According to Datamonitor, by 2008 the European aftermarket, currently worth €124 billion (£85 billion), will have declined to its 1998 value of €121 billion (£83 billion) with the closure of an estimated 30,455 repair/franchised/independent repair outlets.
In the 1990s, Europe's aftermarket players enjoyed strong market growth and high profits. Now, says Datamonitor, margins have been eroded significantly and growth rates have fallen dramatically as technology changes have affected car maintenance. Over the period 1998-2003 there was almost no growth in the value of the aftermarket (0.7%).
Better quality parts in new cars are lasting longer and needing replacement far less frequently. For example the average life of a battery has doubled to 4 years. Competition in the market is also having a negative impact on prices.
In the retail market, Datamonitor estimates that the number of repair outlets will decline by almost 9% between 2003-2008. Currently, there are a total of 353,673. By 2008 the number will have fallen to 323,218. Fast-fits and auto centres, due to their scale, have been able to undercut independents on parts prices and services, further limiting the scope for growth.
These factors, together with the European market being highly fragmented, make it ripe for consolidation, a process Datamonitor says is likely to be boosted by the new EU block exemption’s increased market access for independents.
The rot has already set in. Dana has announced its withdrawal from the aftermarket; Fiat sold its Midas fast fit operation to a competitor, whilst MG Rover has offloaded its aftermarket parts business to its logistics provider CAT. The AA announced its exit from the car servicing business and the closure of AA Tyre Fit and its vehicle inspections business.
Datamonitor automotive analyst Nieves Vecina-Jimenez, says: "The steady flow of profits from the market for replacement car parts and maintenance/repair services has come under pressure from increased competition in a mature market, and from changes within the market. Players in the European aftermarket business need to determine their targeting strategy based on the potential opportunities. In short, consolidate, specialise or die."