Business Models for Automotive Aftermarket

Bruce Zhou September 22, 2016 3 mins read

Until now, the automotive aftermarket was originally a “blue sea” and has transformed into an over-exploited “red sea”. Statistical data showed at the beginning of this year, the ownership of cars in China - 172 million, even the number of auto beauty service enterprises was up to more than 0.4 million. That means each enterprise only has 400 cars each to service, so, those auto repair factories which are small, single as well as traditional have almost no way out under such great pressure. Even, many analysts assert that, in the next one or two years nearly 40 percent of auto beauty service enterprises will face closure.

Therefore, in this kind of competition, the business model is especially important. Nowadays, there are many applications (APPs) for the Automotive Aftermarket which have obtained financing, however, a lot of APPs which don’t obtain financing have to find Venture Capital so that can immediately occupy its market share. Traditional auto beauty service enterprises mix various models of the internet - the main reasons are grabbing customers and profits, and provide service. O2O model of the Automotive Aftermarket presents a variety of patterns including subsidy, shop, supply and cooperation. However, we now can’t blindly comment on which may provide more advantages.

Subsidy type: This is most common and most popular, it adopts radical subsidy strategies, occupies the absolute market share with subsidies and extends to other parts of the industrial chain so as to achieve self hematopoietic and rapid expansion. But it is expensive and contains many problems, for example, Bopai car service shop have declared bankrupt because of its crazy expansion, the conversion ratio of this model which attracts car owners at the cost of spending large amounts of money. Because the attracted car owners - some good and some bad, some car owners are willing to consume when giving huge subsidies in but unwilling to consume when no subsidies. So, ultimately there is no profit at all, all the investors will withdraw investment finally.

Shop type: Frankly speaking, that is, the internet B2C, developing APPs by themselves and setting up an off-line shop. Although, the quality of service can be a unified standard, its storefront is not wide enough, and the quality of its service should be fine rather than its quantities. The disadvantages of this is the usage of off-line shops is not high enough, and everyone waits for “eating from the same big pot”, this means that people will only use popular sites.

Supply type: The distributors who manufacture automotive products collaborate with many businesses and provide products with low profit, such as bsqipei network, qipeiren network, qipei8 network, 7xinxi network and other supply websites.

Cooperation type: This is a win-win concept with a strong alliance. For example, the APP Chezhubang falls feet on the ground and doesn’t discount, and forms a community of interests by getting through on-line and off-line. With the help of integration technologies across platforms, it combines with the mid or high-end automotive beauty shops off-line and gives the car owners the most preferential prices when contracting. The factories give the supply with quality assurance and the lowest price to the automotive beauty shops, and therefore rebates from the platform.

 

Bruce Zhou's picture
Senior Manager | Industrial & Life Science Recruitment
bzhou@morganmckinley.com