Globalization and the Aftermarket

China’s rapid industrial and financial growth continues to reshape the global economic landscape. That influence is now making itself felt in the automotive market and soon in the aftermarket as well.

China’s increasing economic clout, along with the growing influence of India and even Russia and Easter Europe, are changing the global dynamics of car sales and manufacturing. The major North American automakers are starting to see their overall global influence being challenged. To counter this, the North American manufactures are moving aggressively into these foreign markets, manufacturing cars overseas. This has proven quite successful, and companies like GM are discovering they are now more successful in China than in their own backyard. The biggest challenge GM and others face is trying to make even cheaper cars for these markets.

To do so, car manufacturers are not only building plants and designing vehicles that are specific to the Chinese, Indian and even Russian markets, but are also looking to partner with local aftermarket parts makers to be sure there are enough parts for these vehicles when it comes time to later service them. These parts manufactures are now starting to move into the North American market and that will likely change the dynamics of the aftermarket here.

It is easy to dismiss these ‘White Box’ makers as purveyors of cheap and sometimes dangerous goods, such as the recent reports or Chinese tires failing and having to be taken off the market. However, one has to remember that in the 1950s when Japan entered the electronics markets their products were dismissed as junk. But after a time, the quality of these goods surpassed North American and European products, and soon dominated the world market. ‘Made in Japan’ came to symbolize quality and excellence. The same happened with automobiles.

Right now, Chinese-made aftermarket parts may not meet the standards we have come to expect. I predict in a short time, however, those products will start to compete in quality with North American aftermarket parts and at a better price. This will affect the North American aftermarket as there will then be a larger number of parts companies competing to reach service providers with products.

The current homegrown players will have to meet that foreign challenge on many fronts in order to keep their service provider customers. How they meet those challenges will likely change the economics of the aftermarket and how service providers do their business and meet the needs of their customers. How things will eventually take shape will be something to watch, but it is a safe bet the aftermarket in 10 years times will not look the same as it does today.