While many trade shows around the world have lost their luster over the past decade as new product showcase and sales technologies have emerged, such as webinars and web-based trade shows, and travel, exhibition and marketing budgets have been cut, there is still value in attending and exhibiting at Messe Frankfurt’s Automechanika Shanghai.
For anyone interested in the global automotive aftermarket Automechanika Shanghai 2016 was the place to be November 28 to December 3, 2016. Situated in the world’s fastest growing new car market, with a broad base of automotive component and repair equipment manufacturing, Automechanika Shanghai is a vibrant trade show. After only 12 years this annual show competes with other large shows. Why is this happening?
Until recently the main focus of China’s automotive industry was on new cars and all things OEM. Japanese model ‘4S Dealerships’, so designated by an OEM for their commitment to handle Sales, Service [both mechanical/maintenance & collision], Spare parts and Surveys for them, have dominated the maintenance and repair markets. While the focus was on the rapidly exploding new car and 4S side of the light passenger automotive industry, a strong unregulated, underground aftermarket was also evolving, as illustrated by the commercial success of parts ‘markets’, ‘malls’ and ‘cities’ found in virtually all of China’s Tier 1 and Tier 2 cities.
A number of events in China have converged to change the shape of its automotive aftermarket. Probably the most significant are the new national regulations implemented in the fall of 2014 which officially recognized and authorized non OEM parts usage in repair, but stipulated, in part, that all officially sanctioned aftermarket parts, including those used for mechanical, maintenance and collision repair, be certified as comparable to their OEM counterparts. Part certification in China is a work in progress with familiar names like NSF and CAPA, as well as others, staking out territory.
Another significant evolution affecting the aftermarket is the change in attitudes toward used car ownership and the increased availability of newer model used cars in the market. Just a few years ago used car ownership was considered socially undesirable. Only new cars brought status. Used cars brought a certain level of disdain. That was before tens of millions of cars bought in the early 2000s, the beginning of China’s modern private passenger vehicle boom, came off warranty. People began to sell older cars, which are particularly popular in Tier 2 and Tier 3 cities, to make way for an upgrade. The buyers were thrilled and are no longer stigmatized.
The aging of the vehicle fleet has also expanded the sweet spot for aftermarket parts and products. In 2016 the average age of a light passenger vehicle in China was 4.5 years. Approximately 25 million light passenger vehicles were sold the first 11 months of 2016, which brings the size of China’s entire fleet to more than 200 million. Chinese government predictions indicate that the pace of new car sales will slow to 2 percent to 6 percent, down from the 14.1 percent year on year increase reported in November, 2016. No matter how one calculates the growth rate, the opportunities in China’s automotive aftermarket are huge.
In terms of purchasing opportunities, quality manufacturing is more prevalent than in the past. There is an increased awareness of buyers’ quality and safety demands. With the right quality control systems in place and, if deemed necessary by the buyer, monitored – perhaps by a third party – there is no question that many Chinese factories are capable of producing high quality products.
But don’t come to Automechanika Shanghai to see only products made in China. Exhibitors from 42 different countries and regions were well represented among the 5,756 exhibitors in 2016 – an increase of 7 percent. There was strong representation in the form of 18 country pavilions representing Germany, Hong Kong, India, Indonesia*, Italy, Japan, Korea, Malaysia, Morocco*, Pakistan, Poland, Singapore, Spain, Taiwan, Thailand, Turkey, UK, USA and new in 2016, Morocco and Indonesia.
And if you want to sell foreign-made products, especially those from the U.S. and Europe are considered the highest quality and continue to be in demand. With that in mind, however, it would be wise to conduct some market research in advance about competitors and the best approach to market to potential customers. Too many foreign companies have failed in China as a result of their lack of understanding about the market and consumer behavior. A little investment up front can go a long way in saving money in the long run. A visit to Automechanika Shanghai can help in that regard.
China’s automotive aftermarket lacks a robust channel of distribution. So any distribution products or services adaptable to China are in strong demand. A success story in this arena is the China Automotive Aftermarket Part Alliance (CAAPA), which was established in December 2014 and introduced at Automechanika Shanghai that year. This initiative involved the coordination of five Chinese warehouse distributors collaborating to join the U.S. based Automotive Aftermarket Parts Alliance (the Alliance) to capitalize on its operational expertise, management support, an efficient e‐commerce platform, and proven branding skills.
In-demand products include anything related to SUVs, which are the fastest growing segment. There is increased emphasis on hybrid and electric technology. While regulations prohibit certain external aspects of “tuning,” the Chinese love to customize their vehicles. The 2016 exhibition featured specialized zones, including Connectivity, E-mobility & Infrastructure and Motorsport & High Performance/Wheels & Rims, all areas of significant interest.
The number and sophistication of fringe programs in 2016 was impressive. Each session observed had hundreds of attendees. There is still room for improvement on the number of programs available with English translation enabling more international attendee participation. This is recognized and might be improved in the future.
Two programs of particular interest for collision repairers were the official rollout of FIX Auto China, a division of FIX Auto World, headquartered in Canada and Twinway International’s Summit which focused on the importance of on-going training in repair shops. Twinway is a Chinese-based company which provides a range of service and training products for repair shops.
The FIX Auto China rollout was promoted by the China Automotive Maintenance and Repair Association (CAMRA), China’s national association for all aspects of auto repair. China’s collision repair industry is ripe for franchises and American style multi-shop operations for a variety of reasons. As the vehicle parc ages, consumer loyalty to OEM backed 4S dealership repair options wanes, the demand for high quality independent repair options is growing. It is questionable as to how many of the approximately 100,000 collision repair shops are capable of reaching the desired performance level without significant investment, training and coaching. Additionally, China’s auto insurance industry is maturing and the concept of Direct Repair Programs is currently being introduced.
The Automotive Aftermarket Summit provided an insight into the distribution channel including restructuring product mix and standardizing to meet repairer needs, expanding businesses and learning about overseas opportunities. While content was geared to a Chinese audience, other attendees found value in this session.
Held for the second year in Shanghai’s new, modern National Exhibition and Convention Center, approximately 120,000 visitors from 140 countries and regions attended Automechanika Shanghai 2016. Automechanika Shanghai 2017 [http://automechanika-shanghai.hk.messefrankfurt.com/shanghai/en/visitors/welcome.html], will be held November 29 to December 2, 2017.
Editor’s note: Karen Fierst is principal at KerenOr Consultants, which is entering its 21st year providing business, market and strategic development services for the global automotive aftermarket.
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