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Will Online Auto Service Platforms Restructure the Market?

2018-10-25 13:38 Thursday

According to the latest statistics from China's Ministry of Public Security, there are now 310 million vehicles vehicles, of which 217 million are cars, placing China second to the United States in the amount of total vehicles.

Online Auto Service

Due to increasing rates of car ownership as well as frequent vehicle turnover, China's automotive aftermarket has experienced a period of rapid expansion. The value of China's automotive aftermarket is estimated at over 1 trillion RMB, with a projected value of 1.65 trillion RMB in 2021.

By the end of 2016, the 620,000  automotive service centers in China had serviced over 53 million vehicles, generating over 600 billion RMB in annual revenue. With an increasingly profitable automotive aftermarket, auto service centers, 4S stores, and roadside auto maintenance stores have reaped the benefits.

As the market has grown substantially and become increasingly sophisticated, physical stores can no longer entirely meet consumer demand.

However, the scattered distribution of automotive aftermarket enterprises has made the industry difficult to regulate, often resulting in poor service quality.

Opaque pricing and procedures have eroded customer trust, and hindered sales growth.

Complicated distribution channels for auto parts and inefficient supply chains have also lead to overpriced automotive services, presenting a further challenge for the automotive aftermarket.

In addition, many consumers are relatively unknowledgeable about the automotive aftermarket, and fall victim to monopolistic practices from OEMs and 4s shops.

Therefore, the internet-driven models that better meet consumer demand, have had a significant effect on the automotive aftermarket in recent years. The success of online aftermarket enterprises has largely solved problems related to information asymmetry, by facilitating both standardization and specialization in the automotive aftermarket.

Attracted by promising growth, e-commerce giants, including Jingdong, Alibaba and Gome, have rushed headlong into the automotive aftermarket, however it remains unclear if this latest wave of investment will fix structural flaws in the industry.

Although internet-driven modelsreduce costs, the service quality and professionalism of online auto service platforms is undependable.

More importantly, there are still no exemplary models for O2O ("online to offline") platforms to draw from when competing with physical stores for market share.

Nonetheless, it is entirely possible that online platforms force a restructuring in the  traditional automotive aftermarket, sooner rather than later, so long as they continue to improve service quality and management.

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