First important fact: The growth of the automotive aftermarket in a country highly depends on car registrations. With an increasing trend in car sales, usually the vehicle parc´s increase generates more maintenance and repair service demand from the aftermarket. Due to the importance of this, traditional strategies use this as the only variable to measure the size of workshop entries in the aftermarket, however this isn’t the full story!

So, if you want to know why, please continue reading, and we will try to explain you the other facts that also affect workshop activity.

For any further information, please click here to contact GiPA.

The truth of this first “fact”

Here is the ugly truth about the situation of the workshop entries in the aftermarket: Even if car registrations increase, If drivers are decreasing the number of workshop entries, the aftermarket can shrink.

And as a living proof, let’s take the case of Mexico, and view its principal points in the matter:

• After the automotive global crisis of 2008-2009, the country started to recover on car registrations.
• Actually, the vehicle parc has increased its size every year, as newly registered cars are growing at a faster rate than cars approaching their end of life.
• Also, there has been an increased in imported car from the USA.
• In 2016, the country hit an annual car registration record with 1.6 million units.

Despite all of the above, between 2008 and 2018, Mexican drivers made 40% less workshop entries in the aftermarket.

The reasons

And if you still are wondering why, there are at least 3 reasons for it:

1: Increase of maintenance periods

Technology in automotive parts such as brakes, tyres and lubricants implies that parts are innovated by manufacturers to maximize quality. One effect of this is that they also last longer and are more durable parts. As a result, drivers do not need to maintain or replace the parts as often, which lowers workshop entries. Actually, and for this reason, OEM dealers have extended the maintenance periods of their new sales.

2: Financial crisis

Secondly, Mexico is not in its best moment economically speaking, implying that consumers are less open to make non urgent reparations or maintenance to their cars. For example, if a driver had changed tyres as a preventive operation, now it could be delayed for several months until the operation becomes more of a necessity due to the financial struggle that could be present.

Another example that is also representative in the body repair business: if the car can operate with a bump in the chassis, then it is not a priority.

Mexicans are saving money by delaying operations that otherwise will be done if they were financially better.

3: Decreasing of annual mileage

Finally, the annual mileage that the Mexican drivers are doing is decreasing, probably derived on the fact that every year the expense of using the car increases.

Costs of workshop entries in the aftermarket

Along with all these, GiPA has also measured and determined that the costs of the workshop entries in the aftermarket are more expensive every year (mainly due to labor cost) along with the insurance and fuel prices rising.

That is why:

• Families will tend to use the car even less, as it is more expensive to run relative to the incomes they make.
• New mobility options have changed the habits of some drivers that are deciding to decrease or eliminate the use of the car (for example using bikes) along with the new mobility app services such as Uber or Didi.
• The trend of “home office” for employees can promote even less usage of the car is rising.

So when talking about the case of Mexico, it is interesting to see how even when the car parc is increasing, this is not followed by increases in workshop entries as other real major, such as more durable parts, economic decline and rising costs can dissuade drivers from visiting workshops.

GiPA has run several points of analysis that forecast this to be a trend that will be difficult to change. This creates some major challenges for players that are operating in a market with more cars but less money to spend servicing them.

So, yes, understanding this effect is relevant to achieve the business objectives of any company that wants to grow in the aftermarket in Mexico. And with the effect on the decrease of the workshop entries in a country like this, we need to understand that companies need to be share more resources or even borrow from competitors instead of expecting the market to grow by itself.

For any further information, please click here to contact GiPA.