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Overview of the Automotive Aftermarket in China

2018-11-01 14:57 Thursday


Due to rapid development in recent years, China has become the largest auto market in the world. By the end of 2017, the number of private in China had reached 310 million, placing China second behind the United States. The automotive aftermarket has been one of the most promising industries in China, with a market value of 750 billion RMB in 2017, expected to break 1 trillion RMB in 2018

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In order to regulate the development of China's automotive aftermarket, nine government departments including the Ministry of Transport and National Development and Reform Commission, jointly issued the Guiding Opinions on Service Quality Improvements for the Transformation and Upgrading of the Automotive Service Industry.

The opinions stipulate that automotive spare parts monopolies must be broken up, that the resale of original parts by authorized parts distributors and repair shops to unauthorized shops or end users will be permitted, and that essential vehicle information such as parts specifications must be publicized. The opinions strive to eliminate monopolistic practices in the automotive aftermarket, and unhold fair market competition.

Attracted by promising growth, e-commerce giants, including Jingdong, Alibaba and Gome, have rushed headlong into the automotive aftermarket.

The emergence of internet-driven models has intensified competition between auto 4S stores and O2O ("online to offline") platforms.

Although brick-and-mortar stores enjoy a long history and are highly trusted, their outdated management structure and business practices have lagged behind.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

automotive aftermarket

Nonetheless, there are many problems with internet-driven models. Some O2O platforms claim that they have collaborated with 4S shops, but in reality such platforms have little to no power to manage or regulate 4S shops. Other O2O platforms have guided customers to physical service centers, but this leads to increased costs.

Due to flaws with both online platforms and physical stores, no model as of yet is capable of restructuring China's automotive aftermarket on its own. However, experts have noted that close cooperation between automotive manufacturers, 4S shops and e-commerce platforms will be the mainstream model for the future.

Internet-driven models have automotive aftermarket leveled the playing field, allowing customers to obtain quality service at lower prices by minimizing costs. Nevertheless, it is  fair pricing and quality service that attract customers, meaning that both online platforms and physical stores still have their work cut out for them in meeting consumer demand.

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