Professional Documents
Culture Documents
AMStudie en 1509
AMStudie en 1509
in Automotive Service
September 2010
3.4 Trend IV: Intermediaries will change the market structure ..35
5.2.8 Specialists......................................................................86
A new era has dawned in the aftersales market. Influenced by new market
and competitive conditions, new and growing customer requirements and
ongoing technological development, the players in the service industry will
have to reorient themselves in order to survive. At the same time, a long-
term, irreversible consolidation is inevitable in aftersales in the coming years.
1
importance of these online platforms will increase as more and more
workshops join them.
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.
Well-to-do private customers with a strong affinity for cars will pose high
demands on quality, service and convenience, while more price-
conscious drivers with a small budget will lead to the emergence of
discount-style service formats.
2
Trend VII: E-mobility
The advent of the electric car and the growing importance of battery-
powered electric vehicles in urban areas represent more than just a
technological challenge for aftersales. Because new marketing models
may apply for electric automobiles, access to aftersales for drivers of
these vehicles will change. The personal relationship between drivers and
their workshops will be further weakened when new, user-oriented
business models emerge in the field of e-mobility.
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. It also shows their high flexibility and focus on technically complex
shop work. The further qualification of shop employees is accordingly high on
the agendas of surveyed companies.
4
The mobility service outlet, targeting both operators and users of
innovative mobility services.
The service formats described above are already present in the aftermarket
in rudimentary form. The key is to make the service formats consistent and
implement them in a viable business model.
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, car manufacturers have a wider range of strategic
options compared to other players in the service market. Additionally,
automobile manufacturers can further develop into mobility providers,
thereby expanding their basis for creating value. This could help them
to counteract the growing power of intermediaries in aftersales and
thus secure their parts sales.
5
Shop systems should increasingly emphasise their value for money in
the future and take advantage of their multi-brand capability as a
strategic strength. This also provides them with special opportunities
to work with intermediaries.
At the same time, however, it is becoming increasingly likely that new players
will intervene in the market, thereby accelerating the consolidation process
6
even further. 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, either directly or as intermediaries. In so doing,
they will capture a share of the margins achieved up to now in aftersales. The
automotive chain of aftersales value creation will undergo a restructuring
process in the years to come, not only in terms of “old” participants, but “new”
ones as well.
7
1. Introduction: Innovative service worlds
Visiting the dentist is an unpleasant and daunting occasion for most people.
We go to the dentist either because of pain or a guilty conscience for
skipping regular checkups for so long. Berlin dentist Dr. Stephan Ziegler had
a vision of transforming the typical fear-inducing dentist appointment into a
positive experience, according to the motto “enjoy being at the dentist”.
The vision was transformed into reality in a practice in the middle of Berlin:
“KU 64 - the dental office on Kudamm street”. The entire practice resembles
a sandy, sunny dune landscape, where it smells of coffee when you enter,
lounge music fills the rooms, 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. In addition to complete dental services, a massage can be booked
with a naturopath following treatment, and the practice has expanded to
include cosmetic surgery. The office is open seven days a week and is
committed to using only materials that are harmless for people and the
environment, for instance no amalgam or substances containing
formaldehyde.
Whether all patients consider their visit a joyful, pleasant experience remains
open, but the success of and tremendous demand for this dental practice has
confirmed the vision of its founder. 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.
8
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. Ryanair is another pioneer in service innovation. The goal of the
company is to offer air travel as cheaply as possible. The fundamental
principle is in fact the exact opposite of that of KU 64. Whereas the Berlin
dentist office’s approach is “What can we additionally offer to appeal to the
patient even more?”, at Ryanair, 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. 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.
The philosophies behind these two service concepts could not be more
different, but the event-focused dental concept and the bare-bones flight
services from A to B are both highly successful. Apparently the success of a
strategy does ot rely on the “idea” behind it alone, but also on how it is
deployed.
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, a trip to
the workshop is not necessarily associated with positive emotions. At the end
9
one receives one’s car back, which either drives like it did before or like a
regular car once again. Neither maintenance nor repair is a truly enjoyable
experience. 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, i.e. simple maintenance at a low price.
These two approaches have not been carried to their logical conclusion in the
automotive industry. Instead, 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.
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. Conventional service formats and concepts may
have to be fundamentally reconsidered and reshaped in light of these trends
and challenges. Following many years of evolutionary development, perhaps
automobile service is in fact facing its first real revolution.
10
2. Situation and development trends in the automotive service market
If one considers how the service market has developed over a relatively long
period of time, it is easy to see that turnover in the service industry is
reaching its limits of growth. 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 34.8 billion in 2003,
following a record year in 2008 (EUR 35.5 billion) they fell to only EUR 34.5
billion in 2009. This development is in sharp contrast to the growth of the
service market in past decades.
Maintenance
Wartung Repair
Reparatur
(wear
(Verschleißteile)
parts) Accident
Unf repair
allinstandsetzung
40
35.5
34.8 34.5 34.8 34.1 34.5
35 33.2 33.4
29.8
30.8 30.2 30.4 30.9 31.1
Service volumes in billion euros
29.4
30
25
20
15
10
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
11
95
90
85
80
75
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
In EUR
400 1,4
1.4
Maintenance costs
Wartungsaufwand Maintenance frequency
Wartungshäufigkeit
350 1.2
1,2
300
1,0
1.0
250
0.8
0,8
200
0,6
0.6
150
0.4
0,4
100
50 0,2
0.2
0 0,0
0.0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
12
The development of the repair business is similar, where the number of
repair events per vehicle and year decreased from 0.86 in 2003 to 0.62 in
2009 (-27.9%). The cost per repair has also gone down in this segment, from
EUR 185 in 2003 to only EUR 172 in 2009, a decrease of 7.0% (Figure 4).
