After-sales Market a Key Profit Driver for Auto Dealerships

  Mike Bachara   |     Aug 08, 2017

After-sales Market a Key Profit Driver for Auto DealershipsA significant trend in the automotive industry over the last 10 years has been the increase in average age of vehicles owned by consumers. Car owners are more likely to be on top of preventative maintenance and scheduled servicing, to prolong the lifetime value of their vehicles.

The result is that the aftermarket industry for automotive service has grown substantially, and represents a profitable and sometimes untapped, opportunity for revenue.

Globally, the automotive aftermarket industry is expected to reach $1.0 trillion by 2022, driven by an increase in vehicle age, and the global demand from cars in emerging countries such as China and India. (Global Industry Analysts, Inc. March 2017, Press Release).

Vehicles in operation around the world increased from 1 billion in 2009 to 1.24 billion in 2014, but the United States, is still the largest automotive aftermarket, worldwide.

Another industry trend has been to use aftermarket service as a competitive factor. Hit with a decreased demand for new vehicles, dealerships look to bolster their revenue and gain new customers from service: after sale service, selling spare parts, conducting repairs, installing upgrades, reconditioning equipment, carrying out inspections, day-to-day maintenance, and technical support.

Automotive after-sales service can be highly profitable, with high margins, and can be an important revenue stream.  An Accenture study found that GM earned more profits from after after-sales revenues in 2001, that it did from $150 billion in car sales

But c-suite executives often treat aftermarket service as a necessary evil rather than an opportunity. Many organizations struggle with management difficulties, such as coordination between spare-parts warehouses and dealers. If a company doesn’t pay attention to how they organize and allocate parts between warranties and post-warranty work, tension can develop over priorities and responsibility for inventory-carrying costs.

When these issues are left to grow worse – customer satisfaction can be affected. One study found that 50% of consumers faced unnecessary delays in getting vehicles repaired because of lack of availability of auto parts at the dealership.

So, how do you know if you are winning in after-sales service? Some customer metrics to measure are: customer wait time for technical assistance, wait time for diagnostics, and wait time for parts. Internally, keep an eye on fill rates, parts obsolescence, and inventory costing.

When a dealership is excelling in inventory management, there is less likelihood of not meeting demand and disappointing consumers. 

Customer satisfaction is crucial to success in the after-sales market, and the after-sales market is becoming larger and a more important revenue stream to automobile dealerships.

With consumers holding onto cars longer, the potential lifetime service revenue is increasing, and it may be far less costly to increase the sale of parts and service than find a new car buyer.

“being on par with your rivals in performance, price, and quality gets you into the game: after-sales service can win you the game.”

Guide to Optimizing Inventory MGMT

By Mike Bachara

Mike Bachara | Owner of Pro Count West
Mike Bachara | President Pro Count West

Our Latest Blog Updates Delivered to Your Inbox