Automotive after sales – an article by Richard Shamoon

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With profit margins in the new car sales business undergoing continual erosion, high revenues no longer equate automatically with high profits. After knowing and investing in automotive Richard Shamoon knew about its actual marketing strategies.  So, as a result, the new car sales business makes only a small contribution to profits. In fact, the after sales business, long time neglected by automotive OEMs in their business strategies, achieves a significantly higher ROS and is often the most important profit pillar. In Germany, for example, the after sales business generates more than half of profits while accounting for only 23% of revenues (including passenger cars, SUVs and light commercial vehicles). Based on a global growing car fleet and an increasing average fleet age in mature markets, market forecasts show a strongly growing after sales market volume from worldwide 412 bn EUR in 2007 to 718 bn EUR in 2015.

This growth is mainly driven by the rapidly growing service demand in emerging markets where new car sales boost the need for after sales services. The highly profitable after sales business attracts new market players, which enter the market with innovative business models. Today, the after sales revenue is divided between four main after sales service provider groups: OEMs, independent garages, service chains and the do-it-yourself-segment. Many mature automotive after sales markets, with the exemption of North America, are similar to Germany where the OEMs are still predominant with more than 50% market share. In the emerging markets (e.g. Russia), grey market after sales services are strongly established and represent the most important pillar of low price services. On the other hand, there is a noticeable demand for high quality services.

As high quality service substitutes still are widely missing in the emerging markets, the OEMs could currently achieve a higher market share in these markets. Given a growing diversification of the after sales offering, the OEMs face a demanding challenge – maintaining their profitable after sales business in an increasingly competitive environment.

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