Despite the presence of popular car brands, the European automotive market has been suffering for some time now: car sales have slowed. Meanwhile, other markets of the world are reaching record levels in car sales and show no signs of decline anytime soon. This will lead to more overseas exports and high-end or cheaper entry-level products – an innovative way by the European market to get back into the game.
Import
The European automotive industry is a crucial player in the European economy. It has extended its scope on a global scale: Japan is the biggest supplier of passenger cars while the biggest supplier of parts and components is Germany.
- The import of parts and components have grown over the years which gives you probable cause to carefully analyse both your production capabilities and the consumer demands.
- Germany is home to the biggest automotive market so it is highly recommended to establish a relationship with countries such as Germany and develop a good business relationship with it and other similar countries.
- Imports from nearby countries have been growing showing the significance of treating nearby countries utmost care in molding relationships more than the distant ones.
Export
- Export of automotive parts and components have increased and Eastern European countries are presenting interesting opportunities.
- Most of the re-export is mainly because of production being held in different plants in different countries.
- Production of the parts and components are conducted in several parts of Europe.
Production
The production of automotive parts have decreased between 2008 and 2013. Nevertheless, the automotive sector in Europe still has significant relevance and strategic importance.
- The European market will still continue to present opportunities to developing countries despite a poor outlook on the automotive industry.
- Consumer trends should be understood clearly in order to predict the potential of products.
- There is a need these days to sustain the production in automotive sectors in order to make a strategy for the products.
- A need to know the increasing demand in countries is essential in production.
Consumption
The European market is recovering and is expected to expand which would further increase the size of the market.
- Traditional manufacturers still display the highest levels of consumption.
- In Western Europe, vehicle density is already at a high and growth cannot be expected anymore. Eastern Europe is a different matter though.
- Due to better quality parts, there is a decline in service costs. However, the after-sales market still presents a potential in growing.
- Commercial vehicles have not recovered from the economic crisis yet and demand does not show any signs of growing anytime soon.
- New powered two wheelers are declining in demand but this is only opening up opportunities for other parts and components in the market.
- New European markets are showing progress in terms of consumption.
Market channels and segments for automotive parts and components
The OEM automotive market is abundant in Western Europe. Growth will be driven by the demand of OEM segments and the aftermarket. The aftermarket is better accessed through independent distribution segments while the OEM through Tier 2 and 3 suppliers. Opportunities will open for suppliers nearby Europe to avoid stretching the supply chain and reduce costs.
Two major European automotive customer segments consist of the following:
- OEM segments, composed of Original Equipment Manufacturers and Tier 1-3 suppliers, and;
- The Aftermarket segment composed of providers who supply accessories, spare parts, second-hand equipment, and other goods and services used in repair and maintenance.
OEM segment
- In Europe, production is to be focused in clusters. This will keep transportation costs down and supply chain concentrated in one area.
- Tier 1 suppliers are expected to be the future leaders in lightweight materials and automotive research and development. Developing countries should aim to deliver parts that improve performance and safety of original components.
- Tier 2 and 3 suppliers are expected to be more involved in the design and development of parts and systems in the future. Tier 2 and 3 suppliers are smaller than Tier 1 suppliers and are more accessible and have lower margins.
- Tier 2 and 3 suppliers employ multi-annual contracts which define price and conditions.
- The European automotive market has been magnified yet people appear to be buying less cars. Nevertheless, the market is driven more by consumers in Eastern and Central Europe.
- The automotive market is at polar ends: premium cars are characterized by a high level of technology while commodity cars are characterized by fewer accessories and being environmental-friendly. One should at least focus in one of these two.
Aftermarket segment
- The European aftermarket is complex and in order to gain entry, one must know the complexity of the supply chain and the vehicle system.
- The aftermarket segment is expected to grow due to the new car market and increase in the average vehicle’s age.
- Contracts and prices are negotiated every year.
- The average age of a vehicle is getting higher which makes more room for availability of the aftermarket segment.
- Quick delivery is in demand as customers want their vehicles quickly repaired and back on the road.
- The service industry is changing to adapt to specialized diagnostics like telematics in high-end cars which alert and advise drivers on maintenance requirements and directing them to the nearest dealership for maintenance.
Distribution channels
- Spare parts are either distributed through OEM distribution network and/or the independent distribution network. Exporters targeting the aftermarket can easily access the independent distributors due to a great variety of stocked parts.
- Vehicle manufacturers and OEMs usually supply most of the spare parts. Vehicle manufacturers though charge high premiums in the aftermarket.
- The independent channel has less access to OEM-manufactured parts.
Europe has a big automotive industry and its size will not easily decline. There are many opportunities if you provide parts and technologies, you only need to find the right person within the right company. Local consultants can support with market research.
