Even though global automotive supply chain manufacturers have mostly invested in the development and production of electric vehicles, the old car repair market still remains. As automotive component customer demand has changed, global original car manufacturers (OEMs) are turning to the Taiwan After Market (AM) supply chain to place orders for OEM parts with companies that are originally AM manufacturers.
Overview of the Automotive After-Sales Service Market
In the environment of the vigorous development of electric vehicles, Taiwan's automotive component supply chain has not only obtained the opportunity to develop electric vehicle components, but has also won the favor of major automakers, and has been able to penetrate the original factory logistics system and expand its operating territory. In addition to supplying the components needed by car manufacturers for the assembly of new cars, manufacturers need to meet the needs of car owners for subsequent maintenance. Traditional OEM automotive component factories will often have to prepare materials to supply the need for spare parts for five to ten years after the new car is discontinued. This is also one of the reasons for the higher cost of original components.
Taiwan’s auto parts and components manufacturers were the first to focus on the AM market, focusing on the best-selling car models on the market to develop self-developed components. Consumers or maintenance plants can choose different sources of parts to replace, and the price is significantly lower than that of the original parts. In addition to product prices in the AM market, a complete range of products is also an important competitive condition. Taiwan's automotive component industry also has international competitiveness because of its complete product range.
With the advent of the new generation of automobiles, automakers are actively developing electric vehicles. At the same time, the supply chain system is also responding to the needs of automakers, accelerating the development of relevant parts and components for the needs of electric vehicles. With a large burden, Taiwan's auto components have thus obtained greater business opportunities. One component factory pointed out that a car manufacturer came to Taiwan to place an order, and this effectively reduced the supply cost of replacement parts for old cars.
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Classification of automotive components:
Taiwan’s auto parts are simply divided into original factory car parts and after-sales repair parts. The original factory car parts can be divided into original factory commissioned manufacturing (OEM) and original factory commissioned to design and manufacturing (ODM). These are all used in new cars. After-sales repair parts can also be divided into Genuine brand parts, and Original Equipment Service (OES) parts. After the vehicle has been used for some time, the after-sales repair parts used for vehicle maintenance can be replaced by the original parts, or other non-OEM parts. These no-OEM, (AM) parts are mostly used for repair and modification.
Most of Taiwan's component manufacturers focus on the AM market. The market is limited to mainly the domestic market and exports to the United States and Europe. Taiwan’s collision replacement components account for more than 80% of the global market, and it supplies more than 90% of global plastic AM products. Taiwan’s high market share in the U.S. and European markets makes it the world’s leading collision components supplier for such components as sheet metal parts, bumpers, etc.
- AM industry characteristics:
The demand for automotive AM components stems from automotive maintenance and modification. Most manufacturers use reverse engineering to develop molds. After successful development and mass production, most of them are sold to overseas markets. The following describes the characteristics of the AM industry:
- Reverse engineering import technology is required: Retrospectively design according to the original OEM parts, reconstruct the surface data, and then copy the components. Once the data is established, the drawing can be changed and innovated.
- Highly dependent on mold development technology: Mold design and development are carried out according to the drawing data completed by reverse engineering. Once the development is successful, mass production can be carried out.
- Flexible manufacturing with a small amount and variety: The flexible manufacturing characteristics of a small amount and variety to meet customer customization are the main reasons for attracting foreign customers.
- Most of the products are exported abroad: As the number of foreign cars is increasing, there will be more demand for AM parts for maintenance and modification, mainly in Europe and the United States.
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Where the AM market is:
After-sales parts for car lights have a positive relationship with car ownership, road usage, and road driving length. Global car ownership is estimated to reach 1 billion by 2030, and North America is the largest car ownership market, reaching 250 million. It accounts for 40% of the global car ownership, and it is also a potential market for AM parts for emerging markets where cars have not yet been popularized.
AM Markets in Europe and America:The United States is the world’s largest AM market. Car insurance rate is nearly 90%, therefore, insurance companies influence the repair market. When consumers have car repairs, because most repairs are paid by insurance companies, most consumers choose OE parts for repairs. OE parts account for 80%, while AM parts account for only 14 %. The rest are recycled parts accounting for 6%, which shows the influence of American insurance companies on the AM industry. Quality of products is maintained through their verification systems, such as CAPA (Certified Automotive Parts Association), AQRP (ASSURED QUALITY REPLACEMENT) PARTS).
The relatively large-scale AM suppliers in Europe include Spain and Italy, but the speed of developing molds is much slower than that of Taiwan AM manufacturers. However, European consumers have a relatively high acceptance rate of AM parts, reaching 30%. After the North American market, Europe is the second major overseas market for Taiwanese AM parts manufacturers.
AM market verification system for Europe and America:
To ensure the quality of AM products and increase consumer confidence, the European and American markets have adopted a professional product verification system to check the products. The professional certification system ensures the quality of AM products and suppliers so that the quality of AM products can be checked and inspected.
In Europe, there is an E-Mark certification system whose purpose is to confirm product quality and set barriers to product competition. The relevant regulations on vehicle parts and components are called ECE regulations. There are 114 articles, ranging from R1 to R113 and RE3. Its certification bodies include That cham in the United Kingdom and IDIADA in Spain.
Comparison of Original Auto Parts (OEM) and Sales Service (AM)
OEM parts sales are large and stable, but the gross profit is often compressed by upstream OEMs, and the gross profit margin is usually less than 10%.
AM parts are produced in small quantities and are diversified. Although the gross profit can be as high as 30%, the source of orders is relatively unstable. Due to the stricter quality requirements and control of original auto parts, only a few manufacturers in Taiwan can meet the standards, so most manufacturers still mainly export AM products.
Outlook of Automotive After-Sales Service Market
With the advent of the new generation of automobiles, automakers are actively developing electric vehicles. At the same time, the supply chain system is also responding to the needs of automakers, accelerating the development of relevant parts and components for the needs of electric vehicles. With the increased demand, Taiwan's auto component manufacturers have obtained greater business opportunities.
Taiwan AM manufacturers will continue to focus on foreign sales in the future, expanding their market share and further entering the international supply chain. In addition to actively transforming from AM to OEM, they are also upgrading from traditional components to automotive components, and the market is also shifting from European and American markets to China in emerging markets. Taiwan uses its flexible production and ICT industry advantages, hoping to make good use of these advantages to expand the global market and create good results.
