Original Equipment Manufacturers (OEMs) and International Aftermarket Manufacturers (IAMs) are increasingly concerned that the lucrative business of aftermarket parts and services could be on the verge of s collapse, due to the growing popularity of electric vehicles (EVs). This concern is fueled by the rapidly approaching mandatory end of sales of new internal combustion engine (ICE) cars in a number of major countries.
Automotive market history
These apprehensions are neither illogical nor without historical precedent; after all, spare parts for horse-drawn carriages and steam locomotives were once a thriving business. And look at where these industries are today.
The powertrains of battery electric vehicles, also known as BEVs, are significantly less complex than those of internal combustion engine (ICE) cars, which typically have 2,000 moving parts.
Moreover, they are subject to a lower component wear rate such as brakes and have a reduced or eliminated need for routine maintenance and oil changes.
As electric vehicle (EV) sales continue to grow and are expected to account for approximately 56% of new light vehicle sales in Europe by 2030, the automotive industry appears to be on track to become inherently “low maintenance” .
Impacts on the second-hand market
Consumers can be relieved that they no longer have to take their vehicle in for routine maintenance. But this seems to be bad news for the aftermarket, as it will result in two decreases:
- that of expenses in dealer workshops or independent garages,
- and aftermarket sales opportunities for original equipment manufacturers and independent aftermarket distributors.
Evolution and prospects
In light of this information, projections made by some industry observers that used-market revenues could fall by at least 30% seem all too plausible.
Some factors to consider:
EV sales may increase rapidly, but millions of internal combustion engine vehicles are already on the road and still have significant lifespans; therefore, the penetration of EVs into overall vehicle fleets will be slower than many anticipate.
By 2030, electric vehicles (EVs) of all types will represent approximately 10% (4.74 million units) of the total fleet in France (excluding mild hybrid vehicles, hybrid EVs and plug-in hybrid EVs , which are comparable to internal combustion engine vehicles in terms of spare parts requirements).
However, only 5% of vehicles over five years old will be EVs. In the meantime, ICE vehicles will still represent 94% of the global fleet of vehicles between 10 and 14 years old and 100% of the fleet of vehicles over 15 years old (approximately 14.7 million units).
While it is possible that the move to fully electric vehicles will cause component sales to drop by at least 30%, it is highly unlikely that this will happen for a good number of years. In the meantime, there will always be a huge fleet of old vehicles at MCI, which will require the maintenance and repair work typical of old automobiles.
As it will take some time for EVs to be introduced to the entire fleet, eventual aftermarket revenue declines slowly enough that component price inflation offsets a significant portion of the gap.
According to the results of our research, the negative effects that the penetration of EVs and the increase in the reliability of parts will have on the aftermarket will be largely offset by the increase in the size of the vehicle fleet, the increase in its age and , above all, the price increase, which will be the most important tailwind.