A new report highlighted significant changes and challenges in the automotive aftermarket, driven by evolving market forces and industry dynamics.
The latest edition of the Automotive Industry Spotlight by advisory firm Alvarez & Marsal delves into the factors poised to disrupt the automotive aftermarket in the near- to mid-term future.
The automotive aftermarket grew to approximately US$391 billion in 2023 amid rapidly changing industry dynamics.
“The industry, dominated by OEMs and major Tier 1 suppliers, faces significant disruption as automakers pivot strategies around EVs and component sourcing, forcing retailers and consumers alike to re-think their approaches to aftermarket parts and services,” the report said.
Delivery systems that provide parts or services to consumers are essential to aftermarket part manufacturers. These systems include franchised dealership service centers, independent garages, automotive retail chains, and big box retailers. Major automotive-focused retailers lead in comprehensive aftermarket services, while specialty shops and big box retailers like Walmart and Costco dominate certain segments, such as tires.
EVs, autonomous vehicles
While EVs will significantly impact OEM insourcing and the number of parts required to manufacture vehicles, certain automotive aftermarket categories and vehicle channels are more vulnerable to negative change over time, the report highlighted. Traditional batteries and exhaust systems, in particular, stand to be hurt by the shift toward EVs. Although the aftermarket for these components will likely continue for the foreseeable future, the overall volume will shrink as the percentage of new vehicles represented by EVs grows.
EVs also present unique challenges for independent garages and workshops, the report noted.
“Historically strong with technicians well-versed in internal combustion engine systems, these shops will need to expand capabilities to include technicians skilled in EVs or risk losing access to a growing segment of business,” it added.
A farther-reaching and less obvious effect on the automotive aftermarket comes with the broader transition to autonomous driving through EV development. While the transition toward autonomous driving has been in effect for years via technology developments already in place with ICE vehicles — such as lane assistance, adaptive cruise control, and collision-detection braking — software like Tesla’s autopilot is rapidly accelerating the pace toward fully autonomous driving.
As this technology matures, industry experts expect autonomous vehicles to lead to fewer accidents, more mobility fleets like Waymo, and potentially decreased private vehicle ownership.
“While autonomous vehicles are also designed to drive in an ‘optimal’ fashion, they should in theory also require less wear-and-tear maintenance,” the report said. “These factors would contribute to a significant decline in ongoing vehicle maintenance, hurting direct aftermarket players like parts retailers and independent garages.”
Experts also anticipate that a shift toward autonomous driving will change regulatory requirements around part sourcing and insurance liability. This would likely mean an even greater shift toward the OEM service model, where parts are consistent throughout the value chain and service delivery is ‘certified’ by OEM technicians.
“Autonomous vehicles will also provide significant data-driven opportunities for the aftermarket,” the report noted. “With increased data coming from vehicles themselves because of autonomous systems, predictive maintenance will become an increasingly important competitive pillar for aftermarket service providers. This will likely primarily benefit the OEM service model.”
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