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Evolving Russian vehicle market will reshape aftermarket sales

Monday, August 28, 2017 - 07:00
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Russian aftermarket difficult to measure

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The size of an aftermarket often is difficult to evaluate and that is particularly true in Russia. The reasons for this include the fact that there are no official statistics and the market is divided into several different reporting areas. For example, data may exist depending on the age of the car, the sales channel it was sold through, illegal or private importation, or some other such methodology.

There are several local firms that have attempted to do an evaluation of the size and the development of the aftermarket. Estimates from the Russian automotive statistics company Autostat indicate that there has been a steady increase in the aftermarket since the 2008-09 global recession. The reasons for this are attributed to a continuous growth in total vehicles in operation (VIO), which currently stands at 48 million units.

Messe Frankfurt, a trade show organizer that is responsible for several aftermarket exhibition events in Russia, including the MIMS Automechanika Moscow that was held in August 2017, estimates that the Russian aftermarket consumes about 2 billion units annually. They calculate that the market is valued at approximately US$65 billion.

Based on their figures, the Russian aftermarket outsells the OEM market by three to one. One of the key growth drivers in the aftermarket is the continuing deterioration of highway infrastructure. As such, tire sales account for nearly 12 percent of all aftermarket sales, followed closely by steering and suspension components which is estimated to be about 10 percent of the market (US$6.5 billion).

Servicing a car in Russia can be accomplished several ways, often depending on the age and origin of the vehicle. Newer vehicles are more often serviced at a certified branded garage or new car dealership, especially while under warranty. When the car is older, it is more often the uncertified/unofficial garages that take over both service and repairs.

Additionally, there are even more local unofficial garages and a growing DIY segment. Locals have devised an unofficial color coded system for designating the segments. White is the official, certified repairs and service with original spare parts, about 40 percent. The Grey market is mostly repairs by uncertified garages, which may use known brands, or more likely, with value brand or counterfeit spare parts, 35 percent. The Black market, which is mostly the worst of the uncertified garages and DIY, often use value parts or counterfeit spare parts, 25 percent.

Russian car dealers believe the strongest market opportunities are shared between the White and Grey markets. Dealers don’t consider the DIY segment as a competitive threat. In the context of their thinking, it is important to underline that the DIY segment is relegated to the cars produced within Russia, as they traditionally have been much simpler in their manufacturing, and thus easier to maintain on a personal basis.

Distribution segment

Distribution in the Russian aftermarket has its own unique peculiarities due to the massive landmass that is Russia. National level players tend to be few and far in between. Among the largest is Automag. While they claim a national footprint, they are essentially franchised locations spread around the country, but mostly clustered around Moscow and other major cities.

AGA is a large retailer of auto chemicals, appearance products and accessories. Koreana, as its name suggests, specializes in Korean vehicle parts and has more than 200 locations around the country. They also operate 65 repair facilities in the northwest, more European part of Russia. Rounding out the national level players is Avto49 and Bi-Bi (pronounced buy-buy), a single company with two sides to its operation. Avto49 operates stores and about 70 repair facilities, while Bi-Bi specializes in internet order fulfillment.

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