Frost: OEMs eye stronger aftermarket sales

MOUNTAIN VIEW, Calif. (Nov. 13, 2015) — Among auto manufacturers, General Motors Co. and Ford Motor Co. are the most competitive in the independent automotive aftermarket in terms of parts and service coverage, respectively, according to a Frost & Sullivan Inc. report.

With the average vehicle age in North America at 10.5 years and nearly 60 percent of vehicles on the road more than six years old, there is a consumer migration from the original equipment service (OES) to the independent aftermarket, according to Frost, noting that OEMs need to not only design customer retention strategies within their dealership franchises but also compete effectively in the aftermarket.

GM's AC Delco brand has the greatest parts penetration rate in the aftermarket among all OEM brands. The key success factors for the brand in the aftermarket, according to Frost, is GM's robust distribution network and partnership with independent repair facilities for marketing and technician training.

General Motors Customer Care & Aftersales (GMCCA), along with its channel partners, focuses aggressively on educating and encouraging consumers about installing a GM or an AC Delco part during servicing/repair, Frost said.

Meanwhile, Ford's Quick Lane service chain — with outlets often located at car dealerships — is the largest competitive advantage for Ford in the aftermarket, “as no other OEM has such kind of service business model,” according to Frost, noting that the service chain is designed to counter the loss of service business to independent service shops.

“Quick Lanes are a viable alternative to OES for Ford owners, as this option ensures the installation of Ford or Motorcraft parts in their vehicles whereas in the (independent aftermarket) that may not happen,” said Avijit Ghosh, principal consultant for Frost & Sullivan's automotive and transportation research practice.

Fiat-Chrysler Automobiles (FCA), Toyota Motor Corp. and Hyundai Motor Co. do not sell directly into the aftermarket, but their respective dealerships do sell in the aftermarket, Frost said, adding that Volkswagen of America prefers to retain customers within its OE network and does not compete in the aftermarket.

FCA's Magneti Marelli parts brand offers application coverage for all makes and models, which “gives it a significant competitive advantage, as no other OEM offers such a line in the (aftermarket),” Mr.  Ghosh said.

He noted that all foreign OEMs have an economy, premium, and remanufactured line of parts but they are confined within the OES.

As foreign vehicles are forecast to expand by about 4 percent annually from 2015-2021, foreign OEMs will have to create an aftermarket-focused brand and/or aftermarket service line strategies to prevent slippage of post-warranty older vehicle service and repair business to the aftermarket, he warned.

According to Frost & Sullivan's annual research, the major reasons for consumer migration from OES were high cost, more fitting options available in the aftermarket, expiration of vehicle service warranties and inconvenient location of OE dealerships.

The three key factors that could drive a consumer back to auto dealerships for service and repair work, post warranty, are lower prices (including coupons and incentives), quick (while-you-wait) service, and more convenient location of dealerships, Mr. Ghosh concluded.

Among OE programs aimed at retaining customers post-warranty are:

c GM's use of the OnStar system leverages technology to build the perception of OES channel convenience. This system will soon be able to perform remote vehicle diagnostics, schedule service appointments and remind consumers when maintenance is due, with full functionality available through mobile device apps, according to Mr. Ghosh. “This is an example of capitalizing on an opportunity that is unavailable for the (aftermarket) installer,” he added.

c Toyota's Toyota Care complimentary maintenance program provides an upsell opportunity, educating the consumer on the convenience possible with a prepaid maintenance contract.

c VW's Service Xpress program, combined with the carefree maintenance plan, ensures that every 10,000-mile vehicle inspection is followed by quick and inexpensive minor maintenance services in the dealer channel. The OEM has invested significantly in adding more service bays at VW dealerships equipped with highly specialized equipment and skilled technicians in an effort to keep customers within OES post warranty, Frost said.

If the car dealer's prices are not competitive, VW will pay part of the cost so that the customer does not feel the price burden and remains loyal to the OES channel.

c Ford has differentiated its eRetailing platform from OEM competitors by offering online installation purchase for some parts, direct shipping or dealer pick-up, and a dedicated DIY repair-guide channel.