OEMs taking multi-faceted technology approach to gain aftermarket share

Automotive OEMs see the digitization of their businesses – everything from selling cars online to remote service and connected vehicle technology – as a key to future profitability.

According to Frost & Sullivan’s recent report, “OEM Disruption in Automotive Retail and Aftersales,” vehicle manufacturers will combine connectivity, e-tailing, direct parts sales and service marketplaces in a strategy to improve their share of the aftermarket.

This is also playing out on the front-end of car sales. “The links between the bricks and clicks are increasingly blurred,” says Dr. Julie Saini, global vice president for mobility aftersales and retail at Frost & Sullivan. “Customers want an omnichannel, anytime, anywhere shopping and service experience.”

According to Frost & Sullivan, the automotive industry invested nearly $20 billion in digital transformation initiatives in 2015, including smart manufacturing, connected living/Internet of things technologies, security, big data analytics, digital retailing and mobility.

“The future of auto retailing is digital,” Saini says. “Digitization allows for the display of an unlimited product range in a relatively small showroom space. This is expected to continue as more omnichannel capabilities become the norm in the industry.”

Customers want the same type of experience with their auto dealer that they get with Netflix or Amazon.com. BMW, for example, is moving toward online car sales. Carwow in the UK, meanwhile, allows customers to configure their ideal vehicle and then get quotes from multiple dealers.

Hyundai dealer Rockar is another good example. The company sets up business in shopping malls with a few models on display and minimal staff. Customers can purchase a car online in just a few minutes. According to data from Frost & Sullivan, the company boasts a 96 percent customer satisfaction rate.

The future of parts and service

Digitization is also affecting parts and service. “Every aspect of the business is being changed in some way or another,” says Kumar Saha, director of aftersales mobility at Frost & Sullivan. “From order fulfillment and warehousing, to how tires are sold, or how services or parts are sold.”

Frost & Sullivan refers to this as “Aftersales 4.0,” and it includes e-commerce capabilities for parts, an all-makes/models repair strategy, predictive service, connected loyalty and social media programs, embedded telematics, over the air (OTA) firmware/software updates, branded aftermarket parts (like Ford Omnicraft), and express service at dealerships.

Dealerships are leveraging service marketplaces and telematics solutions to help extend their reach with customers and try to gain back some of the post-warranty market share that is held by the independent aftermarket.

“We are seeing that, for the first time, OEMs are moving downstream and getting closer to the customers when it comes to aftersales,” Saha says. “They are making direct contracts with online sellers and marketplaces. GM is selling parts directly to Amazon in the U.S., and other companies are looking at similar arrangements.”

Saha says to expect more remote service offerings, technician training via online resources, and more data from connected vehicles to play a big role.

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E-tailing is top of mind. Frost & Sullivan puts automotive aftermarket e-tailing at $21 billion currently, and that figure will grow to nearly $50 billion by 2022. While the market is currently dominated by the U.S., Canada, France and Germany, by 2022 China will be the second largest market for online parts sales in the world.

OEMs will expand their own e-tailing presence when it comes to parts using a variety of strategies – setting up direct websites, using online marketplaces, or partnering with distributors. Strategies could vary by country; BMW uses marketplaces in the UK, and a direct e-store in Germany to sell parts. Fulfillment is handled through its dealership network.

Frost & Sullivan also expects to see the “Uberization” of vehicle service expand in the aftermarket. Services like WhoCanFixMyCar.com, Auto Butler, Openbay and others are creating service marketplaces where both dealerships and independent shops can provide quotes to customers looking for specific types of service.

“Going forward we’ll see parts and service bundling, increased dealer interest in flat-rate or fixed-price service and consolidation of service aggregator platforms,” says Saha.

OEMs are also looking for ways to monetize the data being generated by vehicles, and are even investing in dongle technology for older vehicles in order to expand the number of connected vehicles.

“Dongles are a short-term solution for bringing older models into the connected car ecosystem,” Saha say. “OEMs want to acquire these unconnected cars, which is why Ford rolled out its SmartLink solution and Mercedes Benz is promoting the Me line of OBD-II dongles. Once the car population gravitates more toward embedded telematics, that strategy will be less effective.”

OEMs are investing in a variety of approaches to expand their aftersales presence. PSA in France acquired both an e-tailer (MisterAuto.com) and the service marketplace Auto Butler in addition to expanding its authorized service network and announcing a multi-brand parts portfolio. Mahindra in India has a one-stop website (m2all.com) where consumers can buy cars and parts online. They have also launched a service marketplace called Carworkz.com.

“The benchmark is really Amazon,” Saha says. “They are trying to build a comprehensive ownership management experience. They are pushing into vehicle sale as well as parts sales. They offer some kinds of vehicle service options and going forward, Amazon will likely get into direct distribution and even diagnoses.”

This fully integrated model where parts, service and connectivity converge are part of Frost & Sullivan’s vision of Aftersales 5.0. “OEMs are moving toward a fully integrated mobility and ownership management model, and aftersales will be a big part of that experience,” Saha says.

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