Strategic Analysis of the Indian Automotive Aftermarket

High Market Growth Attracting New Entrants

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February 2015

Contents

Section

Slide Numbers

Executive Summary

Research Scope, Objectives, Background, and Methodology

12

Definitions and Segmentation

20

Country Overview

24

Automotive Aftermarket Overview

28

Vehicles in Operation Analysis

32

Parts Analysis

37

Service Analysis

45

Distribution Channel Analysis

54

OES Channel Analysis

71

Regulatory Influences

80

Technology Trends

84

Consumer Trends

87

Why Market Participants Should Consider Entering the Indian Aftermarket

90

Conclusions and Future Outlook

97

Appendix

101

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Key Findings
Industry growth will be driven by old vehicle parc and the countrys strong market potential.
Automotive Aftermarket: Key Findings, India, 20142021

The passenger vehicle aftermarket is estimated to grow at a CAGR of % for the following reasons:
o The growth of vehicles in operation (VIO) is estimated at % over the forecast horizon, with more
vehicles in the
to
year range requiring replacement.
o Vehicle maintenance needs are higher than average in India because of poor road infrastructure and
consumption of low-quality fuel.
o A strong economic growth forecast combined with an increase in disposable consumer income will
drive consumer spending habits on vehicle maintenance.

Global automakers operating in India will increase the amount of locally made parts in vehicles, which
they sell in India to cut costs in a competitive market dominated by cheap small cars. This opens up
new growth opportunities for original equipment manufacturers (OEM) part providers and would make
the market more competitive.
Counterfeit parts account for as much as % of passenger car aftermarket part sales. This is the
biggest challenge for the aftermarket and will continue to be unless regulations are imposed on selling
these parts.
Due to increased competition in new car retailing, OEMs are looking to extend the relationship with
customers by ensuring that they continue to return to their dealerships for their servicing needs.
Unauthorized multi-brand service chains are likely to take market share from original equipment service
(OES) and local garages.

Growth

Top
Trends

Regional
Trends

India is a highly fragmented market with regional variations and no distributor has complete presence in
India.
Gurgaon, Pune, and Bangalore forms the strategic locations for Indian OEMs to establish regional
warehouses, which distributes parts in the independent aftermarket.
Source: Frost & Sullivan

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Key Findings (continued)

Independent aftermarket are projected to gain strength from OESs in vehicle servicing, repair, and replacement.

Regulatory
Influences

Technology
Trends

Consumer
Trends

Competitive
Environment

The aftermarket in India is currently unregulated for both parts and services.
Because there is no mandatory standard for products sold in the aftermarket, the production and import
of counterfeit products cannot be checked. This is a large challenge.
Automotive Component Manufacturers Association (ACMA) plans to propose incorporation of
aftermarket standards in the Motor Vehicles Act to the government in 2015, which will make selling
counterfeit parts a cognisable and non-bailable offence.
Key technology trends in India are:
o Implementation of Dealer Management Systems by OEMs in an effort to improve customer service
o Preference towards alternate fuel vehicles will increase in future
o Advancement of manufacturing process and parts technologies as part of the Go Green Initiative
o Internet emerging as key vehicle diagnostics source of information for aftermarket technicians
As per Frost & Sullivans study finding on passenger vehicle service patterns in India, % of customers
do regular maintenance to increase the performance and life of vehicles. This would drive the
aftermarket.
Close to % of the customers shift from the OES channel to the independent aftermarket for vehicle
servicing within two years of a car purchase. This means that automakers are losing
out of
owners
every
years to independents. This is the biggest threat for automakers, who need introspection.
In parts manufacturing, the unorganized sector does not adhere to government stipulations poses a
significant threat to the organized sector (OEM and aftermarket part suppliers) because they are price
competitive.
In vehicle servicing, multi-brand service chains are likely to be the biggest competitors for the OES
channel because they have a strong quality brand image.
Source: Frost & Sullivan

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Aftermarket Parts Revenue Distribution by Product Category

Servicing parts such as filters and brake parts will be the fastest growing category during the forecast period.

Automotive Aftermarket: Aftermarket Parts Revenue Distribution by Product Category, India, 2014
Servicing Parts
%

Tires
%
Batteries
%

Oil & Lubricants

%
Collision Body Parts
%
Other Parts and
Accessories
%
Other automotive parts (e.g., engine and transmission parts, HVAC parts, fuel delivery system parts), as well as
accessories (e.g., body kits and seat covers), will dominate the aftermarket and is expected to continue to be the largest
revenue generator in future.
Consumable servicing parts, such as filters, brake parts, spark plugs, and lighting, will be the fastest growing category and
will capture a greater share of the pie in future.
Improved vehicle safety features are more likely to slow the growth of the collision repair parts market (CAGR %)
compared to the growth of the VIO in India (CAGR %).
Note: All figures are rounded. The base year is 2014. Source: Frost & Sullivan
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Automotive AftermarketMarket Share by Channel and Repair Service Providers

Independent Aftermarket (IAM) to gain from OES, and service chains to take away market share from OES and
independents.