In EUR
350 1.2
1,2
Reparaturaufwand
Repair costs Reparaturhäufigkeit
Repair f requency
300 1.0
1
250
0.8
0,8
200
0.6
0,6
150
0,4
0.4
100
0.2
0,2
50
0 0.0
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
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, improved vehicle quality
and fewer kilometres being driven mean car owners do not have to visit the
workshop as often. Another factor is a growing sensitivity to the cost of
ownership, which has also led to a reduction in the frequency of taking the
vehicle to the shop. Many drivers avoid what they subjectively see as
unnecessary maintenance and repairs in order to reduce operating costs.
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. The price index of the
German Federal Statistical Office shows a 25% increase in prices for
maintenance and repair work between 2000 and 2009. This figure is
13
significantly higher than the increase in general consumer prices, which only
went up by 15.9% in the same time frame. Shop price increase in the first six
months of 2010 also outpaced consumer price growth compared to the same
period in the previous year (3.3% vs. 1.3%) (Figure 5).
128 127.9
126 125.1
124
122 120.9
120
117.9
2000 index = 100
118
116 118.6
113.3
114 111.2 115.9
115.4
112
109.1
110 112.5
108 106.8 110.0
104.7
106 108.3
104 102.1 106.2
104.5
102
102.0 103.4
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1st
1. half
Hj
of2010
2010
Maintenance
Wartungs- undand repair work
Reparaturarbeiten Verbraucherpreis-Index
Consumer price index
The situation is similar for prices for replacement parts and accessories
(Figure 6): Following a modest increase in the years 2000 to 2005, from
2006 to 2009 replacement part prices increased significantly more than
overall consumer prices (+12.8% vs. +9.5%). This trend continued in the first
half of 2010, when replacement part prices increased much more quickly
(2.3%) compared to the same period in the previous year than consumer
prices, which increased 1.3% as previously mentioned.
120
118.6
118
115.9
116 115.4 117.4
114 112.5
Index 2000 = 100
114.5
112
110.0
110 112.0
108.3
108 109.7
106.2
106 104.5
103,4 106.1
104
102,0
104.1
102 102.2 103.1 103.4
101.3
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1.1st
Hj half
2010
of 2010
Verbraucherpreis-Index
Consumer price index Ersatzteile und
Replacement Zubehör
parts and accessories
14
Whether this above-average growth in shop prices will continue is
questionable. Apparently in the past, shops not only passed on increasing
costs, especially personnel expenses, to their customers, but also attempted
to drive profits by raising prices. In light of the stagnation of real income and
increases in other vehicle operating costs, car owners are likely to be less
and less accepting of this pricing policy.
In growing markets, companies can still expand despite losing market share.
In stagnating markets, growth is only possible by eliminating the competition.
As the growth curve in the service business flattens out, the scenario of
“predatory competition” is increasingly becoming a reality.
Both the weakening market development and the continuing large number of
service providers have intensified the competitive situation in the service
business. Car manufacturers and importers have tried to adjust not only the
number of their dealers but also the size of their service networks, with only
partial success. The attempts by automobile manufacturers and importers to
consolidate were countered by the liberalisation of the authorised service
market by the Block Exemption Regulation, according to which essentially only
a "qualitative selection" in service is possible (BER 1400/2002). Many former
authorised dealers took advantage of this opportunity to remain in the network
of their manufacturer. Other authorised dealers have added additional service
brands to their portfolio, while many independent shops have become
authorised as service partners for one or more brands. Overall the number of
authorised service providers increased 4.3% between 2005 and 2010 to
reach the level of 25,626 establishments (Figure 7). This mainly resulted
from the increase in pure service establishments from 9,324 in 2005 to
11,785 in 2010 (+26.4%). An even larger increase was observed in the
number of branch shops, which tripled in the same period of time. The only
decrease occurred in the number of primary and secondary dealers, which
fell from about 15,000 in 2005 to 13,362 at the beginning of this year (-
11.4%)
15
Number of
2005 2010 Change in %
establishments
Primary and
secondary dealers 15,087 13,362 -11.4
Branch shops 156 479 +207.1
Service shops 9,324 11,785 +26.4
Number
2.500
2,500 2,200
2.000 1,800
2,000
1,500
1.500
1,500
1,100
1,000
1.000 800
500
0
2006 2007 2008 2009 2010
16
more or less “peaceful coexistence” was the norm, where the authorised
workshops focused on newer cars and the independent shops on older cars, in
recent years automobile manufacturers and their authorised shops have
increasingly attempted to penetrate segments II and III, in particular through
customer loyalty programmes such as flat-rates that bind owners to a specific
shop for up to four years. But car manufacturers have also become more
flexible in parts pricing, at times going so far as to establish a second range of
more cost-effective parts (Figure 9).
Toyota OPTIFIT Approx. 2000 Approx. 25% Key maintenance components and
high-priced replacement parts
Independent suppliers are also increasingly trying to expand into the newer
car segment. They do this by enhancing their existing locations and offering
an expanded range of services oriented toward those of the authorised shops
(e.g., providing replacement vehicles, financing repairs), and in some cases
even by selling cars and offering their own flat-rates (Figure 10).
17
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, 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). Only in segment IV, i.e. vehicles that
are 8 or more years old, has the market share for authorised shops decreased.
Under 2 years 90 91 7 4
2-4 years 82 86 11 12
4-6 years 63 77 24 17
6-8 years 60 71 28 25
More than 8 years 33 29 46 55
Total 55 53 30 37
60%
50%
40%
30%
20%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Authorised shops of
Vertragswerkstatt derown manufacturer
eigenen Marke Other automotive
sonstige shops
Kfz-Werkstatt
This situation has tended to intensify in recent years rather than weaken, due
to greater activity on the part of car manufacturers in supplying non-
authorised dealers and to the activities of large groups of dealers, which have
increasingly entered the parts market (Figure 13). Correspondingly, a
significant consolidation is expected in wholesale parts in the coming years.
