The automotive aftermarket, also known as the "car market," is the sector that deals with the post-sale processes of vehicles. This market is rapidly becoming a significant profit generator, second only to the vehicle sales market. As of 2012, the potential for business opportunities in this sector is limitless. However, the lack of relevant laws and regulations, coupled with the monopoly of automobile manufacturers and parts suppliers, has resulted in a chaotic business environment. This article delves into the intricacies of the automotive aftermarket in China, where car ownership has exceeded 100 million.
The automotive aftermarket refers to the series of trading activities that arise from the needs and services following the sale of a car. These activities generally include car repairs, maintenance, services, and the provision of necessary spare parts, supplies, and materials. In developed markets, the profits from the sale of motor vehicles account for about 20% of the entire automotive industry's profits. Parts suppliers also account for about 20%, while a whopping 60% of the profits are generated in the service sector. This means that the profit from after-sales service is typically three times the profits from car sales.
In 2011, China's auto market transitioned from a high growth rate to a stage of stable development and brand competition. Major car firms have been forced to repeatedly cut prices, compressing vehicle profit. However, they have realized that the automotive aftermarket holds more potential for profit than vehicle sales. As such, the aftermarket has gradually become a tool for car firms to consolidate their business, rapidly grow their profits, and enhance their competitive advantage.
Consumers are becoming increasingly sophisticated and critical of after-sales service. They view cars not just as tools for travel, but also value the convenience that car derivative services can bring. The vast and profitable service sector, coupled with consumers' personalized preferences, has expanded the demand for automotive aftermarket services among car manufacturers, dealers, and consumers. It can be said that China's automotive economy is transitioning from a sales-oriented to a service-oriented model.
As of August last year, car ownership in China had exceeded 100 million. This massive car ownership is sufficient to support a large-scale maintenance and repair market. According to statistics, the turnover of China's automobile market increased from 88 billion yuan in 2005 to 240 billion yuan in 2009. Industry experts predict that by 2012, China's automobile market size will increase to 490 billion yuan, and may exceed 700 billion yuan by 2016.
The Commerce Department released guidance on the promotion of car circulation for the "12th Five-Year" development at the end of last year. Improving the automotive marketing and service system has become a primary task. With the proportion of first-time buyers in China reaching up to 80%, the capacity of the automotive aftermarket will significantly increase once the proportion of first-time car owners drops to 50 percent.
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