Australia with a population of just over 25 million has 20 million vehicles on road, and annual sales of 1.2 million new ones. This makes the country one of the largest automotive aftermarkets in the world. The Australian Automotive Aftermarket Association (AAAA), the national apex body, has 2500 member companies of manufacturers, distributors, wholesalers, importers and retailers of automotive parts and accessories, tools and equipment, as well as providers of vehicle service, repair and modification services. They range from national and multi-national corporations to independent, small and medium businesses. Spread all over the country they employ 40,000 people. The AAAA member companies export locally manufactured products worth AUD 1 billion a year.
AAAA conducts the Australian Auto Aftermarket Expo, the Collision Repair Expo, Autocare Convention, publishes the Australian Automotive Aftermarket magazine and represents the industry before government and regulators. The association has established automotive Innovation Labs in Victoria and South Australia to help innovate, design, test and manufacture for the local and export markets.
“The Australian aftermarket is driven by the new vehicle technologies. There is going to be quite a big consolidation in the market. Probably, the smaller workshops might not be able to survive as they lack the latest technology and equipment to work on new cars,” Stuart Charity, Executive Director, AAAA, told Pramod Thomas of AutoParts Asia, on the sidelines of Automechanika Frankfurt 2018. He was heading the Australian delegation to the exhibition. The excerpts:
Q: What role does the Australian Automotive Aftermarket Association play in shaping the industry in the country?
A: The Australian Automotive Aftermarket Association is the national association which represents the entire supply chain of the industry in the country. We represent manufacturers, importers, distributors, retailers and also many of the repair and service chains. We have around 2500 companies and we do a range of things to promote and support the industry. We run a trade exhibition in Australia called the Australian Auto Aftermarket Expo, which will be held from April 4 to 6, 2019. We also publish our own magazine- Australian Automotive Aftermarket magazine- which is the market leading trade magazine in Australia. It reaches 15,000 workshops in Australia and we have a digital edition as well. We also support the Australian manufacturers to expand to new markets.
Besides, we do a lot of market research and intelligence on the industry, on market trends and also about technology changes in the industry structure etc. So our member companies can very well adapt. Like these, we provide a whole range of different services. We also represent to the government on a variety of issues. These are the roles played by the association. We have a growing membership which is represented by all the major brands in the Australian market.
Q: How different is Australia from other automotive markets in the world?
A: In terms of population, Australia is a small region. We have only 25 million people. But, we have nearly 20 million vehicles on the roads. We very much rely on cars to get around. Mainly because of the public transport system, though okay in big cities, is not that good in the rest of the country. So, a lot of people drive to get around. In terms of the industry itself, unfortunately, we do not make cars anymore. Our car manufacturing was completely shut down last year. We used to have Toyota, General Motors, and Ford. Now, everyone has closed shop. The main reason for the shut-down was that they were building cars for the right-hand drive market in the country. Besides, the market shifted from the cars they were making to light commercial pick-up type of vehicles. The cars in the Australian market mainly come from Japan, Korea, Thailand, Europe and the US. About 30 percent of the cars are from Thailand. Small cars like Toyota Corolla, and other mid-size cars, constitute around 25 percent of the market. This is the second largest segment in the Australian automobile scenario. Toyota Hilux, Ford Ranger, Mitsubishi Trackson and the like are popular commercial vehicle pick-ups. They represent 30 percent of the market now. The number of cars on road is growing by four percent a year.
Q: The vehicle density is huge in Australia. How is the aftermarket performing?
A: In the aftermarket, there are two major sectors. One is the replacement parts. They are normally fed by the trade. In Australia, the authorised dealers only feed the genuine car parts, about 35 percent of the service market. The rest 65 percent is being serviced by the large national chains. There are 23,000 independent workshops in Australia. But we have only 4000 dealerships. Clearly, the independent workshops have a much larger footprint. The majority of the parts are supplied to customers through independent channels. Many of our members supply through independent channels. Major global players like Bosch, Hella, Valeo, Scheffler are selling through the independent channels. They sell through larger retailers and re-sellers as well.
The other interesting point about Australia is that even though we have 20 million vehicles on the road, we sell 1.2 million new vehicles (70 different brands) each year. That makes us a
very diverse market. The 23,000 independent workshops in Australia generate a turnover of AUD 16 billion. This includes not just parts but repair as well. There is also a huge retail channel which comprises big national parts giants like Repco, Supercheap Auto etc.
The selling of accessories and car care products is an AUD5 billion industry. Another segment which is unique in Australia is the four-wheel drive parts and accessories industry. Since Australia is a big country people travel far during weekends. They use a caravan and engage in boating, camping etc. Take this example, people in Australia will buy a brand new Toyota Land Cruiser and will spend another AUD 20,000 on accessories such as lighting, suspension, new tyres, roof-racks etc. This is also a huge market with sales worth AUD 2 billion.
The four-wheel drive segment is growing fast.
Q: What is the impact of online sales in the automotive parts retail segment?
A: At the moment it is around five percent of the total market, which is very small. Now, eBay is the main player in Australia and Amazon entered last year and has recently launched an automotive parts segment. They are just starting up. We have a local website called Gumtree. In the future, they
will pick up, probably more in retail. Online will surely grow but looking at the current trend it will have slow growth.
Q: How does the electric vehicle segment fare in the Australian market?
A: The electric vehicle segment is very small in Australia. The total number of fully electric vehicles will be only 700 now in the entire country. It is not picking up well at the moment. The problem with Australia is the poor infrastructure and lack of enough charging stations for electric vehicles to take off. Our cities are far apart. So, electric vehicles need good range in one charge. The factors which negatively affect the expansion of electric vehicles will be the cost of the car (they are probably twice the price of the internal combustion engine vehicles), lack of infrastructure for charging and issues with range. Currently, Tesla is selling quite a few electric cars in Australia. Nissan and General Motors have also tried electric cars but did not work out well. Currently, electric hybrids are selling in large numbers in Australia. Toyota Prius, the full hybrid electric vehicle, is very popular.
It is a fact that electric vehicles are growing in big numbers all over the world. But it is unlikely that Australia will follow the world in this mainly because of the unique circumstances in the country. Today, diesel cars constitute 35 percent of the total sales in Australia.
Q: How do you foresee the future of the Australian automotive aftermarket?
A: The change in the market will be driven by vehicle technology. The workshops will invest in equipment and training to work on modern vehicles. There is going to be quite a big consolidation taking place in the market. The smaller workshops might not be able to survive as they will be out of work because of the lack of equipment to work on new cars.
In the accessories area, one of the things we want to do in the industry is to improve in the area of design and test products to make sure that they integrate with the vehicle very well.