19
Figure 13: Automotive dealer groups as wholesale parts suppliers
using the example of the Dello Group from Hamburg
Source: Dello 2010
20
with the support provided to better utilise shop capacity, with a score of 3.17
in 2010 compared to that of 3.28 in 2009. Nonetheless, this appears to be a
trouble spot for dealers as evidenced by the overall below-average
satisfaction with this factor (Figure 14).
Prices for parts threatened by competition 3.20 3.10 3.10 3.19 3.13 3.03
Margin bonus system for parts and accessories 3.10 2.90 3.00 3.04 3.03 2.90
Manufacturer delivery system for parts and accessories 2.50 2.30 2.50 2.40 2.34 2.37
Support from manufacturer to better utilise shop capacity 3.40 3.40 3.40 3.39 3.28 3.17
Handling of warranty claims and goodwill repairs for new
2.80 2.80 2.90 2.86 2.93 2.91
cars
Average satisfaction in the aftersales domain 2.99 2.89 2.97 2.96 2.93 2.87
When ranked according to brand, Toyota dealers lead the top 10 list of
satisfaction with manufacturers, but only just ahead of BMW dealers, whose
score increased significantly in the past year. Positions 3 and 4 are held by
Mercedes and Audi, two additional premium brands. The rear of the ranking
is brought up by the two French manufacturers Peugeot and Renault (Figure
15).
21
Rank Brand 2010 2009
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 Brand 2010 2009
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.
24
Source of contribution margin (in %) 2009 2008 Contribution margin 3 of each
2009 2008
New cars 43.8 28.8 department revenue (in %)
Used cars 0.8 4.9 New cars 4.2 2.7
Replacement parts / accessories 28.2 33.2 Used cars 0.2 0.9
Workshop 23.3 28.0 Replacement parts / accessories 16.4 15.7
Other departments 3.9 5.1 Workshop 18.5 17.7
Total contribution margin 3 100.0 100.0
But the outstanding profitability in aftersales should not conceal the fact that it
is based on a single, precarious source: the oil business. According to the
Institut für Automobilwirtschaft (IFA), some 50% of profit in the aftersales
market depends on the oil business. This corresponds to approximately 15%
of the total profit of a car dealership.
It is natural that many drivers are sensitive to price-based advertising for oil.
According to data from the IFA Institute, the price that private customers are
willing to pay for an oil change today is EUR 36.35, well below typical shop
prices at authorised service providers.
Can and will automobile service in its current form secure the economic
viability of today’s market players in the medium and long range, as it has for
decades?
Increases in hourly rates and prices for replacement parts must also be taken
into consideration.
The Institut für Automobilwirtschaft (IFA) has been generating predictions for
the German service market based on these factors for many years now. Their
data come from the statistics of the German Federal Department of Motor
Vehicles (KBA), the DAT report and their own model for calculating the annual
maintenance and repair demand per vehicle. These two figures are estimated
taking into consideration relevant economic and technical factors, whereby two
scenarios each are developed, an “aggressive” and a “conservative” model.
26
According to the 2010 IFA prediction, the service market potential based on
sold hours for maintenance and repair work will decrease by 19.6% to 25.2%
by the year 2025, depending on the scenario (Figure 18). This results from a
stagnating number of existing cars accompanied by an additional decline in
demand for maintenance and repairs per vehicle and year.
How strong this serious decline in turnover in the aftersales business will be
depends, as mentioned above, on how hourly rates and parts prices change.
Considering the growing intensity of competition and the increasing price
sensitivity of drivers, the potential for increasing prices in the aftermarket is
expected to be relatively small. Given the assumptions described here, service
market sales are anticipated to decrease by 6.3% to 13.2% by the year 2025.
Both scenarios presume an additional but moderate increase in hourly rates.
Conservative Aggressive Conservative Aggressive Conservative Aggressive Conservative Aggressive Conservative Aggressive
model model model model model model model model model model
2015 47.7 mill. 48.8 mill. 3.2 h 3.3 h 152.6 mill. h 158.4 mill. h € 68.39 € 68.58 € 10,438 mill. € 10,865 mill.
2020 48.1 mill. 50.1 mill. 2.9 h 3.0 h 139.5 mill. h 148.8 mill. h € 71.83 € 72.05 € 10,020 mill. € 10,721 mill.
2025 48.4 mill. 50.4 mill. 2.7 h 2.8 h 133.1 mill. h 143.1 mill. h € 74.70 € 74.95 € 9,939 mill. € 10,728 mill.
27
Service market prediction (hours)
205
Conservative
Def scenario
ensiv-Szenario
Wartungsarbeiten in Mio. Stunden
und
195
Of
Aggressive
f ensiv-Szenario
scenario
175
165
155
145
135
125
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
Service market prediction (wage hours in €)
13.000
repairs andund
Aggressive
Of scenario
f ensiv-Szenario
€
mill. €
12.000
in Mio.
11.500
maintenance in
Wartungsarbeiten
Total marketfür
11.000
Gesamtmarkt
10.500
10.000
9.500
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, the declining aftersales
market brings with it the risk of discount wars as well. The first signs of this
are already manifesting themselves (Figure 19). The range of aftersales
products and services however is more diverse than in the new vehicle
market, where primarily standardised products are sold. Moreover, soft
factors such as trust, friendliness and expertise also play an important role
for customers when visiting the workshop. In this respect, discount wars can
be at least partially avoided through individual customer service.
28
Figure 19: Discount mania in aftersales
Source: Institut für Automobilwirtschaft (IFA)
29
3.2 Trend II: Older vehicles continue to gain in importance
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 8 7 6 5 4 3 2 1
2009 2010
While the trend towards longer retention and usage will continue in the
coming years, it will be at a significantly lower level than before 2009. The
scrapping premiums in Germany caused an estimated loss of 700 million
euros in service sales.
