Greg Anderson - Foot Patrol: state capitalism in China # 39; automobile industry
Automotive Aftermarket China a strategic opportunity.
China is now the world's biggest auto market, and while automakers have focused on new car sales, there has been recent interest in the automotive aftermarket development for China vehicle service and repairs the secondary market for domestic car is relatively new in China and there are several unique features in the Chinese market.
Driven by huge growth in car sales, the stock of China's cars, especially older vehicles, a dramatic expansion In 2009, China surpassed the US to become the largest market for new sales of automobiles in the world China has experienced recent annual growth of about 20 percent over the 10 years a strong growth should continue despite some cities, such as Shanghai, Beijing and Guangzhou, the introduction of monthly quota numberplate.
The continued growth in car sales has the side effect of considerably increasing the cumulative stock of cars in China The average warranty period for vehicles in China is generally three years after the estimates of LEK Consulting, 2017 Age means cars will increase from three years to four 5-year age where spare parts and services spending usually peaks the number of cars out of warranty will nearly triple over the same period, the more demand for driving aftermarket products and services.
Previous experience indicates that these factors will create a significant demand for spare parts and services The market size has increased significantly from 10 billion in 2008 to 24 billion in 2012 This trend can be expected to continue as a park auto China increases and ages.
Assembly and repairs wear, including engine, chassis, bodywork repair and transmission, and minor repairs are the two largest market segments value repair and should remain the largest segments in the future predictable.
Develop automotive aftermarket in winning strategy in China is to map the value chain, identifying the key stakeholders, and how vendors can best achieve customer product type, manufacturer's background, the market geographic and level of development of each city will affect each of these elements.
auto parts manufacturing is done mainly by three types of international original equipment companies OE suppliers, domestic suppliers and suppliers OE aftermarket dedicated distribution and service is generally performed either by the network original equipment supplier or OES the network of IAM independent aftermarket.
Because the development of a large scale of Chinese auto market is relatively new, service stations and repair chain must still be set up large-scale Traditionally, 4S stores controlled by automakers do most of the auto service 4S stores, which is short for sales, service, parts and customer feedback surveys, have been developed in China to address the lack of services for vehicles after being bought customers buy cars 4S dealers, who also provide an automotive after-sales service non-OEM parts suppliers are mostly small regional companies that sell parts by distributors who provide independent repair shops in the independent distribution channel is complex and multilayered Some distributors may be di stributeurs also have their own outlets and repair shops to complicate matters.
There is a new, but smaller, emerging direct channel where component suppliers are opening in clean and self brand stores, or directly provide products online Bosch and Continental are examples of players who move in this direction and other companies are studying whether and how they should participate in these channels are generally less frequent in other markets, but could be very effective in China as consumers are generally brand and price sensitive and require more and more check the parts they buy are genuine addition to the opening of new sources of revenue and cost, these direct channels help strengthen the manufacturer's brands that can help its heart business.
The launch of direct channels are not without challenges, and a company that is considering this should carefully evaluate the product, the economy shops and operational issues before going this route.
Currently, 4S stores dominate sales and repair services in China, although chained repair shops should increase the relative importance in the years to come direct channels, including self-owned stores and brand self- and online distribution can also be positioned for strong growth but a small base.
Another important trend is the increasing levels of public policy directives industry consolidation have been issued in the last decade to reduce the number of auto parts suppliers such as scale capacity and competition means more more the 11th five-year plan called for reducing the number of suppliers of components while increasing competence supplier capacity a mandate of the Commission of the national development and reform 2006 encourages mergers of business and acquisitions in the sector each year, hundreds of domestic transactions in the automotive industry of China suggest the ambitions of the government for a stronger Home- increased automotive suppliers are gradually taking shape.
Understanding demand and customer behavior is still essential to determine the right strategy for success Here we examine consumer behavior, including where drivers go for after-sales services, how different use of the service center, and what motivates the selection of auto parts consumers.
At present, most care owners use 4S stores for the purposes of their aftermarket Consumers who buy their private cars as opposed to company cars or government cars are more likely to use non-4S service centers These consumers are often more price sensitive and can have a greater knowledge of the automotive However, the OES ie 4S shops network even dominates the market for private car repair, and was estimated at 70 percent.
There are differences in consumer behavior depending on what product or service is required Consumers who need major mechanical repairs or safety issues may be more inclined to use a 4S center However, other factors including price, convenience, product availability or technical expertise influence or determine the choice of the service center.
In general consumers prefer branded parts supplied by OEMs, with about 70 percent of consumers likely to choose 4S centers as their first choice Usually customers buy branded items because they fear that non-OEM parts generic could be counterfeit However, there are regional differences in the propensity of consumers to consider non-OEM parts, for example, consumers in the coastal provinces are buying non-OEM more willing branded parts that are perceived as less critical, such as wipers, trusting that the quality will meet their needs at a decent price total sales of 4S auto parts are also lower than the estimated demand for parts 4S This is probably due to a desire to use other brands and the prevalence of counterfeit parts on the market.
The dynamic nature of the means Chinese market there are several key factors that determine success in the consumer market can be very price sensitive and brand awareness is low, it is not uncommon for a BMW owner to shop and save some renminbi on an oil change, for example, haggling for bargains is an essential feature of Chinese consumers and car owners are no different in this respect in such an environment, it is essential to position the company correctly and harmonize products, price and channel strategies accordingly, the Chinese component supply chain is long and complicated, and there are usually many levels of distributors design and management of the go-to-market and assets of the chain supply will also determine the success or failure in the industry.
Author Michel Brekelmans partners with LEK Consulting LEK and co-leaders in China's practice with an experience of over 17 years, mainly in China, advising clients on strategy development, mastery and organizational improvement Lane Chen a Shanghai office manager of LEK consulting LEK consulting is a management consulting firm that uses deep industry expertise and analytical rigor to help clients solve their most critical business problems for more information on the article or the details of how LEK can help, please contact the author by email protected.
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