Though private vehicle ownership might decline in the years to come thanks to trends like car sharing and e-hailing, commercial vehicles will not be sharing the same fate, especially in the European market.
This will be due to a couple of factors.
The first is that the coming years will register a strong economic revival in Europe. It could register a GDP growth at CAGR of 2%. The reason behind the growth, though seemingly less but significant, are that Russia and Italy are expected to show strong growth in their respective economies. The Russian market recovery is on its way with growth in GDP and CV sales. Besides that, Italian market has the oldest vehicle parc and it is likely to continue its steady rise.
Frost & Sullivan’s research shows that another reason could be that by 2023, there will be 16.7 million vehicles in the prime repair age (4–11 years), which might mean more work for the service providers. More work is good, as it means a 6% increase from 15.8 million revenue in the last year.
Increase in truck sales also makes a strong case for the growth, which will be at a CAGR of 1.7% until 2023. The truck population in the market (excluding Russia) is estimated to grow from 38.9 million (in 2016) to 44.2 million (by 2023). The growth by over five million is likely to escalate the revenue of OES parts and services.
Adding to it is Uber’s influence.
Uber’s ridesharing business model has worked out well for the company and its success is likely to be adopted in the commercial vehicle sector as well. The thought of adopting such a model in the commercial vehicle sector might seem more like a survival strategy. But in the coming years, this survival strategy might work with flying colors in the commercial vehicle market in Europe.
- Time is the biggest constraint in this situation. The products are expected to be delivered in the shortest possible time. This is a challenge in itself because it is not always possible considering logistics constraints across countries within Europe.
- Quality: The product quality concerns much to the Western Europe than other parts of the continent. Euro6 regulations have made fleets more wary of regulatory issues and consequently, impacted supplier choice among distributors. Stringent emission regulations – all across Europe, manufacturers are required to meet the standard. IAM suppliers have to produce acceptable standard quality parts.
- Price: It is the biggest factor dealing in Eastern Europe and Russia. Pressure from OEMs and buying groups regarding the price has also increased.
- Rising labor rates could also be a challenge.
If the commercial vehicle aftermarket tackles these challenges head on, then they are looking at a lucrative market. The next five years are crucial.
Sachi Mulmi is a researcher with Frost & Sullivan. She can be reached at firstname.lastname@example.org
Sapan Agarwal drives content and marketing for Frost & Sullivan. Sapan is based out of Kuala Lumpur Malaysia and can be reached at email@example.com | +603 6204 5830