Market Challenges And Opportunities

ASEAN Automotive Aftermarket- Drivers

An Increase in the Average Age of Vehicles

The average age of a vehicle in operation refers to the average time in years after which a vehicle can be scrapped. This life varies from region to region based on countries' macro and micro economic indicators. For instance, in developed countries such as the U.S. where per capita income is high, the average life of car is less. Whereas, in emerging economies such as Indonesia, Thailand, and Vietnam, vehicles are used for longer period of time. According to CMI analysis, the average age of vehicles is increasing year-on-year.

Increase in Miles Driven Per Vehicle

The average miles driven per vehicle have increased over time. This increase in miles driven per vehicle is closely associated with wear and tear of parts. The increase in miles driven per vehicle affects the aftermarket for automotive parts such as tires as they need to be replaced once they have been driven for a fixed set of miles. The introduction of technologies such as tire pressure monitoring, remote vehicle diagnostics along with better quality services and maintenance have increase the average age of vehicles in the region. Thus, the rise in the average age of vehicles and increase in miles driven per vehicle is facilitating growth of the automotive aftermarket.

ASEAN Automotive Aftermarket- Restraints

Unorganized Aftermarket for Replaceable Components Such as Filters and Lubricants

The aftermarket for components such as automotive filters and lubricants among others is enormous as these require continuous replacement. The ASEAN market has large number of the local automotive parts manufacturers which served domestic customers' demand. The aftermarket in the ASEAN region is highly unorganized as a large number of local players operate in the market and supply low standard air filters, coolants/lubricants at a lower price. As countries in the region are cost sensitive, consumers are likely to buy low price components, making it challenging for global players to operate in this region. Moreover, using low quality intake air filters with ineffective filters-media can damage the engine and its components. Similar effect can be observed by using low quality lubricants.

Increase in the Replacement and Maintenance Cost

With the increasing technical complexity of vehicles, cost of replacing parts and maintenance costs have increased substantially over time. Furthermore, with advancement in replacement parts, tools and equipment used for maintenance, there has been a surge in aftermarket costs. Moreover, increasing cost of labor across the globe and low consumer preference for costlier parts and services is restraining the growth of the market. According to CMI analysis, the annual passenger car maintenance cost per unit is expected to increase during the forecast period.

ASEAN Automotive Aftermarket- Opportunities

Technological Advancements

With an increase in technological advancements, vehicles are becoming more complex. As a result, there is need for skilled technicians for repair and replacement of parts. Service centers and franchise stores have the needed parts and trained technicians. Some franchise-based stores also provide training on replacement and repair of parts. Therefore, the growing complexity of vehicles has created growth opportunities for the automotive aftermarket.

Strategic Evolution of Local Repair Shops

Several small locally-owned repair shops don't offer a complete range of repair and maintenance services, and therefore follow a competitive strategy of specializing in any particular service or expand the number of services and offerings. Additionally, small local shop owners are engaging in strategic partnerships and standardized contracts with fleet operators and leasing firms to provide replacement and maintenance services at lower prices. Moreover, there are more than 5000 independent repair shops in Thailand which is expected to drive the ASEAN aftermarket growth.