Capgemini Consulting and University of St. Gallen Study Reveals Increasing Competition in the €630 billion Global Automotive Aftermarket Industry

| Press release
Report outlines the competitive environment, challenges and opportunities for growth in aftermarket operations in the auto industry, in both established and emerging markets
Paris, February 4, 2010 – Capgemini Consulting, the global strategy and transformation consulting
brand of the Capgemini Group, together with the University of St. Gallen, today released The Aftermarket
in the Automotive Industry, a new in-depth report that focuses on how to optimize aftermarket
performance in established and emerging markets. The study includes a frameset designed to help
companies maneuver through global aftermarket competition and improve their performance to become
global aftermarket leaders. The report is based on over 150 interviews with aftermarket executives from
the world’s leading automotive manufacturers and suppliers.
Globally, aftermarket volume is growing rapidly. With sales of new vehicles remaining flat, particularly in
Western Europe, many vehicle manufacturers are turning their attention to the aftermarket as an increasingly
important revenue and profit stream. However, success in the aftermarket is far from easy due to the high
complexity, large number of maintenance and parts activities and critical supply chains involved. In addition,
wider market and competitive factors also have a significant impact on aftermarket operations.
Focusing on the markets of Western and Eastern Europe, Russia, China and India, the report lays out in detail
what investment programs companies took to become high performers in the respective markets and what lower
performers must do to step up. The study finds that, regardless of performance, companies still need to increase
their investments into the aftermarket in order to satisfy customers’ requirements. Most companies still
concentrate on a cost-center-driven organizational approach to run their aftermarket activities and optimize their
operations with a functional, isolated focus. In contrast, global aftermarket champions run a control-tower type
of supply chain operation where the company has full end-to-end responsibility for the supply chain from
suppliers up to customers. They operate their aftermarket business as an independent profit-and-loss
organization with optimized multi-echelon networks of warehouses and use worldwide benchmarks to transfer
best experiences among warehouses, dealers, technicians and maintenance centers.
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Not surprisingly, the report also indicates that the Western European aftermarket is already quite mature, with
aftermarket volumes beginning to plateau, but significant opportunities for growth do exist in the emerging
markets. Also, in Western Europe, competitive intensity remains at a high level whereas most of the emerging
markets (Eastern Europe, Russia and India) enjoy relatively moderate competitive intensity. China is the only
exception here. However, competitive intensity in the emerging markets is expected to increase to a similar level
as in Western Europe.
In Western Europe, competitors that are able to strengthen their marketing and sales processes and utilize the
new European Union Block Exemption Regulation in 2010 (BER2010) can expect additional growth rates of
five to 10 percent, compared with the market average. BER2010 aims to liberalize the European automotive
aftermarket, increasing competition by attracting more suppliers and making it easier for independent dealers to
access relevant service information. Original Equipment Manufacturers (OEMs) there will face significant price
competition from copy manufacturers and on average OEMs’ parts revenue is expected to decline by up to 5
percent in the next three years. Specifically, companies that improve their service innovation processes as well
as their retail and wholesale relationships will have a good chance to either maintain their leading position or to
at least step up into the high performers’ peer group.
The report also reveals that each emerging market has specific characteristics that require a localized approach
to the aftermarket. For example, Russia’s geographic expansion requires improvements in distribution
processes; India’s aftermarket is increasingly being led by top-performing Asian companies; and China’s more
competitive aftermarket industry brings the most challenges.
“Given the fact that the aftermarket business creates such attractive margins, aftermarket activities are moving
ever higher up the management agenda in both established and emerging markets. But to benefit from the
attractive growth rates in the emerging markets requires immediate action, taking into account local market
factors – a standardized global approach will likely fail,” said the study’s leader Frank Tennstedt, Vice
President, Capgemini Consulting.
About the study
Capgemini Consulting worked with the University of St. Gallen to conduct an aftermarket analysis based on an
in-depth survey of over 150 aftermarket managers of the leading global automotive companies, as well as their
own automotive experts and additional market research.
About Capgemini
Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services, enables
its clients to transform and perform through technologies. Capgemini provides its clients with insights and
capabilities that boost their freedom to achieve superior results through a unique way of working, the
Collaborative Business ExperienceTM. The Group relies on its global delivery model called Rightshore®, which
aims to get the right balance of the best talent from multiple locations, working as one team to create and deliver
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the optimum solution for clients. Present in more than 30 countries, Capgemini reported 2008 global revenues
of EUR 8.7 billion and employs 90,000 people worldwide.
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Capgemini Consulting is the strategy and transformation consulting division of the Capgemini Group, with a
team of over 4,000 consultants worldwide. Leveraging its deep sector and business expertise, Capgemini
Consulting advises and supports organizations in transforming their business, from strategy through to
execution. Working side by side with its clients, Capgemini Consulting crafts innovative strategies and
transformation roadmaps to deliver sustainable performance improvement. More information is available at
About Capgemini’s Global Automotive Practice
Capgemini’s Automotive practice serves 14 of the world’s 15 largest vehicle manufacturers and 12 of the 15
largest automotive suppliers. The sector generates value for companies through global delivery capabilities and
automotive-specific service offerings such as Integrated Lead Management, B2C Web Strategy, Service and
Parts Management, Supplier Transformation, Optimization of Dealer-Focused Operations and Global
Emerging-Market Sourcing.
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