The big parts shake-up: How EVs will hit your profits
There’s a big shake-up coming our way, and you and your workshop need to be ready. That’s the key take-home message from a major report into the next decade of the global automotive aftermarket industry by the expert analysts at McKinsey and Company—and there are lots of opportunities for those preparing now. Called Making Every Part Count, the report looks at disruptions in the automotive aftermarket for light vehicles—specifically the parts market—until 2030. It uses an analysis of the technological trends impacting 100 key vehicle components to forecast probable effects on workshop revenues. It incorporates some of the major shifts in the industry abroad, including digitisation, electrification, autonomous driving and shared mobility. While the report used the US, European (UK, Germany, Italy and France) and Chinese markets to calculate its results, and did not include Australia and New Zealand, it does at least give us a clear indication of the trends we’re likely to see here, too.
It’s all about your bottom dollar Let’s start with some good news. McKinsey forecasts a 15% growth in the size of the car parc between now and 2030. That’s a slower pace than in the past decade but still a healthy pipeline for workshop owners. What workshop owners may not be quite so prepared for is what McKinsey called “a very significant paradigm shift”—the increasing electrification of that car parc. “Despite regional differences in the adoption of electric vehicles (EVs), globally the share of EVs is expected to rise from approximately 2% in 2019 to 17.8% in 2030,” the report says. That’s according to McKinsey’s base case (or least disruptive) scenario. Anecdotally, there’s a reluctance among workshop owners and others in the automotive aftermarket in Australia and New Zealand 2 6 CAPRICORN IGNITION DECEMBER 2021 JANUARY 2022
to believe EVs will be a part of our future. State of the Nation 2021 found less than 20% of Members would be ready to service EVs any time soon. But a separate report from the Automotive Aftermarket Suppliers Association (AASA), released in 2021, warned workshops and suppliers to expect “accelerated adoption” of EVs as soon as the total cost of ownership reached parity with traditional internal combustion engine vehicles (ICEs). The AASA expected that to happen “in about five years”, if not sooner “if ambitious battery cost targets are achieved by key OEMs”. The other potential major accelerator of EV adoption could be government regulation. Although the Australian Government, in particular, isn’t leaping towards regulating against ICEs in favour of EVs, there’s no guarantee that won’t change in the future— especially as governments try to reach the carbon emissions targets agreed to as part of their climate change commitments.
How the experts see the disruption to come The switch to EVs brings with it a wide range of problems, not least of which is tooling up your workshop and training your workforce. But beyond those obvious challenges, the McKinsey report points out that the market for conventional parts is set to transition to meet the demand for EV parts. “Overall battery EVs (BEVs) have fewer moving parts, less wear and tear and, thus, significantly lower maintenance costs,” the report authors state.
