Switzerland is a rugged landscape dotted with incredible beauty, and the national psyche matches their terrain. The Swiss are known for their discreet banking laws, strict political neutrality and sweet confections. But just as important to the Swiss identity is a dedication to precision, an embrace of individual liberty and a sense of ruggedness in the face of nature.
These elements of the Swiss psyche combine to make a dynamic market for automobile sales and the aftermarket that has developed from it.
Many people see Switzerland as one relatively small country. It is in fact more like 26 even smaller states, called cantons, that make up Switzerland. The 26 cantons are each independent, but all contribute to a loose federal system that was established in 1848.
Switzerland doesn’t have an official language. Rather, it has three of them. Depending on where you live within the country, you might speak German, French or Italian, with German being the most prominent. Most Swiss tend to speak more than one of these languages, but speaking English or Portuguese is also rather common.
With a population of slightly more than 8 million people, Switzerland is not a big population center, and demographics indicate an overall shrinking population due to more people aging than being born. This is a common factor throughout Western Europe.
Yet, the Swiss economy outperforms its size, placing it 40th in the world with a gross domestic product (GDP) exceeding $500 billion. Due to its modest population, the per capita GDP ranks 14th, globally, meaning it’s a relatively wealthy nation. How do they derive that wealth?
As a country lacking many raw materials and a limited agricultural output, Switzerland was forced to develop an economy built on transforming imported raw materials into high-added-value goods destined for exportation. Think of items like Swiss chocolates or watches as examples. Swiss banking laws favoring secrecy and privacy also have made the nation a haven for wealthy investors. Tourism also is an important industry in a country rich with natural beauty.
The density of motor vehicle registrations in Switzerland is quite high, with 4.5 million registrations as of 2016, which makes approximately 556 vehicles per 1,000 people. Counties with similar GDPs like Argentina and Saudi Arabia, average about 330 vehicles per 1,000 people. Contrast that with the U.S., where there are 800 vehicles per 1,000 people. Switzerland ranked 22nd in the world for vehicle population density. However, this dense population of vehicles doesn’t necessarily translate to a diversity of vehicles.
Using 2016 as the last full year for which statistics are available, the Swiss auto market was dominated by European brands. The Volkswagen group (Volkswagen, Audi and Skoda), accounted for 26.5 percent of all sales. BMW and Mercedes were good for second and third place, respectively, at 7.8 percent and 7.5 percent.
Rounding out the top brands were Renault, Opel, Ford, Peugeot and Toyota, in that order. The best selling individual models, VW Golf and the Skoda Octavia have a 3.8 percent and a 3.7 percent respective market share. The two vehicles, along with the Audi A3 (1.3 percent share) are built on the same platform. Vehicles made in the U.S. do not play any significant factor in this market. In fact, the top selling U.S. vehicle is the Jeep Grand Cherokee, which ranked 88th in sales volume, totaling 1,180 units sold (0.3 percent share).
Exports of automotive parts to Switzerland from the U.S. peaked in 2004 at roughly $13 million. However, the global recession of 2008-2009 sent exports from the U.S. plummeting to $4.6 million. Since then, there had been consistent annual gain, and sales had rebounded to $8.7 million dollars in 2015. But 2016 was a bad year for U.S. auto parts exports, diving back down $6 million. The declines were led primarily by component parts (steering gearboxes, for example) and by body and collision parts. There was, however, improvement in the accessories business, which grew by 11 percent in 2016.
One factor cited for the declining sales of U.S. exported automotive parts is the declining share of American vehicles in the Swiss market.
“Up until 2010 or so, they were making Jeeps and Caravans for Europe in Austria,” said Ara Sakayan, CEO of Eximus Corporation, a New York-based exporter of aftermarket products. “While there were never too many sold, we could always count on a steady stream of business for these vehicles from throughout Europe. But since they shut down production in 2010, we’ve seen sales for these vehicles slowly declining.”
Another factor driving sales lower is strict European Union rules government product safety and manufacturing standards. For many manufacturers, the additional costs associated with compliance with those laws isn’t worth the profit that could be made. For example, the E.U. has strict rules about brake pad frictional material formulations. For this reason, many suppliers have dropped out of selling to those markets.
In the case of Switzerland, exports of U.S. made brake pads were roughly $500,000 a year in 2006. In 2007, when the law took effect, exports dropped to nothing. Similar standards for lighting have impacted that business, but the statistics for lighting are not broken down by the United States International Trade Commission.
“We lost several lucrative accounts in Switzerland and throughout Europe when the brake pad rules took effect,” said Sakayan.
A third factor that impacts aftermarket sales in Switzerland is the lack of do-it-yourself (DIY) vs. do it for me (DIFM). While the U.S. aftermarket gets approximately 25 percent of its sales from DIY consumers, the vast majority of Swiss consumers, more than 95 percent, are strictly DIFM.
Adding even more to the difficulties U.S. exporters face in Switzerland, OEM service is the dominant provider of service to vehicles in that market. Independent service, such that it exists in Switzerland, accounts for less than 20 percent of service related sales. As an example, those numbers would be almost exactly reversed in the U.S. The service work not going to OEM dealers, is further spread to dedicated service centers operated by parts manufacturers, such as Bosch or Delphi.
While there are significant challenges for American exporters to succeed in the Swiss market, viable opportunities still exist. According to Sakayan, “the buyers we are selling the most to these days are interested in innovative accessories. They are buying mostly accessories for Jeeps and other SUV’s, including towing kits, hitch mounts and canvas tops.” Most of his customers, Sakayan said, were met at trade shows like Automechanika Frankfurt or AAPEX in Las Vegas. “There are not many customers to sell to,” he said, “but the ones we have, we have been working with for a long time.”
Switzerland does host a few shows of its own. For motorcyclists and tuners, there is the Swiss-Moto Show which is held in Zurich each winter. Also for tuners is the Swiss Car Event held in Geneva every June. For those more interested in the heavy-duty segment, there is the UTILEXPO show, also based in Geneva, and is held in even numbered years. Of course, most of the traditional “hard parts” business is conducted at the Automechanika Frankfurt show, also held in the fall of even numbered years.
Those manufacturers who have either non-application specific parts or those who have a strong range of European parts offerings should consider selling to Switzerland. However, it is important to be mindful that the market is highly demanding of quality and innovation. Most parts distributors in Switzerland look to Europe first when seeking suppliers, therefore participating at a European trade show would be a promising idea. Due to many reasons, Switzerland doesn’t offer the same array of sales opportunities other, perhaps larger, markets do. But those that do find opportunity in the Swiss market will benefit from a strong economy and stable political environment.
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