Aftermarket facing £1.3bn shortfall

The fall in new car volumes over the last three years is set to hit aftersales revenues significantly, according to new research.

According to REALtime Communications, the net result is a forecast shortfall of £1.3bn in new car servicing revenue over the next four years.

REALtime’s insights and data director John Law said: “We are now at a crossroads where higher volume service revenue from the scheduled third (major) servicing of new cars sold in 2019 starts to wash through (at the higher pre-pandemic sales volumes). After that, the traditional scale of activity will be impacted by the significantly reduced scale of new vehicles and the subsequent fall in the first and second servicing of cars sold during 2020 and 2021.

“The numbers evidence very clearly a significant shrinkage in aftersales revenues for the next few years. All the result of 1.8 million vehicles between one and three years old having been lost to the franchise network.”

The impact of a loss of £1.3 bn in revenue could be even more significant. The number excludes additional upsell opportunities, the chance to place customers back in a new car, the acquisition cost of ‘re-acquire’ customers that may have gone elsewhere to purchase their used car, the inevitable impact on aftersales of a growing electric vehicle parc and the unknown impact of any switch to agency retailing models.

The situation is likely to deteriorate further without affirmative action.

Richard Robinson, COO at REALtime Communications, said: “While I’m delighted by the positive impact created by used vehicle sales, retailers should not ignore the pressure on aftersales and its traditional role in supporting overhead absorption. Retailers must look for new ways to increase efficiency and productivity and evolve their operating models to retain and enhance lifetime value customers. This is true for both new and used car sales, notably those recent conquest sales and the all-important service work available to them.”