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European aftermarket ‘in decline’

New research from Datamonitor reveals that Europe's car aftermarket business, currently worth €146bn (£101.3bn) including parts and labour and taxes, is in decline.

Its European Aftermarket Database 2005, which tracks the components of this sector across Germany, Italy, France, UK, Spain, Belgium, Netherlands, Switzerland and Portugal, expects 2008 revenues to drop by 1% compared with those of this year, having grown by 3% between 1999 and 2003.

This forecast shrinkage equates to a €1.2bn (£0.833bn) decline in value.

Fast fit, autocentre and tyre specialist sectors, however, are expected to remain healthy in this contracting market.

Vehicle manufacturer networks currently hold the largest share of the aftermarket across Europe - approximately 40%. Their share will decline, with revenues expected to take a €2bn (£1.39bn) hit, says Datamonitor.

In large part the declines will be focused on the networks of the secondary dealers and agents rather than the core main dealer networks. Independent garages will likewise see a marginal reduction in their share of the market and a decline of €700m (£486m) in revenues by 2008.

The key negative factors impacting Europe's aftermarket are lower volumes of replacement parts and highly competitive pricing. The lower volumes are being driven by longer replacement periods on components as better quality parts are fitted to new cars. And as service intervals are extended, volumes of "fast moving" replacement parts are impacted.

“Heightened competition - amongst manufacturers, distributors, retailers and service providers has resulted in intense price competition, with a resultant impact on the value of the market. Datamonitor also believes changes by the European Commission to the Block Exemption are undoubtedly having an impact on the competitive situation in the industry,” says Datamonitor.

It forecasts a net reduction of 39,000 aftermarket outlets across the 10 European countries surveyed by 2008. A reduction in the number of independent garages is also expected - and this will particularly be the case in countries such as Spain and Italy with very dense networks of small independent outlets.

"Throughout Europe, the contraction in outlet numbers will be impacted by rationalisation of vehicle manufacturer dealer networks, consolidation amongst vehicle manufacturers' sub-dealers and agents and a contraction in the number of service stations," says Simon Hodson, managing analyst of Datamonitor's automotive research.

According to Datamonitor, the fast fit, autocentre and tyre specialist sectors will see an increase in value, with over €1.5bn in revenues added in the period 2003-2008, as consumers perceive them to be a cost-competitive and low-hassle way to maintain a car.

Having undergone significant consolidation in recent years a number of major international competitors have emerged in this sector - KwikFit (including Speedy, PitStop and now Axto), Norauto of France (now incorporating Maxauto and Midas), ATU of Germany and Michelin's Euromaster network (having acquired Viborg).

Hodson says: "The negative factors are partially offset by a number of positives. For example, there is a steady increase in the number of cars on the road - generally rising between 1% and 3% per year - and this naturally creates more demand for replacement parts. Furthermore, the value of the aftermarket is boosted by a positive ‘mix’ effect. Whilst fitting better components - such as stainless steel exhausts or precious-metal spark plugs - reduces volumes, they are significantly more expensive. Likewise, the closure of the smaller - and therefore less economic - retail networks, will eventually lead to average revenues per unit rising over the next few years."

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