CII Report prepared by McKinsey & Company titled: “Opportunities in the Indian Automotive Aftermarket”, released at the CII Auto Serve 2010. The report observes that the Indian automotive aftermarket, which is growing at 11 per cent per annum, is at an inflection point with: the increase in vehicle parts, more complex parts, price sensitive customers, and expansion of global suppliers in terms of sourcing and distribution presence in India. The CII Report said that the market demand for parts and services set to double over the next 5 years.
According to the Report, roughly, 30 per cent of the market comprises spurious parts. Market interviews and analysis indicate that owners of older vehicles often migrate to independent service networks for cheaper and faster service. With OEMs more focussed on vehicles in their warranty period, offering higher levels of service for older cars will be necessary for independent players to attract customers. OEMs and distributors should develop branded generics to capture the cost advantage in this rapidly growing independent market: The Indian market for branded generics is already worth Rs 3,000 crore to Rs 4,000 crore and is set to grow significantly in the next 5 years. Analysis shows that generic brands tend to have much higher margins and are extremely popular among consumers looking for fully functional, yet cheaper alternatives to OE spares, especially in the non-critical product ranges.
OES’s, independent players and distributors should consider partnerships and options for forward integration: Since many key skills and capabilities required for success overlap along the value chain, forward integration offers players the potential to create additional value. While global trends and the complex nature of the Indian market indicate independent distributors are going to remain valuable components of the value chain,