In other words, the long-term trend toward longer vehicle retention and usage
has merely been interrupted by the scrapping premium program, not
stopped. Further improvements in vehicle quality and fewer kilometres being
30
driven mean that age segment IV (cars older than 11 years) will significantly
increase in the future. Already today, cars older than 11 years account for
one-third of existing vehicles (Figure 21).
Segment I: ≤ 4 years
Figure shows existing cars in individual age segments as of 1 January of the year in question
Existing cars incl. temporarily deregistered vehicles
This development poses both opportunities and risks for service suppliers:
¾ The risk in this development is that customers will migrate to the do-it-
yourself segment, which normally means the permanent loss of the
customer.
The internet will take on a greater role in information and thus customer
acquisition in the future. 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
for upcoming maintenance or unexpected repairs. Price comparison will play a
particularly important role.
32
Figure 22 gives an overview of various repair exchanges and their respective
business models.
www.repcar.de Job descriptions for repairing cars Currently still free for private persons and
www.autoreparaturen.de Job descriptions for all types of car Driver enquiries free.
price offers)
types of repairs
eBay Motors Workshop finder (address Free for searchers, listing shops in shop
price offers)
database)
database)
+ services finder (advertised fixed EUR 5.00, EUR 2.90 or EUR 78.90.
price offers)
33
+ customer job descriptions for all
The workshop search portal autoreparaturen.de went online in 2008. The goal
of portal founder Sebastian Cyran was not to offer just a simple list of addresses
of all workshops in Germany, but to create an intelligent machine to connect
shops and potential customers. Today, more than 2,000 workshops and over
10,000 car owners use this service, according to the company.
Shop enquiries from drivers are generally free of charge. Customers can
describe the required services for their cars and upload up to two pictures. All
enquiries are forwarded to shops within a radius of 5 to max. 40 kilometres
from the driver’s place of residence. A few days or sometimes even just hours
later, the local shops contact the driver with their estimates. After sending a
shop enquiry, every driver receives a free account in the
34
www.autoreparaturen.de search portal, where estimates and messages from
the shops can be read and managed. This information is also sent via email
and text message.
The fee-based account for car workshops has a number of advantages. Their
user account gives shops their own internet site where they can present
themselves and their services online. The account is easy to use, as
incoming enquiries can be managed without additional work. Before deciding
on a membership, workshops can test an account at autoreparaturen.de for
at least four weeks for free.
The structural shift in the new vehicle business away from private customers
towards commercial customers also has implications for aftersales.
Significantly more cars have been registered in recent years by fleet
management and leasing companies as well as car rental companies. They
typically own large fleets of vehicles which they acquire, manage and direct,
often on behalf of customers. These companies act as intermediaries
between end consumers/users and the workshop. In other words, they not
only decide who gets how many repair jobs, but also under what conditions.
The former B2C business of aftersales is thus increasingly becoming a B2B
business.
35
70%
60%
50%
40%
30%
20%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Authorised shops of
Vertragswerkstatt derown manufacturer
eigenen Marke Other automotive
sonstige shops
Kfz-Werkstatt
The reason for this is the “active claims management” of automobile insurers.
Despite counter-strategies by the car manufacturers, significant volumes of
auto body and paint work have apparently been “directed away” from
authorised shops.
36
LeasePlan also cooperates with selected tyre partners, which grant LeasePlan
customers special conditions. Preferred tyre brands include Michelin,
Goodyear, Dunlop and Bridgestone.
37
population in large cities grew by nearly 3% between 1999 and 2008, the
overall German population decreased slightly during the same time period.
A growing number of people are saying that they want to change their
mobility behaviour. 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%).
It is also very apparent that younger people are more likely to do without a
car than older people. In the same survey, 35% of 18- to 34-year-olds
reported doing without a car, while this figure was only 27% in the age group
of 35- to 54-year-olds.
The main reasons cited for doing without a car are economic aspects (88%).
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).
Reasons:
Save money 88 90 90 77 87 89
Ecological reasons 46 50 46 30 41 52
38
Car sharing members
But more and more commercial providers are now offering innovative mobility
services, especially for inner-city transportation. One example is Deutsche
Bahn (German Rail), which provides its train passengers with motorised
mobility through its “Flinkster” car-sharing service. Likewise highly successful
is the Car2Go mobility concept, currently being tested by Daimler in
Ulm/Germany and Austin/Texas. If one assumes that innovative mobility
concepts in urban areas will increase in importance, it will lead to a further
shift of the customer structure away from classic private customers towards
commercial customers, because the respective mobility providers take over
the service. For workshops this will mean a loss of current customers,
affecting all shop types, whether authorised or independent.
The strong increase in total cost of ownership (TCO) in recent years has led
to growing price sensitivity amongst drivers. Price topped the list of criteria for
selecting a workshop, cited by nearly 30% of respondents. Price was
followed by other important criteria including quality and reliability of work as
well as of parts (Figure 27).
39
Preisniveau
Price 29.9
Quality
Qualitätofder
parts / original parts
Teile/Originalteile 24.5
SchnelligkeitSpeed
der Reparaturen/Wartezeiten
of repairs / waiting time 5.3
Quality
Qualitätofder
advisement
Beratung 1.7
Terminverfügbarkeit
Appointment availability 1.4
Hours of operation
Öffnungszeiten 0.5
Termineinhaltung
Meeting deadlines 0.4
Sonstiges
Other 2.3
0 5 10 15 20 25 30 in35
%
The estimated price at German service provider ATU is nearly 18% below
that of the VW shop, while that of independent establishments was even 25%
lower. As mentioned, these are not actual prices but estimated ones that
reflect the price image of various suppliers.
40
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 €)
135
100 98 96
88
82
75
Independent
workshop
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:
¾ Demanding drivers
¾ Car enthusiasts
41
¾ Pragmatists.
Special customer
orientation is important 9 39 11 -37 -11
42
House/Home Office/Workplace
Internet Infrastructure/Car2Car
43
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. However, 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, for
example.
