Aftermarket is an important piece of the Commercial Vehicle industry puzzle and the Indian OEMs have not yet been able to exploit the aftermarket potential as much as their global peers. Aftermarket revenues as a percent of sales are typically 7 – 10 percent for Indian commercial-vehicle OEMs, as opposed to 20 – 25 percent in North America and 26 – 34 percent in Europe.

In India it is one of the most complex functions/lines to manage due to the three stakeholders involved; Original Equipment Manufacturer (OEMs), Original Equipment Suppliers (OES) and Generic Manufacturers.

For distribution of replacement parts, OEMs rely on their own distribution networks through franchisees or company owned networks. However, OES have the advantage of following both routes and margins are higher in doing it independently. In certain cases, traditionally, OEMs have restrictive covenants for OES which limits the land of play for the OES. Tug of war exists as OEM restricts OES to bite into the pie of high margin business (independent).

Customers who spend real money are not as sophisticated as those in the developed markets. Immediate cost of replacement is one of the key variables that determine his choice for OEM distribution network or independent channel. Independent channels are cheaper but at the cost of spurious parts, inconsistent quality, untrained mechanics.

With advent and penetration of internet, future is expected to change at a much faster rate. As more fleet vehicles are equipped with advanced electronics for vehicle diagnostics to enhance operating efficiencies, there could be opportunities for the aftermarket to keep these systems serviced and in ideal shape.

“Operators will no longer wait for one or two days to get a truck back on the road; that’s why the ‘parts business’ is increasingly becoming a ‘now’ business,”. Parts availability and responsive delivery will be the key to the future.

Buyer’s inclination will be towards value and choice; basis will be price-value expectations. What does existing value chain structure mean for OEM and how going forward, changes may push them to forward integrate will be the key question.

Join us at India’s leading Commercial Vehicle platform: Commercial Vehicle Forum 2016 (https://cvforum.in/) on 24th November 2016 at The Westin – Chennai where more of such trends will be discussed by industry experts.