Free competition is a requirement in Europe. It is unlikely that Brussels will let the manufacturers have their way.Steven Zimmer, Vice-President Global Sales & Marketing Aftermarket Lumileds.
The market Steven Zimmer: The market is looking promising in Eastern Europe and growing everywhere in Russia and the former Soviet republics. It is more stable in “old” Europe. The market will not change in 2018. For our part, new technologies (Xenon) are growing in the aftermarket. I think that all equipment manufacturers must be seeing the same phenomenon for their products.
Concentration S.Z.: The arrival of the “US giants” is an opportunity for established equipment manufacturers, who have done a thorough job with their brands and their commercial activities. These investors will help bring more resources to mid-size companies. If they are putting money on the table to buy them, they will also invest. The arrival of industry professionals will, in my opinion, lead towards a healthy consolidation of the business. At the same time, the sale of Alliance Automotive Group to a player like GPC also shows that these groups have reached such an enormous size that it has become complicated for an investment fund to manage them. The question is: who will be able to buy these companies in the future? Apart from accepting mergers between them or a takeover by a manufacturer, it will become difficult to take them back.
Consolidation S.Z.: We are starting to feel it at different levels, depending on the customer. This is normal. Any concentration is always in the direction of a consolidation of purchasing, contracts and so on. This is a healthy evolution for suppliers with coherent business policies. This should also accelerate concentration among equipment manufacturers who will find themselves one day with a dozen customers in Europe! But this means adapting to these customer profiles. Two years ago, Lumileds set up an international transverse organization, with global key account managers with pricing power. The big groups from the USA clearly told us that, today, one of their challenges is to have interlocutors aligned with the big equipment manufacturers.
The war of the US giants S.Z.: There is a risk of a war of the giants, whether they be American or not. On the other hand, there is a fairly marked geographical split in Southern and Northern Europe. There is a potential risk of a price war in some very sensitive areas; but not everywhere, because they also need to safeguard their margins. On the other hand, during this period of consolidation, intermediate players – to survive or be taken over – will continue to fight over prices.
Manufacturers in the IAM S.Z.: We saw PSA enter the market as a new wholesaler. Their teams are ambitious and have the required skills, but it’s not easy to start from scratch. I would not say it’s a battle won for them, because they are pitched against the giants. As an equipment manufacturer, we need to be present. We’ll see what happens.
Less interest in the IAM S.Z. : I do not think there is a decline in investment in the aftermarket, but a dilemma has arisen between expectations and what the equipment manufacturers can supply today. There are costs that increase and that cannot be squeezed: from those linked to the requirements of the large groups to those related to the management of “data”. Suppliers are like manufacturers or distributors; they have to keep an eye on the financials.
Online business S.Z.: While we can see manufacturers as new entrants to a traditional business, the rise of online business sales will be the biggest upheaval that the aftermarket will see. Market players need to be prepared for it. In the United States Amazon is changing the rules. In Germany, there are pure-players taking over traditional distributors. In China, the mechanic is integrated into the ordering process by online suppliers. This has completely changed the balance of power in some regions in China. You cannot imagine what is happening there. If someone with sufficient means deploys this kind of system in Europe, te situation could change drastically. The strength of the European model is an extremely dense network with a high service rate, but also consumers who are still going to garages. Things are changing, but there is still a physical link that Amazon cannot contest.
Connectivity S.Z.: I remain confident about the EU authorities. Free competition is a requirement in Europe. It is unlikely that Brussels will let the manufacturers have their way. Especially as they do not benefit from a good image right now. The Caruso initiative that was announced last month has created a lot of tension. But everyone has an interest in making it work. This shows that there is a lack of knowledge of the subject. Likewise, the disappearance of the OBD port is not a problem. It will be replaced by a WiFi connection or Bluetooth. Today, you do not plug your phone into a hands-free kit in your car. When the question actually comes up in workshops, the problem will be solved. And if tomorrow, miraculously, the manufacturers manage to keep control of data for four years – which is legally impossible – they will not have the network to maintain all the vehicles. It’s a strategic issue, but there is no need to panic.
Caroline Ridet
Lumileds key figures : • Present in 30 countries• 10 factories• 9,000 employees