44
Authorised dealer Data stored in the Authorised
vehicle workshop
Apart from additional tax burdens for vehicles with high CO2 emissions,
restrictions on the use of such vehicles must be anticipated in the future as
well. This could affect traffic in the areas of high population density in
particular. This is another aspect that is contributing towards the growing
45
pressure on the automotive industry to introduce new drive concepts into the
market.
One of the few series-produced electric cars is the Tesla Roadster, of which
around 1000 vehicles have been sold worldwide so far. The Tesla Roadster
is equipped with a rechargeable lithium ion battery, which weighs 450 kg, and
has a range of around 500 km. A major service is due on the vehicle once a
year or every 20,000 km and each one requires 6.5 hours of work. There is
no need for the usual wear-related maintenance activities, which means that
maintenance work is focused on the battery and the power electronics. A
notebook with diagnostic software is used for this. Remote diagnosis is also
possible if the vehicle data are transferred to the service base online.
46
Investments in the workshop are also reduced due to the discontinuation of
many maintenance routines. No oil traps are needed, for example, and no
exhaust gas extraction systems. Situated in the centre of Munich, the Tesla
workshop merely requires a lifting platform, a tool trolley and a headlight
beam adjustment device. Tesla works in cooperation with a network of body
specialists, who repair any body damage.
The requirements profile for workshops and mechanics has changed with the
advent of the electric cars. This particularly applies to the handling of high-
voltage equipment as the voltage in an electric vehicle may be 400 V or
more. This means that additional qualifications are needed for workshop
personnel.
The growing importance of electric cars in the aftersales market is not only
relevant in terms of the modified vehicle engineering, but also in terms of new
business models, which could develop with the electric car. It is already
obvious, for instance, that the electricity supply companies will become very
deeply involved in the electric car business. We must assume that they will be
offering complete packages, including aftersales service, and this would sever
the direct links between the workshops and the end customer.
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
Case study: RWE Mobility
The vehicles are repaired and maintained by all Fiat dealers. RWE and
Karabag are building up specialised knowledge of the electric motor and the
battery within the service companies. The customer receives a statement of
account for the charging station rental fee and an itemised bill for the
supplies of green electricity.
Reliable service
In virtually all cases, the vehicle
can be repaired and maintained
within the existing Fiat dealer
network. RWE and Karabag are
also building up the specialised
knowledge required to service the
electric motor and the battery
within the service companies. The
first specialised workshops are
located in North-Rhine Westphalia,
for example. The German
automobile club ADAC is another
partner in the NRW pilot project,
which has trained its personnel to
provide a reliable breakdown
service for electric cars on the
roads within the pilot region.
48
increase in the number of insolvencies has already been evident in the car
trade in recent years.
As shown in Figure 34, 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. This clearly emphasises the way in which economic
manoeuvrability is gradually being constricted in the aftersales sector as well,
and particularly in this area.
800
687 690
700
633
608
589 571
600 563 546
519
480
500
373 384
400 362 369
346 340
319
304
300
200
2002 2003 2004 2005 2006 2007 2008 2009 2010 *
* Forecast
49
Index Index
220 110
Vehicles per Workshop
180
90
160
80
140
70
120
100 60
80 50
1997 2000 2005 2009 2015 2020
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. Figure 36 summarises the relevance of the trends for
the various market participants, whereby the directions of the arrows indicate
a positive, negative or neutral evaluation with respect to their positions in the
market.
50
Original Authorised Original Parts Workshop Indepen- Specia-
Equipment Equipment dent
Manufacturer
workshop whole- systems/ lists
Supplier workshops
saler chains
Trend I: The service market will
develop negatively P P P P P P P
Trend II: Older vehicles continue
to gain in importance J J J N N N J
Trend III: Internet exchanges
direct customer flows J P J J N N J
Trend IV: Intermediaries change
the market structure J P J J N J N
Trend V: Polarisation of
customer segments N N J J N N J
Trend VI: The connected car –
opening up the automotive P P N J N J J
system
Trend VII: E-mobility
N N J P J P J
Trend VIII: Consolidation in
aftersales J P J P J P P
The overview clearly shows that the underlying conditions for aftersales
business are likely to become more difficult for the contractually bound
players, whereas independent suppliers, particularly including workshop
systems and chains, can benefit from a number of trends. It will be the
players themselves, however, who finally decide whether they take
advantage of opportunities or are caught up in the potential risks with their
strategic responses to these challenges.
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. 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.
51
The IFA Dealer Panel that was used for this contains more than 3,500
addresses, most of which belong to authorised dealers and workshops. The
questions were communicated to and answered by the dealer panel
participants online. 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, whereby their composition approximately corresponds to
the basic population in terms of the represented brands. It may therefore be
assumed that the obtained results have a high relevance.
The profile of the survey participants is shown in Figure 37, which indicates
that 42 percent of the surveyed companies employed between 1 and 10
people. As far as the workshop throughputs were concerned, most of the
companies − i.e. 54 percent − recorded a maximum of 30 workshop events.
52
Number of facilities
Workshop throughputs
Number of facilities
Employees
53
Increased Decreased Decreased
- In % - Increased Constant
considerably slightly considerably
How have your parts sales developed? 3.1 59.2 17.4 17.4 2.0
How has the utilisation of workshop 2.0 40.8 34.7 18.4 4.1
capacity developed?
How has the number of sold labour hours 1.0 43.9 30.6 20.4 4.1
developed?
How has the number of employees in the 0.0 21.4 58.2 19.4 1.0
workshop developed?
Forty-five percent of the survey respondents said that the number of labour
hours sold had increased over the last three years, although only one percent
of respondents described the increases as being substantial. A similar
development is evident in the utilisation of workshop capacity, with around 43
percent of respondents stating that it had increased during the period under
review. 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. This corresponds with the trend towards greater growth
in parts sales than labour sales that has been recognisable for some time
now, due to the fact that more items are replaced rather than being repaired.
54
respondents considered these to be the most important competitors (Figure
39).
