Aftersales can no longer be an afterthought

Even though aftersales can represent half the profits for an established car manufacturer or a franchised dealer, it often remains the ‘poor relation’ in terms of the attention that it gets by comparison with the more glamorous world of new car sales.  When visiting manufacturer aftersales teams, they are often based in the back corners of the office block, distant from the senior executive suite.  In dealer groups, top managers rarely come from the ranks of aftersales.  Meanwhile there are an increasingly professional and capable set of aftermarket players in the independent sector who little by little have been increasing their share of the total market, and have consistently demonstrated their ability to cope with new technologies and repair processes.

That picture has been a constant for a long time, but just as the sales side of the business is facing more fundamental change through the combination of product change and efforts by manufacturers to reduce their cost of distribution, aftersales is arguably entering a similar period where the future model in five to ten years may be significantly different to that which we have arguably taken for granted for the last ten or twenty years.  This has been reflected in a number of recent discussions with players in both the franchised and independent sectors, who are considering how they need to adapt to a changing world.

There are a number of drivers of this.  Perhaps unusually, one of them is not the drivers of the cars themselves, at least for younger and mid-life cars.  Our consumer and fleet research over the years has shown that what matters to car drivers in respect of aftersales are convenience, trust and value.  Where they are making the decision on where to take the car for service or repair, they tend to be creatures of habit, using the same repairer unless or until there is a change that affects any of those three priorities – the repairer closes or cannot offer a convenient time slot, something went wrong on the last visit that created some level of mistrust, or the price quoted is not seen as offering value – in part a function of the age and value of the car itself.

Electrification is clearly a major change, but the evidence so far is unclear in terms of what this will actually mean for service and repair – currently tyre replacement, crash repair and warranty work up, general repair and maintenance down, but will that pattern still hold as the product matures?  Will manufacturers hold to annual or biannual service requirements or will more follow Tesla into more of an ‘as needed’ pattern?  Will mobile repairers and over-the-air updates (OTA) reduce the need for physical bays even if overall demand is stable?  Within ICDP, we have a view on these trends, but cannot pretend that it is better than other forecasts or opinions.

Electrification and the broader technology shift to the software-defined vehicles puts even greater pressure on the need to recruit appropriately qualified technicians.  If there is anything rarer than hens’ teeth, then filling technician vacancies with EV/digitally capable technicians would fit that description.  Simply training more technicians is part of the solution, but those repairers who do invest in training end up in a retention battle with those who try to short-cut the process by poaching staff with higher salaries and sign-on bonuses.  Ultimately this drives costs up for everyone, so we need a solution that addresses the demand side – greater technician efficiency, more automated diagnosis, transfer of work from skilled master technicians to lower paid staff and so on.  This transfers some work from workshops to central teams at manufacturer and dealer level who improve the quality and accuracy of on-line diagnosis, predictive maintenance and workshop and technician scheduling.

Going back to the point of drivers not being as great an influence as would have been the case in the past, the bill-payer and decision-maker for service and repair is increasingly not the car driver but the lease company or service plan provider – in some cases linked to the manufacturer or dealer group so with interests that can (theoretically) be aligned, but in other cases third parties who are much more focused on lifetime cost of ownership, balanced with residual value impact.  They may not make the same decision as a retail customer in terms of where work is done, what work is authorised and what parts are fitted.  This is not only a factor influencing vehicles during their first ownership cycle, but also in a second or third cycle as manufacturers, dealers and lease companies struggle with managing lower or at least unstable BEV residual values and take more of a life cycle approach over 6 or 8 years

Finally – at least for this blog – is the knock-on effect of sales network restructuring and changes in the sales distribution model.  If the density of sales points is reduced, how will aftersales coverage be maintained in franchised networks?  Can mobile service, OTA repairs or more standalone authorised repairers fill the gap, or will this become an open goal for the independent repairers?  Or will we see growth in the co-opetition between the franchised and independent worlds that we suggested in our Aftermarket of Tomorrow report a couple years ago?

In any event, with overall profits tightly linked to aftermarket performance in the authorised sector and the opportunity for independents to take advantage of any mis-steps by the manufacturers or authorised repairers, there is everything to play for.  Having a strategy that considers in advance the potentially different scenarios, and being sufficiently agile to move quickly to plug gaps and seize opportunities will be critical.  Aftersales will be critical and should be front of mind, not an afterthought.