Automotive Aftermarket CLEPA Conference March 22nd, 2018
THE GLOBAL AFTERMARKET Global AM parts retail market value by region bn EUR 38 +5.7% 59 135 +3.2% 174 85 +2.3% 102 86 +8.6% 166 Global +4.5% 44 +1.9% 51 10 +4.0% 14 398 566 2 Source: IHS, Team analysis
SEVEN INDUSTRY TRENDS AREAS OF CHANGE TRENDS DRIVING CHANGE KEY TRENDS BEFORE VEHICLE TECHNOLOGY Connectivity Softwarization Electric vehicles (EV) Autonomous vehicles Mobility services & new ownership models OWNERSHIP MODELS Intermediary power DISTRIBUTION CHANNELS Independent wholesale consolidation Online platforms 3D printing Value chain integration Short term (0-5 years) Medium term (5-10 years) Long term (+10 years) 3 Source: Team analysis
VALUE CHAIN IMPACT European AM parts retail market value 1) bn EUR VEHICLE TECHNOLOGY 123 OWNERSHIP MODELS DISTRIBUTION CHANNELS 48 51 58-10% + 20% 1) Overall market trend shown individual developments and share might differ 4 Source: Based on 33 interviews, Team analysis 'DO-NOTHING SCENARIO Supplier revenue EBIT impact UPSIDE SCENARIO
VEHICLE TECHNOLOGY Growth per product category European AM parts retail market value by product type bn EUR x% CAGR 17-25 Software/content/data Retrofit solutions Tires Accessories Crash repairs Maintenance 3 123 28 5 15 25 11 +3.4% 15.3% 4.6% 2.2% 1.4% 1.3% 1.2% 34 4 33 5 16 27 70% of car park connected ~140 EUR revenue/car/year Average vehicle age up by ~1 yr. Electronics parts up by ~25% Average tire price up by ~5% EV tire price higher by ~3% ~0,2% price increase # crashes down by ~2% Cost/crash up by ~1% Maintenance demand down by ~5% Cost/repair up by ~5% Wear-and-Tear 37 1.2% 41 Wear-and-tear demand down by ~5% Cost/repair up by ~5% Base case 1) Based on data produced by driver and vehicle 2) BEV = battery electric vehicle 5 Source: Based on 33 interviews, Team analysis
OWNERSHIP MODELS Fight for customer access just opened European AM parts retail market value by vehicle owner bn EUR OEM fleets Non-OEM fleets 1) Private w. insurance service contracts Private 123 4% 0.4% 4% 8% 5% 5% 4% 9% 5% 1% 12% 5% 50% of new car sales and 13% of car park in fleet ownership in Expansion of fleets into segment II 92% 82% 82% 82% Market controlled by insurances w. service contracts up by 20% : OEMs keeping control OEM leverage data access, brand and network advantage Base case Base case Increase in fleet park shared between OEM and 3P 2) : Third Platforms parties taking dominating over control OEM brand erosion gives advantage to multi-brand fleets 3 rd party fleets take advantage of lower service cost and digital know how Private ownership still dominating in segment III 6 Source: Based on 33 interviews, Team analysis
SALES CHANNELS Balance of power between OES and IAM European AM parts retail market value by sales channel bn EUR DIY IAM OES OES (own prod.) 1% 1% 1% IAM OES 123 5% 56% 29% 10% 54% 35% 10% 59% 30% 10% 65% 24% 10% Increasing share of Segment III in car park lowers overall OES market share OEMs taking Base case IAM dominating OES gaining Base case IAM gaining more active role OES leverage data access, contain fleets and adopt faster change Slight OES advantage due to data access IAM leverage digital capabilities, professional and specialized service networks and lean SC 7 Source: Based on 33 interviews, Team analysis
INDEPENDENT WHOLESALE Shift towards digital platforms Future role of the wholesale Rationale Data source Repair shops (own franchise) Repair shops (large chains) Repair shops (small chains) Repair shops (OES) Repair shops Shift only a matter of time due to tremendous potential: Fulfillment platform (possibly incl. 3PL) Workshop network / franchise concept Analytics platform Taking out cost and inventory out of the network Digital Plattform Data clouds Top line boost though market intelligence Ecosystem Offering of data mining and AI based solutions Suppliers Benchmarking Inventory planning Market intelligence Software and application providers Small specialized wholesalers Logistics optimization Value-added services... OEM Who will make it? three scenarios: Today s large wholesalers (LKQ ) Today s digital players (Check24, Amazon ) Supplier-controlled platforms Transactional data (IoT) Optimization algorithms Value-add solutions Today s focus Future focus 8 Source: Based on 33 interviews, Stern Stewart, Team analysis
SALES CHANNELS Example UK pharma wholesale market Megatrends: Huge cost pressure in the system Consolidation (manufacturers, pharmacies, competitors) Vertical integration Manufacturers striving for supply chain control Battle for patient data Managed / home care Personalized drugs Biologicals Traditional full line wholesaler revenue pool evolution % in value 100% 90% Mid 2000s Others Traditional wholesaler profit pool evolution % 12.5% Mid 2000s 100% 50% Mid 2010s Full-line wholesale 6-7% Mid 2010s Median wholesaler margin REDUCED WHOLESALE AGREEMENTS (RWA) SOLUS AGREEMENTS AGENCY DIRECT-TO-PHARMACY (DTP) DIRECT-TO-HOSPITAL (DTH) DIRECT-TO-PATIENT SHORT-LINE DISTRIBUTORS... 1-2% Trade 15% Value-added services Wholesaler EBIT margin by business segment Digital business models: E2E inventory transparency Robot dispensing E-prescription AI-based qualification App-based ordering Telemedicine Patient risk monitoring Central fill for pharmacies E-pharmacies Predictive analytics (e.g. demand forecast) AI-based supply chain optimization 9 Source: Stern Stewart
SUMMARY: SUPPLIERS AFTERMARKET AGENDA AFTERMARKET AGENDA 1 2 3 4 Asia and Eastern Europe strategy Softwarization and use of data End customer business models (e.g. retrofits) Fleet strategy Special product offering (e.g. FoD) Specific go-to-market approach TCO & availability optimizing services 5 6 Car and driver data access Digital network platform 10