Workshop chains Increasing market penetration Focusing strategy Brand-supported Internet presence Framework agreements Focusing on priceoriented groups of buyers Expanding range of accessories (portable terminal devices) Ensuring access to technology/ qualifications Active network strategy Independent workshops/ specialists Joining workshop systems Focusing strategy Ensuring attractive positioning in the exchange Partial framework agreements (specialists) Focusing on priceoriented buyers (independent workshops) Ensuring access to technology/ expanding service range Ensuring access to technology Consolidation strategy Cooperation strategy Establishing new business models Active network adaptation Figure 65: Strategic options in the aftersales market of the future Source: Institut für Automobilwirtschaft (IFA) 88 .3 Interim conclusion IV: Strategic options in the aftersales market of the future However appealing giving an answer to the question of how many market players and which ones are going to survive the predatory competition may be to trade observers and analysts. the bandwidth of the strategic options that are available to each player also varies. Apart from this. Figure 65 therefore shows a systematic overview of the strategic options that are available to the various players. This section is summarised from the industry practitioner's point of view. Some trends are favourable to certain players while others put them at a disadvantage.

Booming new car sales put the workshop business in the shade during the 1950s and 1960s. The revenue potential of aftersales was finally discovered with the growing saturation of the new car market and it was then cultivated to an increasing extent (Figure 66).6. for example. which is described above under the heading "all-round" service. This was the time in which the widely propagated idea that only the first car is sold by the new car sales department and all subsequent ones by the aftersales service department was coined. Conclusion and prospects: new rules of play − old players? A retrospective view of the service market over a longer period reveals a development that is evolutionary rather than revolutionary. that the old 89 . This means. are in the process of changing the rules of play in the aftersales business. as well as new technologies in the vehicle. 1950s/1960s Strategic focus Market situation "Product support" Seller's market Rapidly growing vehicle populations 1970s/1980s Differentiation factor Changeover from seller's to buyer's market Diminishing differentiation potential among vehicles Declining brand loyalty Increasing demands on vehicles and service "Peaceful" coexistence between authorised and independent workshops 1990s/2000s Cash cow Chronic profitability problems in the new car sector Cross-subsidising through service Deceleration of growth in the service market Growing price sensitivity in customers Very demanding New suppliers emerging and expanding More intense competition Customer world Competitive situation Less demanding Maintenance seen as a "necessary evil" High level of acceptance for repairs Low competition intensity Figure 66: Car service sector undergoing change Source: Institut für Automobilwirtschaft (IFA) All of this took place within the framework of a relatively stable service format. when it was identified as being an instrument that could be used to retain customers. Increasing pressure in the market and among competitors. Service did not become a differentiating factor among competitors until the 1970s and 1980s. The "predatory competition" scenario is forcing companies to adopt new strategies. Technical service was nothing more than "product support". a range of services that aimed to support the sales of new vehicles as a "necessary evil".

But it is also clear that in an overall declining market. and the growing demands of private customers with respect to quality. Car dealership and customer loyalty programmes are become matters of course to an ever-increasing extent. however: workshop systems and chains develop their networks of branches on the basis of clearly defined standards. The “opening of the automobile system” and the trend towards electromobility will mean that companies from outside the sector will enter into the automotive industry's chain of value creation and will influence the direction of customer flows. The growing share of “users” instead of “owners”. thereby accelerating the consolidation process even further. The electricity supply companies will certainly not want to merely perform the role of power suppliers when it comes to the 90 . All participants in today’s aftersales markets have access to strategic options to prepare for the future market and competitive situation. centrally managed vehicle fleets. three or more brands from the franchise partner of a workshop system? The "independent" market is changing as well. convenience and price are forcing all players in the aftersales market to have a more professional market profile and customer-relevant processes. they will capture a share of the margins achieved up to now in aftersales. consolidation is inevitable. the increasing importance of large. takeovers and mergers. In so doing. They will almost certainly be companies from the IT and communication technology sectors. The car manufacturers are serving the "independent market" to an increasing extent in order to safeguard their parts business in the light of an ageing vehicle population. The strategic radar of every market player must be realigned with the changing customer structures and changing customer behaviour. who are gaining access to the "intelligence" in the vehicle to an increasing extent.distinction between "authorised" and "independent" markets is gradually becoming obsolete. however. even in the independent market. And what distinguishes a brand workshop with service contracts for two. At the same time. This wave of consolidation will reach all groups and lead to a growing number of insolvencies. it is becoming increasingly likely that new players will intervene in the market. There is only a sketchy outline of who these new players might be at present. either directly or as intermediaries. Ultimately it is customers who are driving forward these changes.

The number of market players who are currently active in the aftersales sector is declining and the survivors must be prepared for the arrival of new competitors.subject of electromobility either. One thing is for sure: the automotive chain of aftersales value creation will undergo a restructuring process in the years to come. Charging station business might enable them to access service-relevant vehicle data. but “new” ones as well. The same old question will pose itself: confrontation or cooperation? There are many arguments in favour of a cooperative strategy because the new players have competence in areas that the established players are rarely able to master themselves. not only in terms of “old” participants. if at all. 91 .