How the automotive industry and aftermarket is adapting to survive COVID crisis

Major international markets have adopted a variety of measures in the face of lockdown

Updated: Automechanika Dubai, the region’s largest automotive services event, is now confirmed to take place on 7-9 June 2021 at its traditional home of Dubai World Trade Centre, Dubai, UAE.

Digital showrooms, online customer service interaction and aggressive promotional activity are just some of the measures that have been implementing in the auto industry and aftermarket worldwide in reaction to the current COVID-19 pandemic, with greater emphasis placed on hygiene, safety and cost across major markets around the world.

With the pandemic expected to reduce new vehicle sales by around 20 million globally this year, and the aftermarket set for an estimated 16% contraction in the Financial Year 2020, the industry is taking a series of measures to mitigate the decreased demand. This has seen Original Equipment Manufacturers (OEMs), component manufacturers, distributors and retailers diversifying their business models in the top five auto markets in the world – the US, China, Germany, India and Japan.

Speaking at a webinar organised by Messe Frankfurt Middle East for Automechanika Dubai, the largest international automotive aftermarket trade show in the Middle East, Vishal Sanghavi, senior manager Business Research and Advisory at global research and analytics firm Aranca, said: “We have seen the impact of the COVID-19 virus across the ecosystem in the last three to four months, and it is encouraging to see a number of dynamic measures being taken.

“It is clear that players across the industry are not just sitting and watching the situation unfold. They are trying different measures to entice their customers and attempting to diversify and identify practical solutions that work with consumers.”

Despite a number of factors impacting the auto industry and the aftermarket, including decreased footfall in showrooms, a reduction of miles travelled and lower disposable income, there is already evidence that the industry has taken steps to adapt and recover across the top five auto markets in the world.

OEMs have seen a huge shift towards digital operations, with many exploring virtual showroom experiences and diversifying the platforms they sell on. Similarly, component manufacturers have capitalised on boosted online activity resulting in a 50% month-on-month increase in sales for the Japanese market and a 40% boost in April sales for e-commerce specialist US Auto Parts.

While a number brands including Audi, BMW and GM already offered digital experiences to encourage potential sales pre-COVID-19, it is clear that the pandemic has catalysed brands into diversifying their e-commerce platforms and bolstering their digital presence.

Change in focus for many industry players

Component manufactures have had to change their focus to adapt to the current situation with many taking advantage of on increased demand for hygienic products by cornering the market on products such as air filters and paints. Other avenues being explored include private labelling, 3D printing and online product training.

Efforts made by distributors and retailers include aggressive promotions, the offer of free warranty extensions and discounts on new and used cars. The digital space is also important in this sector with businesses exploring live streaming, and e-retailing coming into play with a demand for spare parts growing by 40% in the past three to four months.

The customer service space is also increasingly looking at the digital realm as it evolves operations. While some workshops were deemed essential services, they still had to hone customer serving techniques by conducting live after-sales interactions through different platforms such as WeChat and Weibo. Workshops are also offering free pick-up and drop-off of vehicles, and then pushing these tactics as promotion techniques to regain customers.

Sanghavi said: “Several factors will determine the recovery curve. On the macro level, although we have significant job losses in all markets, we have also seen the introduction of government stimulus packages in the range of 10-20% of GDP for most economies.

“While a significant reduction in new vehicle sales has already been seen due to prolonged stay-at-home measures, a shift in preference towards used cars is anticipated and this will drive the need for higher spend on repair and maintenance overall.

“Weaker consumer spending and reduced miles will have an impact, we will see an increase in preference for personal vehicles over public options, a behaviour which will drive maintenance and repair requirements and lead to increased ownership in the markets of India and China.”

More information is available at: www.automechanikadubai.com.

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