PMM hears from Quentin Le Hetet, General Manager at GiPA UK, and Tristan Kitchin, GiPA’s Research Manager, who look at how some of the industry’s big motor factors’ attempts to consolidate market share could affect the independent aftermarket.
The ‘independent’ aftermarket
With a total of 35.2 million passenger car workshop entries in 2016, the UK aftermarket has proven to be an appealing area for business. It currently has the fourth largest passenger car parc in Europe with 30.85m cars, and is quickly catching up with third place France on 30.9m cars. But forget the figures; what makes the UK so attractive is its market make-up. Unlike its European neighbours, whose aftermarkets are home to large business chains, the UK is largely dominated by independently run businesses. There has, however, been a shift in recent years. The independent aftermarket is still largely independently run, but a handful of larger players have sought to consolidate their market position, and at every level of the supply chain.
The consolidation movement: motor factors
In an increasingly competitive marketplace, with tightening margins and an increasing number of layers, efforts to consolidate market share have seen some businesses move from building partnerships into acquisitions, targeting local companies and regional and national groups across the UK. Buyouts have become commonplace in distribution channels, but this movement has not just been limited to distributors – it has had an impact on garages as well.
The consolidation movement: garages
Currently, around 12% of all independent garages in the UK belong to a network, and this figure is on the increase. Around half of these 12% are members of the network run by one of the ‘big three’ distributors. These three have been recruiting repairers to their networks for years, and this has become as important to their market consolidation efforts as the acquisitions at the distribution level they have been making. The larger the garage network, the larger, and more consistent, parts sales for their distributors.
Catching up with Europe?
Although this movement may be new to the UK aftermarket, it is not limited to home shores. Indeed, Germany and France have been experiencing consolidation in the independent aftermarket for years. Germany is a prime example – its IAM has been slowly merging together since the fall of the Berlin Wall. First at the installer level in the 90s, picking up speed at the wholesale level in the 00s, and then at the manufacturer and trade levels in the 10s. Today, in Germany, around 50% of independent garages are a member of a network. In France, this figure is around 56%. Both are significantly higher than the 12% seen in the UK.
David vs Goliath?
The UK’s largely independent make-up is what makes it so enticing for businesses hoping to gain a foothold, hence the many large transactions that have been occurring since 2011. The UK IAM’s potential for growth and low barriers for entry have made the UK a prime target for newcomers who simply want to buy in. But the UK is, to an extent, seeing the same thing that happened (and is still happening) in Germany and France.