Particularly
Strong Moderate Weaker
- In % - strong
competition competition competition
Weak competition
competition
Other authorised workshops with the 14.3 22.5 14.3 25.5 21.4
same brand
Independent workshop without 6.1 17.4 33.7 29.6 11.2
workshop system
Fast Fitter (e.g. Pit Stop) 1.0 8.2 29.6 32.7 24.5
55
4.4 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. The contractually
bound providers in the service market are therefore obviously relying on their
high level of brand-specific technical competence (Figure 40).
Very huge Huge Moderate Fewer
- Figures in % - opportunities opportunities opportunities opportunities
Few opportunities
All the same, more than half of the survey respondents also see opportunities
in the growing importance of older vehicles, while the additional demand for
information and communication technologies also met with a high level of
approval. Even so, 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.
The list of potential risks in the aftersales sector is clearly led by the claims
management of the car insurance companies. More than 80 percent of the
56
authorised dealers and workshops surveyed regard this as a high-level risk,
with 45.9 percent of respondents rating it as a very high-level risk (Figure
41).
- Figures in % - Very high risk High risk Medium risk Lower risk Low risk
Workshop prices are also giving cause for concern. Almost 80 percent of
respondents are expecting customers to be more sensitive in terms of prices
and 68 percent are dreading discount wars. Extensions to maintenance
intervals and the decline in repair needs are also high on the list of concerns.
The propagation of electric vehicles with lower service requirements, the
emergence of new suppliers and service exchanges on the internet are
regarded as being more minor risks.
57
Very
- Figures in % - important
Quite important Indifferent Less important Unimportant
Other fields of action have high priority ratings as well, however, such as
improving customer satisfaction, active marketing of services to ensure the
utilisation of workshop capacity and the optimisation of workshop processes.
More cost-effective purchasing of parts and accessories also achieved an
approval rate of over 70 percent.
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, requiring more highly
qualified personnel in order to exploit it. 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, at least: the power wielded by the insurance companies in
the accident repair sector, increasing sensitivity to prices among customers
58
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, as shown by the trend analysis in this study.
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. This ascertainment is where the
theoretical analysis and practical experience come together. Which strategic
conclusions must be drawn by the service providers, whether authorised or
independent, in order to retain long-term competitiveness in this changing
environment?
59
5. Strategies and fields of action in the service market of the future
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. Current car service concepts −
offered by both authorised and independent service providers − pursue the
"all-round service" principle. After all, every customer should be addressed
and satisfied by more or less the same level of service and support. The
advantage of this concept is that a wide service range is offered to each
customer at the respective service location. It is also increasingly non-ideal,
however, given the increasingly diversified needs of the customer.
This has been recognised by a growing number of market players, who are
trying to introduce differentiation into the all-round service model that is
dominating the market today. They soon come up against limits in many
cases, however, as the business models behind the various service concepts
are irreconcilable. It is therefore necessary to generically develop pioneering
service formats from future market conditions and base these on stable
business models.
The situation is further aggravated by the fact that the customer structures
are changing. The classical private customer, who buys a vehicle and then
drives it to the workshop to have the necessary maintenance and repair work
done, is gradually becoming less important. This customer is being replaced
by intermediaries, who administer complete fleets of vehicles and are
therefore responsible for deciding where the vehicle is taken for service. The
actual users have nothing to do with service under normal circumstances, or
follow the advice of their mobility service providers.
Provider
Owning Using
61
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.
Business model Premium Service Service Discounter Service Factory Mobility Service Outlet
Provider
Customer focus Wealthy private Price-oriented private Intermediaries (leasing Operators or users of
customers, user choosers customers and fleet management innovative mobility
companies) concepts
Relationship to the Personal relationship with Internet-based customer Relationship to the fleet Mobility provider as the
customer the customer - permanent relationship; service corner manager / pool manager contact person for service
contact person
Value proposition Brand-exclusive service Permanently low prices - Standardised maintenance Comprehensive mobility
with comprehensive guaranteed fixed prices and repair work in concept with integrated
convenience and support accordance with the service, including ongoing
spectrum manufacturer's vehicle care
specifications with
guaranteed quality
Revenue model ¾ Active sale of ¾ Menu pricing for basic ¾ Framework agreement ¾ Charge model for
supplementary and supplementary with quantity-dependent vehicle use (packages)
products / services, products / services discount schemes
including accessories,
according to customer
requirements ("wants")
¾ Order-dependent
pricing
Value-added ¾ Maximising the scope ¾ Maximising the workshop ¾ Cost-optimised service ¾ Internet-based customer
model of products / services throughputs processes organised at processes
per customer / order ¾ Focusing on standard an industrial level ¾ Subcontracting on a
¾ High level of internal repairs ¾ Use of subcontractors case-by-case basis
service depth ¾ Trained employees in specialist areas
¾ Qualified employees ¾ High proportion of ¾ Quality of parts in
¾ Use of original parts identical parts accordance with
customer requirements
Customer ¾ Loyalisation of ¾ Focus / price advertising ¾ Personal key account ¾ Internet-based
acquisition and purchasing customers in daily news- management marketing for urbane
support model ¾ Personal papers/supplements ¾ Internet-based handling target groups
recommendation ¾ Active search engine of business processes ¾ Customer club as part of
¾ Customer support by marketing, including "closed" user pools
means of classical placements in service
media (letter, customer exchanges
magazine etc.)
The preferred target group of the premium service providers are private
customers and user choosers, who have a high affinity with their vehicles and
are willing to pay the prices. The success of this service format depends on
the development of particularly lucrative segments in the service sector
combined with well above-average support.
62
„Needs“
Maintenance and repair
Automotive glazing
Tyres / rims
Service discounters have their sights set on the private customers with
limited mobility budgets, whose primary aim is to drive economically and
reliably. The focus here should not be restricted to the owners of older
vehicles alone. It is the group of new car buyers in particular, where a
growing number of customers want to lower their running costs. The success
of this service format is determined by permanently low prices communicated
in a believable manner, extra charges for all special services and a good and
perceivable standard of quality.
