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Roland Berger study: Highly profitable business in truck aftersales is crumbling – European OEMs need innovative business models

Munich, December 15, 2015

  • Aftersales business achieves gross margins of up to 50 percent
  • Suppliers, wholesalers, workshops and non-industry players are pushing their way in to the highly profitable market
  • Besides a competitive baseline offering, truck OEMs also need new and innovative business models

Customer service, maintenance and spare parts – in a word, aftersales – represent the most profitable business segment for truck manufacturers (OEMs). But suppliers, wholesalers, workshops and players from outside the industry are increasingly trying to break in to the market with new business models, putting traditional OEMs' profit margins under pressure. The automotive experts from Roland Berger analyzed this difficult market situation for their new study: "European truck aftersales 2030 – Securing the most profitable business". They also formulated a two-step approach for new business models that truck OEMs can adopt to help ensure their success in this fiercely competitive market.

"Gross margins on spare parts, maintenance and service can be as high as 50 percent," said Norbert Dressler, Partner at Roland Berger. "The OEMs simply cannot afford to pass that up. That's why they must act in response to the new competitive context, and they must act now."

Speed and cost efficiency are key

For companies with sizable truck fleets, downtime caused by maintenance or unplanned repairs on their vehicles can threaten the very essence of their business. Fast, cost-efficient repairs management and all-round services are therefore becoming one of the key factors in competition. Suppliers, wholesalers and workshops have spotted this trend and are bringing in customer-centric business models to conquer the market previously controlled by OEMs.

Suppliers are bundling their know-how in independent workshop systems and offering a premium, one-stop service on a 24/7 basis for a wide variety of makes and models. Wholesalers' tight dealer networks enable them to deliver spare parts to customers multiple times a day if needed, so that the parts can be fitted immediately. But even smaller, independent workshops are enjoying increasing popularity among customers given that they are often more flexible than the OEMs, usually have just as well trained staff and provide a fast and fair-value spare parts fitting service. "All of these players have different business models despite operating in the same market," said Dressler. "So what OEMs need to do is develop a comprehensive portfolio of services to optimally cover the individual customer needs. That is the only way for OEMs to defend their share of the aftersales market."

Baseline offering comprises five success factors

With this in mind, the Roland Berger experts recommend a two-step approach. Step one concerns the baseline offering, which OEMs should structure in a way that enables them to compete with the products and services offered by suppliers, wholesalers and workshops. It involves five success factors along the distribution chain. OEMs should: 1) Offer a broad spectrum of spare parts in different price categories to address even price-sensitive customers; 2) Use connected assistance systems as standard to support both fleet operators and truck drivers; 3) Understand the lifecycle of a truck and the requirements of the market to enable competitive pricing; 4) Optimize spare parts logistics to trim process times in the workshop and keep downtime to a minimum; 5) Offer customer demand oriented all-in-one services 24 hours a day.

Service scenario 2030: Digitization calls for innovative business models

"This baseline offering alone does not go far enough, though, for OEMs to maintain their market leadership," said Philipp Grosse Kleimann, Partner at Roland Berger, on a cautionary note. He recommends going one step further and developing new and innovative service solutions. As the experts illustrate in their study, the rise in digitization in the automotive industry coupled with the entry of new market players with digital business models and the trend toward (partly) autonomous trucks will serve to transform the aftersales market. "The key factor distinguishing between rivals in the aftersales business will no longer be the brand name. It will be the efficiency of the products and processes they offer," said Grosse Kleimann, adding, "OEMs need to position themselves correspondingly."

Take maintenance and repair: Here, data-based technologies will enable vehicles, and even entire truck fleets, to communicate with drivers, OEMs and workshops direct. All relevant information will then be sent direct from the vehicle to the parties involved for them to initiate the scheduling, spare parts logistics and coordination. That will make it easier to deal with breakdowns, for example, or enable accident repairs to be carried out fast. And even vehicle downtime caused by regular maintenance needs can be reduced to a minimum if the driver and workshop both receive automatic notification and the necessary parts are ready and waiting at the workshop when the truck is scheduled to come in. "The growing automation of processes such as these will turn workshops into 'service factories' capable of carrying out repairs and maintenance at any time without advance notice, and they will do so at fair cost and high quality," said Grosse Kleimann.

And when it comes to optimizing vehicle use: Logistics firms and shipping companies have long sought solutions to avoid uneconomical empty loads. Truck sharing could provide an answer, enabling the shared use of trucks to plan cargo capacity on demand and in line with actual needs. Here, too, data-based technologies are applied – with corresponding consequences for the OEM business model. "It will be the truck OEMs that have the best customer and vehicle data and those that are in a position to respond fast to the changing market that eventually emerge the winners," explained Dressler.

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