Globally the automotive aftermarket relies on the millions of cars that run, most of them daily. CLEPA, the European Association of Automotive Suppliers, is the voice of European automotive suppliers, representing over 3,000 companies which employ about five million people, invest over Euro 20 billion yearly on Research & Innovation and provide solutions for safe, smart and sustainable mobility. CLEPA provides market studies, acts as a sounding board for the industry and supports the members with an impartial impact analysis of the major trends, leaving decision-making and strategising to them. Frank Schlehuber, Senior Consultant Market Affairs, CLEPA, spoke to T Murrali of AutoParts Asia on the current trends in the aftermarket and the emerging challenges it is likely to face. Edited excerpts:
Q: What is your outlook for the aftermarket in the European Union for the next decade?
Schlehuber: The outlook for the automotive aftermarket in Europe in general is positive. We expect the market to grow by two to three percent but we will see a lot of differences between the western and eastern parts of Europe. We have a growth of five to six percent in the East and a lower growth rate in the western or middle side; but in total it will be positive in terms of market volume.
When it comes to who gets access to the market, I see it a bit differently. With the latest legislation on CO2, decided a couple of months ago in Brussels, what we see is a clear trend to battery electric vehicles. If it kicks in a bit stronger, it will definitely have a good influence on the aftermarket. If we assume six percent of battery driven vehicles by 2025, we would see the wear-and-tear market grow slightly by 1.2 percent overall in Europe. But if battery electric vehicles are at a level of 10 percent, we would see a decline in the wear parts market. That is the critical factor – how many electric vehicles will come into the market. However, it does make me optimistic because we would see hybrids definitely increasing; diesel share is going down, replaced by gasoline in combination with hybrids. What we will see in the next three years is adding complexity as hybrid vehicles have more complex systems, having IC engines plus batteries.
Q: How will this trend impact the aftermarket?
Schlehuber: I see a challenge for the independent aftermarket in the coming years because not every repair shop is prepared to handle hybrids.
We have to make sure that the aftermarket appreciates hybrids and does not send customers away. That is the challenge now; every force in the market is needed to help these workshops overcome resistance to hybrids and provide adequate service to consumers.
Q: During this transformation do you see a rise in the prospects for the aftermarket when the hybrid comes in, as there are two technologies – IC engine and electric? Do you see growth in the aftermarket because of these twin technologies?
Schlehuber: There might be more opportunities and potential then, but overall I do see Europe growing consistently.
Q: What is the value of the aftermarket in the EU for suppliers?
Schlehuber: It is about €123 billion for parts and services.
Q: What is your role on advocacy? How do you support your members and voice their concerns to the EU and get them the things they want?
Schlehuber: What we do is provide market studies. We decide together with members on what particular topic do we need to get more market intelligence. Last year we did a study on the driving elements for change; our members got insights on potential market scenarios. This is where CLEPA can really add value. We open doors to top management, support in developing questionnaires and act as a sounding board for the industry. The results are evaluated and we orchestrate the finding of trends. This year we will support members with a study on e-commerce platforms because we believe such platforms will be the deciding factors in the way the market develops in the future.
Q: You also support them with market forecasts and the opportunities for them in export markets?
Schlehuber: We support them on the major trends with an impact analysis on our industry but we leave it to the members to take their own decisions and shape their own strategies.
Q: What are the threats and opportunities you see in disruptive technologies driven by the megatrends of connected, autonomous and electric vehicles – from the aftermarket point of view?
Schlehuber: The aftermarket exists on the fact that there are millions of cars in the market that mostly operate on a daily basis. The aftermarket was always there; economic ups and downs did not affect it much, only marginally. The aftermarket in general is not used to any disruptive ideas.
What is really challenging is that three trends with disruptive potential are coming in at one time. On one side there is connectivity that grants market access in future; then there is technology of advanced driver assisantance functions which require more and more investment in tools to get issues addressed, even a simple crash repair centre has to build up competencies to replace and re-install sensors and components; and then there is diagnostics where the OEMs intend to make OBD ports safer for the future with access being authorised and controlled. All this will have an impact on the aftermarket, which has always had two big channels – OES and the independent aftermarket. What I see is that connectivity and technology might move this market in favour of the OEMs.
Q: These are threats for the aftermarket. Do you see opportunities also?
Schlehuber: I do see opportunities especially when it comes to creative repair solutions or fleet solutions. We will see more vehicles owned by fleets in the future, operated by professional fleet managers. It would touch 13 percent by 2025 from six percent now. Here, a single person takes the decision on where the vehicles are serviced, what parts are used, what price is acceptable, etc. This means the market will be increasingly regulated by professionals with more chances for independent players who could make very attractive offers. However, it is important that connectivity and access to in-vehicle data is available to independent players in a similar way as it is with OEMs.
Q: What is CLEPA’s stand on data sharing? Do you want data to be transferred to members or do you want to encourage end-users to decide on where it is to be shared?