The service factory concept is oriented to the growing trend towards fleet
vehicles. This is ultimately a service process organised at an industrial level,
with a high standard of quality but little in the way of personal touches, which
are not required by the targeted group of customers. A consistent process
standardisation concept is the success factor in this case.
The mobility service outlet format is emerging from the trend towards
integrated mobility services in densely populated areas. The mobility provider
takes on the workshop service for the user in this business model. The
success of this model depends on a carefully calculated charges scheme for
the total service offered.
63
Although the service formats described above are not identical to the
individual players who are active in the service sector today, they should be
used as points of reference for the development of the market players'
strategies.
Proximity
Brand expertise
Low prices
Appointments made
at short notice
Internet-based
order acceptance
1 = very high, 2 = high, 3 = moderate, 4 = low
64
5.2 Challenges, strategies and fields of action for the players in the
service market
Aftersales business has strategic importance for the car manufacturers from
four points of view (Figure 47):
¾ The quality of aftersales service is part of the brand image and brand
awareness.
Car manufacturer
What consequences do the trends outlined above have for the car
manufacturers?
Active marketing of
parts to independent
workshops
Exploiting the
customer relationship
Competition-oriented
price policy
66
The competitive strategies for older vehicles practiced so far have certainly
proved effective, as shown above. There has been an upward trend in the
market penetration of authorised workshops for older vehicles. The adopted
strategies are associated with high costs and/or reductions in proceeds for
the manufacturers, however. We must therefore assume that they will
attempt to strengthen their grip on older vehicles by means of more far-
reaching loyalty offers in the years to come.
Very long-term customer loyalty strategies have been in place in the service
sector in other countries, such as Switzerland, for many years now. The
Mercedes "Swiss Integral" programme includes all repairs for up to 3 years or
100,000 kilometres and all maintenance services for up to 10 years or
100,000 kilometres (Figure 49), for example.
67
Figure 50: Retaining customers by means of "service inclusive" as
offered by the BMW Group
Source: Automobilwoche journal dated 14 July 2008
¾ the customer receives a vehicle for shared, temporary use with other
customers.
68
While the first model corresponds to the leasing principle, the second relates
to the rental principle. There are certain tasks, which must be performed by
the user with the first model, such as regular care, service and maintenance
of the vehicle. These services are performed by the mobility provider for the
rental model.
The whole point of the mobility provider's revenue model is that he receives a
fee for providing, maintaining and selling the vehicle. 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.
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. Most of these are leasing companies or car rental companies,
which cover both of the fundamental usage models as part of their mobility
service.
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 car manufacturers, their leasing companies and the large
car rental businesses, have the greatest chance of taking over the leadership
of the system by virtue of their high profile, size and financial power alone, as
well as their know-how and experience in organising and controlling large
pools of vehicles. However, the potential of the financially powerful electricity
supply companies must not be underestimated when it comes to the
electrical mobility sub-segment.
Car2Go is a mobility concept that enables users to move around the city
without their own cars. The concept has been in place since the autumn of
2008 and has around 18,000 registered users. Around 60 percent of these
69
are between 18 and 35 years of age. Car2Go is based on a fleet of 200
Smart Fortwo cdi cars, which are parked at various locations throughout Ulm
and Neu-Ulm and are equipped with a keyless entry system (card reader).
Following a one-off registration process and the purchase of a Car2Go chip
(single fee of 19 euros), the user can log into the booked vehicle and open
and close the doors. He then enters his PIN into the telematics unit with
touch screen, removes the ignition key from the glove compartment and can
set off on his journey.
Compared with the classical rental car system, the specific differences are
obvious: the pick-up and return stations are flexible and may be chosen by
the customer. Charges are only levied when the car is actually in use, which
means that the customer is charged 19 euro cents per minute as long as he
is logged into the vehicle. The simplicity of the cost structure is another
factor, with the "all-inclusive" price per minute covering all of the costs for
fuel, service, taxes, insurance etc.
The customer can monitor the costs incurred and the distances travelled on
the Car2Go.de portal, where he can view all of his journeys during the
previous month with details of the departure and destination addresses, the
rental durations, the distances travelled and the prices.
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. In concrete terms, this means that a customer can use Mú to rent a
70
car, a bicycle, a motor scooter or accessories, such as a roof box for the
family holiday. The iOn electric car should also be available for rental within
the framework of the Mú concept starting in autumn 2010.
Challenges
¾ Diminishing maintenance and repair volume for newer vehicles
¾ Parts sales jeopardised by the authorised workshops' loss of market shares
¾ Opening the car system
Strategies
¾ Extending customer loyalty
¾ Establishing different service brands
¾ Further development to become a mobility provider
Fields of action
¾ Increasing market penetration with flat-rate products
¾ Bundeling products and services („service inclusive“)
¾ Developing a second service and parts range
¾ Active network policy and a review of the service formats
¾ Establishing and intengrated, use-based business model
71
in some respects, service business is characterised by a relatively
continuous development (Figure 52).
66
62 26
60 24
58
22
56
20
54
52 18
50 16
Development of turnover
Umsatzentwicklung in new car sales
im Neuwagenverkauf Umsatzentwicklung im After
Development of turnover in Sales
aftersales business
Authorised dealers and workshops have less strategic room for manoeuvre
due to their contractual obligations. 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. It is quite possible for an authorised dealer or an authorised
workshop to make a name for itself as a multi-brand service centre.
72
Kunzmann, a car dealership that has been exceptionally successful in its
activities for many years now.
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. The essential elements of the
service concept are as follows:
73
Figure 53: Autohaus Kunzmann – The New Service Dimension
Source: www.kunzmann.de
74
Figure 54 shows the strategic profile for authorised dealers and workshops.
