The European aftermarket - Transformation of a whole industry accompanied by COVID-19 - Organizatör Kuruluşlar / Powered By
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The European aftermarket –
Transformation of a whole industry
accompanied by COVID-19
Organizatör Kuruluşlar / Powered By
2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 1
If you have any further questions, feel free to contact us
Dr. Robert Alexander
Eirich Brenner
Project Manager, Senior Partner, Global Head
Automotive of Aftersales
+49 160744 - 8757 +49 160744 - 4318
@ Robert.Eirich@rolandberger.com @ Alexander.Brenner@rolandberger.com
Munich Hamburg
Source: Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 2
The automotive aftermarket has to cope with
a strong consolidation wave
In the meanwhile, more
heavyweights are active in the
aftermarket. That is one
consequence of the numerous
Martin Conrad takeovers in the last years.
(CEO of PV Automotive Group)
Source: Statement Martin Conrad 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 3
After a dip of M&A activities in 2019, the consolidation trend continues
with 17 deals closed in 2020
Deals per year Deals per country
Deals per in Europe 2005-2020 in Europe since 2005
115 deals in total
year in 19 for 2005-2020
Europe for 17
IAM whole- 15
salers 14
Germany is a hotspot
Norway 1
13 2 Sweden with 27 deals, alongside
UK
15
Denmark
1 the Netherlands and
2
Ireland Poland
UK with 15 deals
Study excerpt
9 15 3
8 27
Netherlands
2 Czech Republik
Belgium 2
7 Germany 3
Austria
6 France 7 Romania
8
5 2 Italy Trend expected to continue
Spain
after Covid 19 pandemic has
2 2 2 been settled – esp. consoli-
1 1 1 1
dation of mid-sized players
2005 2007 2009 2011 2013 2015 2017 2019 2021
Source: Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 4
Within the last years, different acquisitions further consolidated the
competitive landscape – Medium players trying to follow up
Year Acquirer Acquired company Revenue2) [EUR m]
2020 The Goodyear Tire & Rubber Company Reifen Baierlacher GmbH 2
2019 Swiss Automotive Group Auto-Teile-Pöllath 117
2018 AAG Hennig KFZ-Teile 161
2018 Stahlgruber Rücker KFZ-Teile n/a
2018 Arrowhead Ratioparts 11
Selection
2017 LKQ Corp. Stahlgruber 1,093
2017 Lorch Martika 70
2017 Stahlgruber Optimal 62
2017 Profi Parts A. Jakobs 171)
1) 2015; 2) Revenue of acquired company by year of acquisition
Source: S&P Capital IQ; Bundesanzeiger; Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 5
This process created a competitive landscape, that consists of
several large players with turnover >0.6 bn EUR Countries HQ –
Revenue, 2018 [EUR bn]1) covered [#] Country
4.7 20
2.2 3
1.6 3
1.5 6
1.4 12
0.8 5
0.8 4
0.4 1
1) Some numbers are only available for 2017
Source: Company information; Capital IQ; Orbis; AAG; Wolk; Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 6
Although the consolidation process in Europe recently gained momentum
and speed, there is still further room for consolidation
Consolidation Stage 1 Stage 2 Stage 3 Stage 4
stages2) Opening Scale Focus Balance & Alliance
Combined 100%
market share of Maximum1)
top 3 players
Industry
US consolidation
50% curve1)
Ø 45%1)
Europe
Minimum1)
0%
Industry consolidation lifecycle (time)
1) Average based on the market share of the three largest companies of the total market based on Value-Building Growth database across multiple industries (25,000 companies);
2) Average cumulative timeframe for the consolidation curve c.25 years across multiple industries, however, variations may occur based on industry
Source: Value-Building Growth Database; Harvard Business Review (December 2002 issue) "The Consolidation Curve"; interviews with market participants 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 7
Within the consolidation process, three major strategic moves could be
observed happening either in parallel or sequentially since 2011
National Pan-European Trans-continental
1 consolidation
2 consolidation
3 consolidation
Strong players in one country acquire Leading national players expand to a Mainly US players entering the
small and local players European level by buying local players European market
in other countries
Goal: Increase network coverage and Goal: Increase overall revenues and Goal: Accomplish aggressive growth
reach as well as accomplish European market share targets and increase global market
economies of scale share
Depending on market Mainly
since 2011 since 2016
Source: Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 8
1 National consolidation
Especially in Southern and Central European countries, the consolidation
has not peaked yet and leaves room to maneuver
Consolidation process
in selected markets
Consoli- Most European countries are
dation still in 'Accumulation' Phase
process for
specific
Only Nordics and UK already have a high market
markets1) concentration – UK dominated by US players
Southern Europe and SEE not yet advanced and
Study excerpt
offer good opportunities for potential M&A
Polish market especially attractive due to
its car parc size and starting point for
Eastern Europe expansion activities
1) Analysis until 2019
Source: Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 9
2 3 Pan-European and trans-continental consolidation
Regional targets are the focus of the expansion plan of the big players
resulting in many cross-border deals
Number of Geographical
cross-border deals developments
Cross- 48 of the 76 M&A
border 2006 1
Bidder
transactions recorded
deals and 2007 1
Bidder & target
as cross-border deals
geographi- 2008 1
cal focus1) 2009 0
Significant increase in
2010 2
2011 1
cross-border deals in
2012 1
2016-2017 in particular
Study excerpt
2013 6
2014 3
North American
2015 4
companies have been
2016 10
particularly active –
2017 9 20 out of 39 deals
2018 4
2019 5
1) Analysis until 2019
Source: Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 10As acquisition targets have been relatively cheap, auto parts distributors
are now also on the radar of private equity firms
Players Valuation levels
in the buyer universe in Europe
Buyer 61 out of 76 deals
universe Number of deals Maximum Median Minimum conducted by strategic
and investors
valuation 9 6 Revenue 1.4x 0.8x 0.2x
levels1) Financial Financial/strategic
investor investor
In parallel, involvement
of PE firms in M&A
activities has increased
Study excerpt
EBITDA 17.4x 9.8x 3.4x since 2012
61
Valuation levels in
Europe are still
comparatively low
Strategic investor
1) Analysis until 2019
Source: Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 11Additionally to the consolidation process, customer behavior and the
importance of customer groups are changing
Customer landscape
of auto parts distributor
Changing
customer Supplying auto repair shops
and serving the feeder
landscape business as biggest revenue
for auto sources for IAM players today
parts
distributors
Number of auto repair shops
has been shrinking since 2013
Study excerpt
Importance of intermediaries is
increasing as an important segment
in the B2B customer spectrum
1 Current volume; additional potential not included
2 Includes insurers, leasing companies and service providers for insurers/repair shops and online service portals
Source: Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 12Although the study series mainly focuses on the wholesale level,
all aftermarket players are directly or indirectly influenced
A consolidated wholesale level gains market power due to higher volumes and will put
pressure on suppliers and OEMs
Consolidated wholesale players will further optimize their processes and performance and
with it save money to "go for war"
Consolidated players with strong financial power can further push backward or forward integration
with it putting pressure on OEMs and OES as well as workshops
In contrast, due to local market characteristics and direct customer contact, OEMs and OES
won't be able to leapfrog the wholesale level in the IAM
Overall customer characteristics are changing, and consolidated players will try to cover
future profit pools (fleets, leasing companies etc.)