Schlehuber: Regarding user consent CLEPA is very clear. Without user consent there are no personal data available; the user decides to whom to give which data and for what purpose. This is required by the new GDPR. The other point is the technical possibility to connect to a vehicle. For this, there are a couple of options available. From competition perspective the best solution would be that everyone gets direct access to the vehicle, with no one in-between.
We all know that vehicles today are not designed in a way that makes this possible; currently the vehicle sends data and communicates only with the back-end of the OEM. There is a proposal on the table by OEMs that they are willing to share this data with third party providers. CLEPA at the moment is in a phase to elaborate if that’s a feasible solution or not. We did a proof of concept in 2017 and our conclusion at the end was that it was a first step but not sufficient for the independent aftermarket. We have given to the OEMs and to politics, our list of requirements on what needs to be improved to make such a system work. Currently we are evaluating within three use cases whether we can find solutions for all our topics of concern.
Q: In the present scenario they have agreed to give it to a third party. Who will be that third party?
Schlehuber: Our members, for example, or small and medium size enterprises (SME); or whoever wants to act as a service provider. CLEPA supported its members to create their own data platform; it’s called Caruso Data place which is an initiative of Tier-1s and CLEPA members. We said that if OEMs propose a solution to share data by a neutral server, let’s create one and gain experience. More data places are available with some large players trying to get into the automotive market. The critical part is that all data will be routed through OEMs but no one in the independent aftermarket likes the idea that the OEM can monitor each and every data stream. The big issue here is that there is a delay and there is no real-time information possible.
There is a study available by the JRC (Joint Research Centre) of the EU, published in October 2018, which confirmed very clearly that we need to make sure the data generated from a vehicle should be available, independent of whether the OEM is making use of it or not. We have to make sure we do not restrict the innovation process; that we make the best use of the new technology here and do not limit the use of data.
Q: The percentage of vehicles in the fleets has been increasing over a period of time with shared mobility, etc. Do you see a drop in vehicle sales, especially passenger cars, in the next four to five years? Conversely, would it increase opportunities in the aftermarket?
Schlehuber: CLEPA does not issue any sales figures so I can’t give you a specific answer.
Q: What is CLEPA’s role in giving independence to the independent aftermarket?
Schlehuber: We have a couple of favourable legislations in Europe for emission regulation – the Euro-5 (6) and the Motor Vehicle Bloc Excemption regulation. In all these regulations you do find some positives for the aftermarket. The content was now summarised and partly rephrased in the new type approval regulation valid from September 2020. What we have in this new regulations is that OEMs have to provide electronically processable catalogue data. It means that a lot of work we have to do in the independent aftermarket today to create, update and maintain parts catalogues would be made much easier as we would get information electronically processable. This is a big step forward, fully supported by CLEPA, and aligned with other associations such as FIGIEFA, EGEA and ADPA.
We will see MVBER (Motor Vehicle Block Exemption Regulation) which guarantees suppliers to be able to sell their parts also to the independent aftermarket. It is different from what we have in Japan and North America. In N America, in the contract, an OEM can exclude the supplier from selling parts to the independent aftermarket. In Europe this is not possible; it is illegal. We would like to get this regulation extended as it is valid only until 2023. After that it’s a question of what would follow next and how long Europe takes to get a new legislation done. New elections are coming up in the EU in 2019; we expect the new Commission, elected for the next five years, to start work from autumn this year.
Q: Does CLEPA support the suppliers to sell their parts also to the aftermarket?
Schlehuber: OEMs will have to accept it. It’s a clear intention of all our members that they should be free to sell their parts not only to OEMs but also to the independent aftermarket.
Q: Standards for the aftermarket have not evolved in India yet. Could you please share your experience from the EU?
Schlehuber: We have achieved some further clarification now with the new type of approval. We will work on further strengthening the independent aftermarket within the revision of the MVBER. At the moment where we need certain standardisation is on how to get access to electronic processes on OEM data bases. To download catalogue data we are developing requests and expectation to OEMs on how to make this happen. As the next step intense talks with the OEMs about finding solutions; this is where CLEPA can definitely work with the OEM representation to come up with a specific proposals.
Q: Remanufacturing is done in a big way in the US and Europe. Is there a role for CLEPA to advocate on the circular economy?
Schlehuber: That’s a big thing. At the moment remanufacturing makes about 10 percent of the automotive aftermarket. In Europe our reman volume is about Euro 10 billion, which represents approx. 10 percent of the total parts market. The EU supports it with a circular economy concept; the automotive industry is a main contributor to recycling and the circular economy. CLEPA has a remanufacturing working group where we evaluate what we need globally to make reman as easy as possible.
There are two aspects to it. One is to make sure that defective parts are allowed to be cross-bordered; it’s reverse logistics that you have to do financially and physically. At our Aftermaket Conference this year we introduced a proposal for a standardised platform to make reverse logistics as easy as possible for all market participants – suppliers, wholesalers and workshops. It’s an idea where CLEPA proposes a kind of platform where these things can be introduced and discussed for market participants to decide whether they want to take it up or not.
Q: Can you tell us your short-term and long-term plans?
Schlehuber: Outside the aftermarket we are working on safety standards. We are part of the Working Group 29; we were deeply involved in the CO2 discussions.