Challenges
¾ Reduced utilisation of workshop capacity due to the diminishing maintenance
and repair volume for newer vehicles
¾ Loss of direct customer contact due to intermediaries and repair exchanges
¾ Dependence on the dealers' service and parts strategies
Strategies
¾ Positioning as brand champion in the regional market
Fields of action
¾ Optimisation of sites, structures and processes
¾ Integrated service concept
¾ Multi-brand service
¾ Active internet marketing
¾ Low-cost sourcing and active marketing of parts
Service formats
¾ Premium Service Provider
¾ Mobility Service Outlet (as part of a manufacturer concept
75
5.2.3 Automotive suppliers
There are few automotive suppliers in such strong market positions that they
can establish themselves in a broader fashion in the aftersales sector. One of
the suppliers who adopt this strategy is Bosch which, apart from extending its
product and service range, added the Auto Crew workshop system to its
Bosch services just a few months ago.
76
Activities that are directly targeted at the end customer will probably remain
the exception for automotive suppliers in the future as well. It would put them
in direct competition with the car manufacturers. The separation of
aftermarket activities from OEM business could support the market proximity
of the automotive suppliers, however.
Challenges
Strategies
Fields of action
77
5.2.4 Parts wholesalers
Nearly all of the workshop systems in Germany are currently backed by parts
wholesalers, who want to safeguard the sales of their parts to the end
customers. The strategic orientation of the parts wholesale sector is therefore
very closely meshed with that of the workshop systems. 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.
Challenges
Strategies
Fields of action
78
5.2.5 Workshop systems
The workshop systems have full franchise character and are primarily run by
parts wholesalers. They have undergone a dynamic development in recent
years. Nevertheless, the brand awareness and prestige of individual systems
suffer as a result of their relatively limited level of distribution. A broader
network structure is therefore essential to the success of the workshop
systems (Figure 58).
1a autoservice *)
1,523 *)
No data 10 % improvement
As far as service formats are concerned, the workshop systems could give
precedence to the adoption of the "service discounter" and "service factory"
formats.
Challenges
Strategies
Fields of action
Service formats
¾ Service Discounter
¾ Service Factory
80
5.2.6 Workshop chains and specialised markets
81
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. One of the players who has expanded its operations in this
area considerably is the Halfords Group. Halfords not only offers accessories
for specific vehicle models, but also bicycles, tents and many other types of
technical recreation products (Figure 61). ATU is pursuing similar
approaches in some respects.
82
Figure 61: Halfords – the mobility specialist
Source: www.halfords.com
83
Figure 62 shows the strategic profile for workshop chains and specialised
markets.
Challenges
¾ Predatory competition with authorised workshops due to the car
manufacturers' customer retention programmes
¾ Clear differentiation from workshop systems
¾ Price competition with independent workshops
Strategies
¾ Positioning as a discounter
¾ Ensuring a high network density
¾ Backward integration by means of car dealership
Fields of action
Service formats
¾ Service Discounter
¾ Service Factory
Most classical independent workshops are small businesses and their size
and limited financial resources leave little room for strategic manoeuvre.
84
workshop systems or so-called soft franchises in selected fields to a greater
extent in recent years. This essentially serves to acquire know-how and to
secure support in marketing.
The independent workshops' strong points are their decidedly good price
image, their flexibility and their proximity to the customer. Armed with these
strengths, they have to continue to focus on customers who own older
vehicles − a market segment that is demonstrating a tendency to grow.
Possible strategic opportunities also emerge from cooperative ventures with
intermediaries, as long as their standards can be met by the workshops.
85
Figure 63 shows a possible strategic profile for independent workshops.
Challenges
Strategies
Fields of action
¾ Employee qualifications
¾ Using repair exchanges for local marketing
¾ Low-cost sourcing of parts
Service formats
¾ Service Discounter
5.2.8 Specialists
¾ Tyre stores
¾ Electric suppliers
86
range, which leaves them with hardly any means of compensating internal
risks. This means, 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. A strategy for
specialists should therefore involve more intensive diversification relating to
their core competence. This may also be realised by joining a soft franchising
scheme.
With their clearly defined profiles, specialists have good prospects for
framework agreements with intermediaries. This is an area in which they can
make best use of their wealth of experience and expertise.
Challenges
Strategies
Fields of action
Service formats
¾ Service Factory
87
5.3 Interim conclusion IV: Strategic options in the aftersales market of
the future
88
6. Conclusion and prospects: new rules of play − old players?
All of this took place within the framework of a relatively stable service
format, which is described above under the heading "all-round" service.
Increasing pressure in the market and among competitors, as well as new
technologies in the vehicle, are in the process of changing the rules of play in
the aftersales business. The "predatory competition" scenario is forcing
companies to adopt new strategies. This means, for example, that the old
89
distinction between "authorised" and "independent" markets is gradually
becoming obsolete. 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. And what distinguishes a brand
workshop with service contracts for two, three or more brands from the
franchise partner of a workshop system? The "independent" market is
changing as well, however: workshop systems and chains develop their
networks of branches on the basis of clearly defined standards. Car
dealership and customer loyalty programmes are become matters of course
to an ever-increasing extent, even in the independent market.
At the same time, however, it is becoming increasingly likely that new players
will intervene in the market, thereby accelerating the consolidation process
even further. 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, either directly or as intermediaries. In so doing,
they will capture a share of the margins achieved up to now in aftersales.
There is only a sketchy outline of who these new players might be at present.
They will almost certainly be companies from the IT and communication
technology sectors, who are gaining access to the "intelligence" in the vehicle
to an increasing extent. The electricity supply companies will certainly not
want to merely perform the role of power suppliers when it comes to the
90
subject of electromobility either. Charging station business might enable
them to access service-relevant vehicle data.
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. 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, if at all. One thing is for sure:
the automotive chain of aftersales value creation will undergo a restructuring
process in the years to come, not only in terms of “old” participants, but “new”
ones as well.
91