Automotive Aftermarket: Percent of Auto

Parts Sales by Key Channel, India, 2014

Automotive Aftermarket: Repair Market Share for

Post-warranty Vehicles, India, 2014

IAM
%

ASCs
%

Independent
Garages
%
OES
Channel
%

Service
Chains
%

IAM vs OES

Service Chains to Gain

IAM expected to gain

from OES because of
standard quality
offering at a
competitive price and
providing parts at a
shorter turnaround time

Service chains to gain

from others because of
lower waiting time at
workshops, and
availability of
competitively priced
genuine parts

Key:
IAM (Independent Aftermarket):
Includes warehouse distributors,
wholesalers and auto parts retailers.
ASCAuthorized service center or
vehicle dealerships
OESOriginal equipment service or
vehicle dealerships.

Note: All figures are rounded. The base year is 2014. Source: Frost & Sullivan
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Automotive AftermarketKey Growth Drivers

India is gradually becoming the manufacturing hub of auto components for most global OEMs. This opens up
new growth opportunities for OEM part providers and makes the aftermarket more competitive.
Automotive Aftermarket: Key Growth Drivers, India, 20152021
Poor Condition of Roads Causes Increased Wear of Parts: The poor road conditions resulting from the use of substandard raw
materials, overloading, and weather conditions cause great damage to parts resulting in faster replacement. A faster replacement cycle
translates to higher demand for parts in the aftermarket.

Growth Drivers

India becoming the Manufacturing Hub for Global Automakers: Global automakers operating in India will increase
the amount of locally made parts in the cars they sell in India to cut costs in a competitive market dominated by cheap
small cars. For example, Volkswagen had planned to soon make engines and transmissions in India so that it can raise
the locally made parts content in its vehicles from the current % to %.
Regular Scheduled Vehicle Maintenance: Of owners, % do regular maintenance to improve the performance
and life of the vehicle. This would drive the aftermarket. However, % of owners report that they do not follow the
manufacturers recommended schedule for maintenance, as they find it to be too expensive and frequent.
Increasing Vehicle Age/Miles Driven: Indian consumers tend to use their vehicles longer and so
the number of vehicles older than
years will grow. As road infrastructure improves (currently only
50% paved roads), consumers will drive more. Both these factors will drive the aftermarket.
Steady Increase in VIO: Vehicle sales have been robust until 2012 and dipped in 2013,
but is forecast to show strong growth. This will result in increased VIO, which is forecast
to grow by % until 2021. This will drive demand for parts in the aftermarket.
Economic Rebound: India faced its worst economic slowdown in
years that has
depressed personal vehicle (PV) sales for
consecutive years ending Q1 2014.Post
2014 elections, India earned a stable government after many years, which has begun
economic revival.

Low

Degree of Impact

High
Source: Frost & Sullivan

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Automotive AftermarketGrowth Opportunities for Industry Participants

Most Indian consumers change from authorized service centers (ASCs) to local service centers (LSCs) after two
years of vehicle ownership.

Capitalize on
Opportunities
Created by OES
IAM
Participants

OES
Participants

% of customers shift from ASCs to LSCs within

years of purchase primarily
because of greater waiting time at ASCs as they take in vehicles beyond
capacity. IAM suppliers need to assist their service partners in seizing this
opportunity by providing high quality parts at a lower price.

More Sales to
Multi-brand Service
Chains

IAM organized part suppliers should focus on supplying parts in high volumes
to multi-brand service chain outlets such as myTVS, Carnation, Castrol Pitstop
etc. because these service chains are expected to gain market share in future
for providing value for money quality to car owners.

Growth in CNG
Vehicles

Compressed natural gas (CNG) vehicles have better acceptance than any
other gasoline-diesel alternative in India. Currently, only % of owners have
CNG vehicles, but is expected to gradually grow. IAM participants should begin
to focus on servicing and repairing such vehicles.

Affiliations with
Multi-brand Service
Chains

OES is preferred for major and accidental repairs. Affiliations of OEM part
suppliers with multi-brand service chains such as Bosch Car Service and
Mahindra First Choice will be beneficial because of less costly labor rates and
usage of low-cost genuine branded parts that attract vehicle owners.

Used Car
Business Potential

Used car businesses and exchange programs help increase new car sales by
acquiring new customers, and retaining existing customers.
Vehicle servicing accounts for less than % of dealer profits, so the used car
business has strong potential to overtake vehicle servicing revenue in the
future.

Investment in
Online Marketing

More than % of all prospective car owners/buyers go online before they walk
into a dealership. Dealers should invest in online marketing and social media
for better CRM results, brand building, and increasing sales without spending a
lot of money.
Source: Frost & Sullivan

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