Automotive aftermarket set for fast growth, prompting digital transformation of auto accessories supply chain logistics

Deloitte

The development potential of automotive aftermarket is being unleashed as China's automotive market matures, according to China automotive aftermarket logistics service insights, a joint report issued by Deloitte and JD Logistics. Accordingly, auto accessories business is playing a greater role in the development strategies of automotive OEMs, and is set to become a key segment in future market competition. Meanwhile, the transformation of parts and accessories services will bring more new opportunities to the logistics industry.

According to the report, China's car ownership reached 217 million vehicles at the end of 2017, ranking first worldwide in sales for an eighth straight year. As forecasted, vehicles aged between four and nine years old will account for more than 50% of the vehicles in China in 2018, bringing demand for auto repairs and maintenance to a peak. The automotive aftermarket's scale is expected to exceed RMB1 trillion in 2018, representing an annual growth rate of more than 30%. The rise of China's automotive aftermarket will bring business opportunities to its underlying sectors, including accessories supply chain segment, which is a target market of JD Logistics.

Compared to the automotive OEM supply chain, accessories supply chain management is more complicated. The variety, "long tail effect" and complexity of goods are major difficulties auto parts and accessories logistics face. Given increasing demand for timeliness, and cost control considerations, digital capacity is crucial for logistics companies, requiring stock capacity for a large volume of SKUs and predictive capacity based on big data.

Globally, however, the number of auto manufacturers already able to leverage digital accessories management is limited. "Logistics and supply chain companies with digital capacity are becoming the hard core driving digital transformation in the industry," says Zhang Tianbing, leader of Deloitte China consumer products & retail sectors.                                                  

Meanwhile, as emerging technologies power changes in car buying and aftermarket service experience, auto manufacturers must proactively respond to trends and reconsider how to connect with internet consumers to cope with their rising expectations for product and service experience. The report suggests identifying service opportunities by profiling and analysing consumer attitudes, needs, behaviour, and customer characteristics before innovating logistics and supply chains is an effective route to transformation for the logistics industry.

As next generation consumers are more reliant on the internet, the way people commute is being disrupted. The development and popularization of car sharing and new energy vehicles will impact the automotive aftermarket. Car sharing could centralize aftermarket logistics service, making it more effective, and change the currently small, fragmented and disorganized end-user market of auto accessories logistics by gradually bringing in standards and regulations. For new energy vehicles, although this emerging sector has changed the competitive landscape of the current auto accessories logistics sector, transport, recycling and warehousing of automotive batteries are raising the bar for the logistics industry.

It is clear that healthy development of the automotive aftermarket will rely on continuous smart transformation of the auto accessories supply chain. In future, the auto accessories supply chain will have ample space for development. By building a complete supply chain, companies can manage inventory dynamically as well as improve upstream and downstream transport time in return for higher efficiency and cost advantages.

"As the new economy prospers, the potential of the auto accessories supply chain is tremendous. Existing pain points and potential challenges will become the main driver for companies to unleash their power," Zhang concludes.