Aftermarket Insider Issue 78 - (Page 20)

MARKET iNTElliGENCE checKing in wiTh china A Look into Chinese Service Garages – Part I By S TEVEn H. g A nST E R, M An AgIng DIR E C T O R T EC H nO M I C AS I A * maintenance and light repair car sales and the expanding parc, the market structure for service providers has recently completed the transition from an “emerging” profile to “developing” market status. Yet China’s independent aftermarket is still made up of a highly fragmented base of some 360,000 registered shops, ~97 percent of which are smaller Class 2 and Class 3 players with limited service capabilities (not to mention another 100,000 to 150,000 unlicensed street vendors). In terms of repair service offerings, these independent garages are now a major force competing with 4s and 3s shops (dealer channel). As a result of quick urban expansion, many mid-sized garages need to relocate every two to three years resulting in a fluid customer base. DIYers have yet to evolve to become a meaningful customer base comprising sporadic practitioners among owners of lower end vehicles and car enthusiasts. However, radio programs, Internet, increasing sales of used cars, etc. are helping groom China’s first generation of DIYers. And with ever-increasing knowledge, easier access to parts, limited inventory at garages, more car owners, especially of lower end vehicles, are practicing “I buy it, you mount it.” As the parc expands, competition for repair and maintenance services has been heating up between independent garages and 4s/3s shops with many garage owners complaining of thinning margins. Limited credibility is an Coupled with high growth in Service Provider Dealer/OES (DIFM) Dealerships for OEMs with full range of offerings (3S/4S) Emerging Active/market leader; dominate quality service provision Developing Range of presence – active in promoting post warranty services… and many in services to “all makes/models” to varying degrees by geography Evolving to be significant market leaders – dominant independent shop numbers, taking share from dealers; MLR* chains growing fast and taking share from other independent shops Developed Focused on warranty service IAM (DIFM): • Authorized service outlets of OEMs • Authorized service outlets of parts/materials suppliers • MLR* and tire chains • Service “stations” under chain umbrella • Independent shops • Fleets Unregistered Mom & Pops (DIFM) Small, roadside outlets often operating “illegally.” Low cost/ quality orientation – limited services/technical competence DIYERS Individuals self-serving their vehicles to some extent mostly (MLR)* Very slowly evolving as alternative to dealers • Minimal MLR* chain presence • Low credibility/capability and poorly equipped • Small market share Generally market leaders (volume) – significant presence of MLR* chains Dominant – often majority of service market share/volume for older vehicles Minor to prevalent – share declining to independents; many have upgraded to operate legally (using various legal umbrellas) Sporadic practice of DIY among owners of lower end vehicles; some car enthusiasts Negligible presence Very slowly evolving as an alternative to dealers and independents Active group of DIYERS issue for all service providers, even dealerships whose image has been tarnished as a result of publicity about their ripping off practices, sometimes marking parts up 200 percent. The independent garages primarily rely on referrals to get customers (typically within a radius of 30 kilometers). Service costs on average are 40 percent lower than 4s/3s shops. Many repair shops have been making efforts to differentiate themselves by different value propositions or selling points, e.g. focusing on fender bender repair, which is big business in China. Training is needed at the mechanic level as many are migrant workers from rural, interior regions of China though overall, mechanics are in good supply (except for painters). For the foreseeable future, these independent service shops will continue to grow as the major customers for parts distributors and suppliers and as an important influencer for consumers. 20 | AFTERMARKET INSIDER | VOLUME 78 http://www.technomicasia.com http://www.aftermarket.org/Publications.aspx

Table of Contents for the Digital Edition of Aftermarket Insider Issue 78

Aftermarket Insider Issue 78
Contents
President’s Message
Association News
AAPEX 2012
Company Profile
Member Profile
Toolbox
Government Affairs
Technology Update
Executive Perspective
Association News
Market Intelligence

Aftermarket Insider Issue 78