Source: Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 13Winners of the consolidation wave and the changing environment
have not yet been sift out
The value chain has not really
changed but the relationship
between players and the
importance of different levels in
the value chain have changed
Philipp J. Hess the rules of the game.
(Proprietor of Hess Group)
Source: Statement Philipp J. Hess 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 14Within the consolidation process, COVID-19 also has an impact on the
Aftermarket – We expect the IAM as the 'white swan' in post-COVID time
Performance IAM to be more resilient than both new vehicle
I resilience
sales and OEM Aftersales driven by the stability of the
older car parc
Structural
II change
The ongoing structural changes in the IAM in
Europe will be significantly accelerated
Supply chain GLOCAL will become the new GLOBAL,
III reset
with aftermarket players having access to their local
OE sister-divisions' production
Digital Digitalization will rapidly transcend from being a
IV disruption
'to-be' state into a reality of doing business – both in terms
of client access as well as ensuring an air-tight supply chain
Source: Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 151 Performance resilience
Although short-term demand has dropped, IAM GVA is expected to only
marginally reduce vs. historic levels
COVID-19 > Overall level stays constant
has shown Car parc > Share of older and IAM relevant car parc
some will increase, leading to increase in demand
impact
on major
market > Preference of private transport over
drivers Mileage shared modes will go up
> But net effect will be constant because of lower
major Drivers
mobility (driven by unemployment, etc.)
Impact on
> Most non-critical repairs/maintenance
Willingness will be avoided/ postponed as opposed to
crash-repairs
to spend > Spend on non-essentials like upgradations,
accessories and tuning will be probably avoided
Source: Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 161 Performance resilience – Car parc
As seen in the 2007-08 financial crisis and the European debt crisis, the
car parc is rather resistant to negative impact of lost car sales
Index 2006 value
= 1.0
Average PV age increase
of approx. 1-1.5 yrs Resistant to economical
1.3
shocks because of scale effect
1.2
1.1 As new car sales drop the
1.0 average age of the
0.9 vehicle parc increases
0.8
0.7 Additionally, economic disruptions
such as the 2007-2008 financial crisis might
0.6
Financial European have a higher impact on younger
0.5
crisis debt crisis used car volumes (ages 0-3)
0.4 than older used cars (ages 6+)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Passenger Vehicle parc New Passenger Vehicle sales
Source: IHS, ACEA, Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 172 Structural change
One of the most pronounced expected impacts in the IAM is the
acceleration in the structural market changes in Europe
COVID-19 impact
> Increasing consolidation and integration
Market > Increasing relevance of intermediaries
structure > Growing relevance of life cycle management
Deceler-
ation
Acceler-
ation
Stakeholder > Need to retain competitiveness through lean operations and strategic pricing
> Increasing need to access to relevant customer data
needs > Need for specialized and technical knowledge to stay up-to-date
Deceler-
ation
Acceler-
ation
> As Western targeting the growing Asian market, Asian players are entering EU and the US
Big players are moving towards high-value added segments
Competitor >
> Players are increasingly focusing on creating direct contact with workshops
landscape > Despite multiple initiatives, no 'winning' standalone e-commerce model so far by suppliers
Deceler-
ation
Acceler-
ation
> Potentially increasing penetration of OEMs in the IAM with new 'rules of the game'
> Electricals/electronics driving future AM growth
Tech- > Differential regional product strategy needed considering regional maturity, parc structure
nology & quality/price sensitivity Deceler- Acceler-
ation ation
> EV parc volume still sub-critical, but showing readiness important for success
Can move into both directions depending on priorities
defined by the EU/national gov'ts reg. CO2 targets
Source: Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 18Today's accepted principles may no longer be valid in the future –
Are you well prepared?
… react to the consolidation on the wholesale level?
How to …
… stand one's ground against COVID-19 impact?
… integrate new products in your portfolio and expand
the portfolio with customer preferences?
… maintain price control and customer ownership in the
advent of 3rd party intermediaries?
… take the workshops and service partners
with you on the journey towards a digitized future?
Source: Roland Berger 2021_TAYSAD_Transformation of an industry_Roland Berger_vF.pptx 19You can also read
