Strategic Analysis of the North American Automotive OES Channel
Top Level Solution Trends Possible for the OES Channel Improving customer convenience and certain price control techniques will reduce customer migration from OES.
Automotive OES Channel: Top Level Solution Trends, North America, 2014
OES service locations—at a numerical disadvantage
Problem: Dealership locations are far less numerous than IAM locations. This negatively impacts consumer convenience.
Challenge: Dealership costs are much higher than aftermarket service locations, and service only accounts for a fraction of dealership revenue. Dealership location and count, therefore, cannot be driven by OES potential.
Strategy: Develop dedicated OES service centres, specializing in the most common maintenance tasks, to combat customer migration to the IAM.
Result: Improving customer convenience will eliminate the biggest cause of consumer channel migration. Location convenience, repair time, and hours of availability can be improved through a stand-alone service center.
OES parts and service—outcompeted on price by IAM competitors
Problem: OES parts and service pricing is generally higher than those of the IAM. Despite quality advantages of OE parts and service, consumer migration continues to occur because of pricing.
Challenge: Average pricing is higher because of tight margins on parts and high technician training, labour, and overhead costs for service. Lowering prices, in most cases, would negatively impact profitability.
Strategy: Superior part quality must be emphasized to justify higher pricing through value-added services such as extended warranty. Service pricing could be adjusted through a tiered labor rate which varies based on service and location—quick service locations and minor maintenance have the lowest labor rate.
Result: Price control techniques will restrain channel migration while preserving margins, allowing the OES channel to remain competitive with the IAM.
Vehicle service requirements and opportunities—shifting
Problem: The technology installed on new vehicles will generate service requirements and opportunities that the OES channel must be positioned for in order to benefit from.
Challenge: Vehicles remain in the OES channel only for the first to years. Because of this, the servicing of certain lifetime components, such as a hybrid battery pack or telematics system, are not likely to be performed in OES channel.
Strategy: OES locations should consider the creation of technology-specific VSCs, such as hybrid powertrain VSC. This will secure maintenance revenues for the vehicle early, while it is still in-channel, and provide the consumer greater convenience and quality assurance of OE service.
Result: Capturing maintenance for the next generation of vehicles will ensure future revenues, based on existing OES competitive advantages and requiring little investment.
About this report
This research service offers a strategic analysis of the original equipment service (OES) channel of the North American automotive aftermarket. This channel is made up of franchised automobile dealerships offering parts and service to consumers, in competition with independent garages and distributors. The study includes revenue forecasts and analyzes opportunities specific to the OES channel, including telematics and private-labeling. Consumer insights are offered through the inclusion of customer research. Also, research includes profiles of major dealership groups and analysis of their strategic approaches to increasing parts and service revenue. The study period is 2011 to 2021 using a base year of 2014. Major conclusions are presented.
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