Overview of the Automotive Industry
The UK Automotive industry is a prosperous and integral one to the economy, offering 2.6% of our GDP and 846,100 jobs to the UK alone. Of these, approximately 81% (or 682,727) of these reside in automotive retail, which entails car sales, vehicle maintenance, wholesale trade, and renting and leasing of cars. Roughly 19% (or 163,373) perform in automotive manufacturing, which includes essential services pertaining to the production of motors, vehicle bodies, trailers, and electrical and electronic equipment. With vehicle usage now so widespread, it is very easily to take for granted the skills and effort required to keep things moving. This is why the automotive industry is so important – it is a staple of the UK economy providing, amongst others, employment, innovation and transportation.
The Automotive Aftermarket is an industry in its own right and is treated as such. it helps keep consumer prices affordable for services that are necessary in every echelon of trade. It would be a mistake to think that the offerings of the Aftermarket are in any way dispensable – as this article will explore, its increase in diversity and spread of engagement makes it an unforgettable industry.
The Automotive Aftermarket
The UK Automotive Aftermarket provides inveterate support, both direct and indirect, to the UK economy. By offering a secondary market to the automotive industry, it keeps consumer prices low and offers alternative service providers and manufacturers. Furthermore, as previously mentioned, it keeps the UK safely on the road; without the automotive aftermarket, all other industries would suffer, costing momentous time and resources. It is therefore hard to understate the significance of the industry. While it saw significant success in the last decade, the uncertainties of Brexit prevented enterprises from making the most of growth opportunities. Concerns were replete if trade deals were not negotiated – a return to WTO rules could have amounted to a £3bn loss to aftermarket parts exporters.
No-one expected what happened in 2020; the COVID-19 pandemic restructured forecasts and quotidian business to an extraordinary level, altering habits indefinitely. Solera International Business head David Shepherd stated that the automotive aftermarket was facing unprecedented circumstances, both within the UK and across Europe. The UK was not the most affected, suffering a 42% fall in activity between February 2 to April 5 2020, with European counterparts Spain and France dropping 59% and 52% respectively. That said, the domestic industry was facing seemingly insurmountable challenges throughout 2020. The decision to extend MOT test expiration dates by six months dropped work volumes for repair and body shopping significantly. Health and safety concerns forced employees to work from home where possible, perturbing global supply chains. Consumer habits adjusted quickly because they were forced to; automotive business models, however, were still adapting.
Before the pandemic, the UK automotive aftermarket was eyeing increased relations with Chinese, Indian, and Middle Eastern traders (particularly those from the Gulf Cooperation Council (GCC) region). China’s rapidly growing economy was attractive to prospective exporters in 2015 as car ownership continued to rise. Its car parc was set to double from 150m in 2015 to 300m in 2022. This is a trend that has somewhat remained throughout the COVID-19 pandemic, with ownership hitting 281m in 2020, although other factors might slow the gradient; increased pollution in densely populated cities such as Beijing instigated a car plate policy restricting the use of certain cars on specific days. While this did not interrupt the country’s total ownership of cars, it could still have knock-on effects on demand further down the line.
Further south, India also showed an appreciation of British brands; its aftermarket growth had a guidance of 12.2% Compound Annual Growth Rate (CAGR) between 2015 and 2022. While the country’s automotive aftermarket suffered substantial pandemic-induced losses in the billions, by September 2020 things were looking more akin to pre-pandemic guidance. India remains a place of interest for the automotive aftermarket, despite sketchy circumstances and rocky recoveries; the Delta variant continues to spread, causing the auto components sector to shrink. Nevertheless, second quarter results could still harbour promising opportunities.
The GCC area of the Middle East includes the regions of Saudi Arabia, United Arab Emirates, Bahrain, Qatar, Oman, and Kuwait. The economies are typically reliant on imports to keep operations running, and are also comprised of customers of relative wealth. GCC distributors are traditionally more categorised than Western counterparts, with some focusing on US, Korean, or Japanese specific names, but can also have a high demand for certain parts and assets. For those looking to trade in the area, it might be worth investigating how BAU dynamics could change. The COVID-19 pandemic, once again, wrecked dire damage to the industry and caused regional GDP contractions of 5-10%. Despite such losses, recent investment diversification renders the sector prosperous in the years to 2025.
Post-Pandemic Forecasting and Business Practice
The important factor in a post-pandemic market is to conduct sufficient risk assessments of supply chains, business practices, and export partners. It remains unclear how long COVID-19-elevated health consciousness will continue in the workplace, so ensuring the education of employees on protocols, communications, and hygiene is a de facto element. Adherence to Government Guidance on COVID-19-related requirements is likely to continue. Furthermore, the BVRLA released a bulletin on the 15th of May in conjunction with the Garage Equipment Association (GEA), the Scottish Motor Trade Association (SMTA), the Society of Motor Manufacturers and Traders (SMMT), the Institute of the Motor Industry (IMI), and the Independent Automotive Aftermarket Federation (IAAF). In it, the document highlights that COVID-19 responses have cost the UK Government £123.2bn, representing 15.2% of the domestic economy. SMMT CEO Mike Hawes stated that in order for the industry to recover, each sector needs to play its part, like “all parts of the jigsaw”. Plenty of agents in the milieu have indicated preparation to deal with the upcoming surge in demand for MOT tests, services, maintenance, and repair as the economy reopens from the COVID-19 pandemic. The SMMT also released a sector-specific guide for reviving the aftermarket; so long as enterprises don’t become complacent, there should be a solid future ahead of us.
As a market, many feel that the best strategy going forward is to continue playing to its strengths with one extra focus on communication to offset the effects of the pandemic. Ensuring consistent education to incoming workers will promise familiarity years down the line, thereby investing in the security of current operations. ‘Future-proofing’ the automotive aftermarket is likely to have influenced the IMI’s three key elements to its analysis: Promotion, Development, and Support. Promotion involves increasing the accessibility of career routes in institutions such as schools and competitions. Development entails providing new workers with relevant knowledge and skills, making sure employees have a continuous work path ahead of them. Attention to career advancements, such as the awarding of qualifications and apprenticeships, will also continue to play an important role. Support is also required, whether it be in post-nominal tasks or professional registrations, to ensure that both promotions and developments are running smoothly. IMI’s strategy is hard to criticise; paying attention to the long term and sustainability of the industry is likely the best bet amid current financial insecurities. Generating a competent, sustainable, and professional workforce will play an unequivocally important part in the industry’s recovery.
The industry is also changing beyond merely pandemic-induced trends; the growing focus on Electric Vehicles (EVs) and Advanced Driver Assistant Systems (ADAS) will change demand toward new products. This intensifies the pressure for businesses to sustain a skilled and up-to-date workforce. This needn’t be just regarding maintenance and repair employees; leadership positions need to be occupied by those familiar and knowledgeable of the aftermarket’s terrain looking forward. The automotive aftermarket is one that permeates into everyone’s lives and changes continuously; as the transition away from petrol, diesel, and hybrid vehicles takes effect, the industry and its sectors need to be prepared.
In summation, the UK’s Automotive Aftermarket is one of the most important industries, not only because of its relevance and engagement, but also because it saves ineffable time and resources in almost every other industry. Without the federations and institutions listed above, the UK’s industry status would not be what it is today. In order to secure a future that is resistant to challenges and can adapt to changing demands, the industry should aim to improve the competence and knowledge of its workforce. Furthermore, specialist training in technical skills associated with upcoming green-energy technology will save time in the transition from fossil fuels. All in all, there is reason to be optimistic about the industry’s future – so long as we follow SMMT CEO Mike Hawes’ advice to prioritise sufficient collaboration.