Reminders

The paradox of aftermarket sales in Indian auto industry

By S Ramachandran – May 2, 2014
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Revenue for automobile OEMs does not stop with sale of new vehicles but continues throughout its life cycle due to sale of spares parts and service. Today, the percentage of revenue from aftermarket as a share of revenue is in single digits and there is an opportunity to double it in the long run with meticulous planning, investments in appropriate technology and execution. There seems to be a paradox in some quarters that revenue from aftermarket segment could be due to poor quality of parts, which is not true. All parts have limited life due to wear and tear. If the life of critical parts can be predicted using physics based or analytical models and backed by field data, there is an opportunity to be tapped. This could translate to a regular revenue stream from replacement of parts nearing the end of their life. Revenue from aftermarket sales can be much more predictable and steady compared to new product sales.

 

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