THE IMPORTANCE OF THE UK - Society of Motor Manufacturers ...

THE IMPORTANCE OF

THE UK

AFTERMARKET

TO THE UK ECONOMY

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EXECUTIVE SUMMARY BY MIKE HAWES

THE IMPORTANCE OF THE UK AFTERMARKET TO THE UK ECONOMY

The automotive aftermarket is a vital component of the UK economy. Through the franchised and independent networks, it provides motorists with choices over how they service and repair their vehicles. By keeping the country moving, the aftermarket delivers both direct and indirect financial benefits to the country.

To enable a deeper understanding of the aftermarket's contribution to the UK economy and its growth potential in the coming years, we commissioned Frost & Sullivan to undertake an independent study. This report examines the fundamental structures of the aftermarket, the key factors which shape its operation, and the challenges and opportunities facing it in the future.

The conclusions are telling: with a turnover of ?21 billion, a gross value add of ?12 billion and 345,000 UK jobs dependent on the sector, the aftermarket makes a huge economic and social contribution to the UK.

This contribution is set to grow in the coming years. With new car registrations in the UK hitting an all-time high in 2015 ? and the average age of cars on the road increasing with ever-improving reliability ? the sector's value is set to rise to ?28 billion and jobs to more than 400,000 by 2022.

The report also explores why the UK's independent aftermarket takes a greater share of the ?21 billion work than in most other countries in Europe, with opportunities for further growth by all players in the coming years.

With such significant opportunities ahead, the aftermarket looks certain to enhance its status as a major player within the UK's increasingly vibrant automotive industry.

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CONTENTS

Executive summary ....................................................................2 Glossary ...................................................................................4 Introduction to the UK aftermarket ......................................5 The importance of the UK aftermarket..................................7

The consumer impact..........................................................8 Key characteristics of the UK aftermarket ....................9 The UK in the context of the global aftermarket ........10 The independent and franchised aftermarket ......................11 Independent and franchised prices .................................13 Why is the independent aftermarket important to the UK ................................................................................13 Opportunities and challenges .................................................15 Aftermarket investment trends and opportunities ......19 How regulation will impact the UK aftermarket..........20 Outlook and recommendations .............................................21 Recommendations for aftermarket companies in the UK ................................................................................22 Recommendations for UK government .........................24 Conclusion ................................................................................25 Methodology and sources .......................................................26

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GLOSSARY

AUTOMOTIVE AFTERMARKET

This refers to the whole automotive aftermarket, including franchised businesses and independents, comprising service and repair workshops, retailers, wholesalers, parts manufacturers, importers and distributors.

ORIGINAL EQUIPMENT SUPPLIER (OES)

Parts manufacturers which supply car manufacturers with original parts and also provide parts for aftermarket purposes are known as original equipment suppliers (OES).

FRANCHISED NETWORK (Franchised and Authorised dealers)

For the purposes of this report, the term "franchised network" refers to both franchised and authorised repairers. Franchised and authorised repairers have a(n) agreement(s) with a specific car manufacturer(s). These dealers represent car brands such as Ford or BMW and will specialise in service, repair and parts supply for those brands.

INDEPENDENT AFTERMARKET (IAM)

Independent aftermarket (IAM) companies carry out a range of services, supply a variety of parts options, and are not tied to a particular car manufacturer or brand. Typically cars are more often serviced by the franchised network during their warranty period, but this is not a legal requirement and independent operators are free to compete for this work. Independent operators supply and use parts from both OES and non-OES suppliers.

AFTERMARKET SERVICE LOCATION

Companies which carry out aftermarket work and/or supply aftermarket parts. They can include franchised workshops as well as independent garages.

SERVICE BAY

This is an area in a service location where vehicles are lifted for service and repair work.

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? SMMT

INTRODUCTION TO THE UK

AFTERMARKET

The UK automotive aftermarket is the eighth largest market globally and the fourth biggest in Europe after Germany, Italy and France. With a healthy growth rate of 3% per annum, the UK is set to overtake France by 2020 to become the third biggest market in Europe.The industry provides more than 345,000 jobs in the UK and has the biggest independent aftermarket (IAM) in Europe.

Although the German and Italian industries generate higher revenue, consumers there are more loyal to car manufacturers' franchised networks. By contrast, the UK has more discount parts sellers, private-label brands and independent service providers, giving UK motorists access to a wider selection of products at varying price and quality/performance levels.

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