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Challenges and Opportunities for Online Aftermarket Platforms

2018-11-23 10:58 Friday

According to the latest statistics from China's Ministry of Public Security, there are now 310 million vehicles, of which 217 million are cars. Due to the increase in car ownership, and related trends, the value of the automotive aftermarket in China is projected to exceed 1 trillion RMB in 2021.

online aftermarket platforms

Perhaps most importantly, the average vehicle age in China is just 4.5 years, marking the inestimable potentials of China's automotive aftermarket.

Although brick-and-mortar stores (4S shops) have enjoyed a long history and are highly trusted by consumers, their outdated management structure and business practices have lagged behind. As a result, many consumers have fallen victim to overpriced service at 4S shops.

Nonetheless, there are numerous issues with internet-driven models:

Incomplete service offerings on online automotive platforms make it difficult for them to completely replace traditional stores. Nonetheless, internet-driven models reduce costs, improve service quality, though the technology remains a work-in-progress.

Many online platforms have attempted to seize market share from competitors through discount promotions. However, brand loyalty earned through promotions is fragile, which can lead to a high rate of failure after a normal pricing scheme has been implemented. Thus, retaining customers is the primary obstacle for the sustainable development of online platforms.

Furthermore, the business focus of online automotive service platforms remains imbalanced. The proportion of auto spare parts, manufacturing, retail and service in the mature global automotive aftermarket is 39%, 21%, 7%, and 33% respectively, whereas in China it is 37%, 43%, 8%, 12%, with manufacturing vastly overrepresented, and service underrepresented. Correcting this imbalance is essential to capturing greater market share.

Many online platforms have to restricted their key business within fast-growing sectors such as gas filling and parking, which has constrained the development of online platforms.

Ultimately, the solution to the challenges facing online platforms, is to pursue a sound, and balanced development strategies, that take the latest market conditions into account.

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