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Indian Automotive Aftermarket Growth - Ten Commandments for Capturing the Potential

Growth in the ‘aftermarket’ sector has been a recurring theme for the global automotive industry. The aftermarket parts business is highly profitable for Original Equipment Manufacturers (OEMs) as it contributes a modest proportion to revenues, but a sizable proportion to profits.

In the Indian context, the key drivers for the potential growth of the automotive aftermarket are:

  • A huge growth in vehicle population and higher customer awareness about vehicle upkeep, periodic maintenance and demand for add-on services (e.g. 24/7 breakdown assistance, extended warranty covers, etc.)
  • The non-cyclical nature of the aftermarket revenue stream
  • The prospects of higher profitability in the aftermarket sector vis-à-vis vehicle sales
  • The DIFM (do it for me) segment, which constitutes a majority of the aftermarket size due to the increasing complexity of repair requirements and the after-sales service mechanism brought about by the greater use of electronic components in advanced vehicles

Over the last few years, both organized players (automotive OEMs and non-vehicle manufacturers) and unorganized players (independent part dealers and small garages) have made great strides in the aftermarket sector. The backdrop of economic slowdown in FY 12, coupled with a dip in volume growth of automotive OEMs, has resulted in renewed focus towards growth in the aftermarket sector as a business imperative to maintain growth and profitability for automotive OEMs.

Regulations related to the Indian auto aftermarket are also being made stringent to encourage fair competition in the aftermarket value chain and strengthen the customer’s position.

Hence, there is still a large growth opportunity for automotive OEMs  Capturing sizable market share, managing risks, and creating a disproportionately large impact on customer service can achieve this. 

This paper lays down ten commandments to realize the aftermarket potential for automotive OEMs based on the following:

  • Primary and secondary research
  • Interactions with leading auto OEMs
  • Our understanding of market dynamics in India 

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