Consumer Discretionary

Changing Landscape Of Aftermarket In India

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<p style="text-align: justify;">Electric-Mobility has become the cynosure of automobile aficionados in India of late. At the same time, it has caught public attention as Electric Vehicles (EV) are gaining traction in the country. As India embarks on an ambitious journey of being a hundred percent EV nation by 2030, the ministry of Road Transport and Highways (MoRTH) launched the Go Electric campaign.</p><p style="text-align: justify;">EV offers advantage in terms of lower fuel costs, environmental friendliness and energy independence for a country which pays huge crude oil import bill to meet its energy needs. But there is one segment in the auto sector which is going to face challenging times to keep pace with this change. The automotive aftermarket in India is going to witness major disruption in the coming years. Let&rsquo;s have an understanding on the consequences of EV disruption on aftersales business.</p><p style="text-align: justify;">The automotive aftermarket is going to be affected by the increase of electric mobility and the following factors are primarily responsible for this.</p><ol style="text-align: justify;"><li>Lesser number of mechanical parts in EV</li><li>Longer service intervals due to less wear and tear</li></ol><p style="text-align: justify;">The electric vehicle has very few moving parts in comparison to the internal combustion engine (ICE) automobile. Petrol and diesel engines, provide power through explosive combustion process and thus undergo much higher wear and tear. But in EV there are fewer parts, less wear and hence if some parts need to be changed, they will be changed at far less frequency than the ICE automobile.</p><p style="text-align: justify;">The major stakeholders are the Dealer Partners who will have challenges to maintain the viability of workshop and spare-parts department. Typically, in the first 5 years of the life cycle of a vehicle the dealerships try to lock the customers in their fold with enablers like Free Services, Standard Warranty and also by selling extended warranty. Some customers are also attached to the workshop by offering them to avail certain benefits by getting into Annual Maintenance Contract (AMC).</p><p style="text-align: justify;">Invariably the major source of revenue from a vehicle in the first couple of years, when the vehicle is new, comes from consumables like Engine Oil, Gear Box Oil, Lubricants, Oil Filter, Fuel Filter, Coolant etc. As the vehicle gets older, there is an increased chance of major overhauling works, which provides an opportunity to generate revenue from spare parts and labor charge. Unfortunately, the EV will curtail scope of cash flow from both the sources. Bodyshop repair is another area in aftermarket which generates significant revenue. But the improved road infrastructure, stringent regulation to curb over speeding and overloading as well as advent of advanced driver-assistance systems (ADAS) promises to reduce number of mishaps.</p><p style="text-align: justify;">Unless the workshop personnel gear up to upgrade their skillset, they may face a serious challenge in coping with the changing technological demand for the workshop to remain viable. From service and repair the focus will shift to software competency as the EV will be equipped with Battery Management System in addition to other control units. Another major challenge will be to integrate IoT solutions like track and trace devices with the vehicle. The norm of service schedule will change from periodic maintenance to predictive maintenance which may be completed remotely reducing the requirement for a physical trip to the workshop. Expertise in diagnosis of these complex software-based functions will contribute to the revenue generation of automotive aftermarket in future.</p><p style="text-align: justify;">The workshop personnel will have to now be experts in complex repairs involving electrical, electronics and software components. Otherwise, it will be extremely difficult to remain relevant in a future after market environment dominated by electric vehicles.&nbsp;&nbsp;</p>
KR Expert - Rajesh Sarangi