As of November this year, the cumulative sales of new energy vehicles have exceeded the 6 million mark, with a market share reaching 25%, which means that China has achieved the goal of "25% penetration rate by 2025" ahead of schedule.

According to statistics, this year, the total number of auto parts city demolition and closure cases has exceeded 10, including larger-scale auto parts cities such as Dongju Dacheng and Wufang Tianya.

As of September this year, 15,000 repair shops nationwide have been transferred or closed.

Influences such as pandemic lockdowns, increasing vehicle ownership, aging vehicle age, and changes in the new energy track have filled the 2022 automotive aftermarket with "magical colors." Will 2023 be even more anticipated?

1. The trillion-yuan aftermarket remains a "hot cake"

According to authoritative data from the Ministry of Public Security, as of the end of November 2022, the national vehicle ownership reached 318 million vehicles, with an average annual increase of over 20 million vehicles in recent years. Additionally, China's vehicle ownership per thousand people has reached 225 vehicles.

Currently, China's vehicle ownership is growing steadily at about 7% per year. This trend will slightly slow down with the continuous increase in ownership, but it remains far higher than mature overseas markets.Stable vehicle ownership growth means that China's automotive aftermarket still has significant room for development.

On the other hand, from the perspective of the average vehicle age in China, in 2021, the average vehicle age reached 6.5 years, significantly lower than the 10-12 years in mature overseas markets.

According to data from Zhongyan.com, the scale of China's automotive aftermarket industry has exceeded 1.3 trillion yuan, and it is expected that by 2025, the market size for automotive maintenance and care services will reach 1.7 trillion yuan.

With the increase in vehicle ownership and average vehicle age, the aftermarket remains a long-slope, thick-snow track.

2. 2022 Aftermarket Review: "Elimination" Accelerates, "Chaotic Battle" Intensifies

(1) Accelerated reshuffle of auto service stores

Industry media statistics show that in the first three quarters of 2022, approximately 15,000 auto service stores were transferred, averaging about 5,000 per quarter.

Among the transfer information, nearly over 80% are small-scale stores with weak risk resistance. Wash and beauty stores are the main force in transfers. Price wars failed to retain stores and instead accelerated the reshuffle of the wash and beauty industry.

This year's "Golden September and Silver October" has clearly lost its momentum.

Data shows that compared to the same period last year, the number of vehicles entering shops in October dropped 23.3% year-on-year, and the cumulative number from January to October dropped 11.6% year-on-year.

Local pandemic lockdowns left stores with no business, but fixed costs like rent continued; consumer car owners are younger, paying more attention to brand awareness and service models, which poses a great test for store operations.

With the relaxation of pandemic policies, the industry as a whole will gradually recover its former prosperity. For big players, time is limited, which will lead to more intense market competition. Under this background, the industry may accelerate the elimination of a batch of stores.

(2) Tide of 4S system withdrawals

Data from the China Automobile Dealers Association shows that in November this year, China's automobile dealer inventory warning index was 65.3%, reflecting a very severe automotive market environment.

Affected by the pandemic and controls, 41.2% of dealers experienced temporary closures, most lasting over two weeks; 73% of dealers failed to meet sales targets, with 61.1% achieving less than 80% of targets.

Frequent closures have been almost fatal to physical store businesses. A store in Guangzhou closed for just one week, and November sales dropped at least 30%, with dismal business.

Therefore, this year's 4S stores also faced a severe wave of withdrawals. Statistics show that about 11 stores close and withdraw daily.

Besides closures and withdrawals, 4S operations this year seem to have also suffered a "heavy blow."

In early December, the All-China Federation of Industry and Commerce Automobile Dealers Chamber announced that as of the end of the third quarter, more than half of 4S stores were in loss-making status, over 50% of enterprises reported severe cash flow pressures, and there were even cases of long-established 4S stores running away.

The impact on the 4S system also comes from changes in automakers.

According to incomplete statistics, in 2022, over 20 automakers disappeared. As automakers exit, stores with weak resilience are directly eliminated by the market.

(3) New energy after-sales competition intensifies

In November, new energy vehicle sales reached 786,000 units, with a market share of 33.8%, hitting a new historical high.

Amid the overall slowdown in the car market, the increase in new energy vehicle sales has made this track even hotter.

In 2022, automotive aftermarket companies and traditional OEMs have all laid out new energy, gradually gaining momentum, making new energy after-sales a hot topic for 2023.

In the new energy era, the 4S system is also gradually breaking brand restrictions to compete for more brands' after-sales business. Most new energy after-sales are authorization-based, whether independent after-sales or 4S systems are vying for authorizations and seizing positions first.

(4) Automakers also "sell insurance"

This year, the "conflicts" between repair shops and insurance companies have been making headlines, but more noteworthy is automakers "venturing into insurance."

New and old players like NIO, BYD, BMW, etc., have all been linked to insurance brokerage licenses. Automakers bundle "car + insurance," opening new business segments. The industry believes this is value-added service for users, enhancing customer stickiness while creating new revenue streams.

Tesla's self-operated insurance plan started as early as 2019 and is still implementing insurance subsidies today. NIO packages car insurance into "Worry-Free Insurance" or "Worry-Free Service" packages and sells them to customers.

From another perspective, after-sales remains a "piece of fat." Automakers not only want to bind customers but also drive accident vehicle output value and parts sales through insurance.

(5) Auto parts market still "unpredictable"

According to automotive parts industry statistics, China's auto parts sales revenue is expected to reach 5.2 trillion yuan in 2022.

In 2022, auto parts "going overseas" became a hot topic:In the first 8 months of this year, auto parts export value reached 53.9 billion USD, approaching the full-year 55.12 billion USD in 2018, showing that China has become an indispensable "world factory" in the global automotive supply chain.

Except for a few leading companies advancing steadily, most auto parts companies may still be exploring new "paths" in uncertain times.

From the beginning of the year, auto parts cities have faced issues like "logistics standstill and lockdowns," as well as demolition, rectification, and closures. Among them, the closure at the end of August of Guangzhou's 22-year-old Lao Zhiyou Auto Parts City had a significant impact.

According to public information,this year, there have been more than a dozen cases of auto parts city demolition and closures, with demolition and rectification becoming the "main melody" for most auto parts cities.

(6) Digital capability innovation and upgrade becomes a must for aftermarket participants

According to the China Automobile Dealers Association, over 90% of automobile dealers have started digital transformation.

The pandemic has objectively accelerated the digital transformation of upstream and downstream enterprises in the industry chain and upgrades in operations management.

In recent years, discussions and practices on "digitalization" across industries have become routine and essential. In the aftermarket, parts manufacturers and repair ends have faster digitalization progress compared to other segments.

International brands like Michelin, Continental, Mobil, Shell, Castrol, Bosch, NGK, etc., have the broadest digital influence.

Downstream in the industry, in the digital journey of repair stores and car owners, integrating "people, goods, and market" connects car owners-stores-backend supply chain services into one, making services more efficient and improving customer experience.

In Closing

2023 is approaching, with opportunities and challenges coexisting in the aftermarket, and all players are gearing up for a breakout.

What we can see is that the opening at the end of this year will bring greater changes to the aftermarket, and the future is worth looking forward to.

"Open win-win" is a perennial topic, and the aftermarket is no exception. Cooperation between upstream and downstream in the industry chain is opening up slowly in different forms and will continue.

In 2022, as some exit the stage, others enter, the market always maintains balance. Being friends with time, surviving is the best answer.