Paul McCarthy is executive vice president of the Automotive Aftermarket Suppliers Association (AASA), the light-vehicle aftermarket division of the Motor & Equipment Manufacturers Association (MEMA). Prior to joining AASA in 2011, McCarthy led the Automotive and Industrial Products Strategy Practice at PricewaterhouseCoopers (PwC). He conducted work for numerous automotive suppliers, 8 of the top 10 global automakers, private equity firms and financial institutions. He was PwC’s leading global automotive industry subject matter expert, and his analysis was cited in The Financial Times,Wall Street Journal, Bloomberg, Reuters, Handelsblatt, Frankfurter Allgemeine, Les Echosand other publications.
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McCarthy's areas of experience include team and business leadership, M&A strategy and strategic due diligence, market forecasting, business plan reviews, market entry strategy, product planning, competitive assessment, location selection and technology projections. His past experience includes heading PwC Germany’s Automotive Strategy advisory practice and leading global analysis for the Autofacts vehicle and market forecast service.
Responding exclusively to a series of questions posed by Aftermarket Business World, McCarthy recently provided an analysis of the Chinese aftermarket:
Q: What is your overall assessment of China’s aftermarket?
A: I will share with you a few insights from the leaders and the members AASA’s China Aftermarket Forum (CAF). CAF is composed of the senior leaders of international companies active in the Chinese aftermarket and meets quarterly in Shanghai.
The China aftermarket is certainly in the midst of tremendous change. In the past, it has been extremely fragmented. It is slowly maturing with larger players, more organized distribution networks, and tremendous growth in e-tailing and online to offline (O2O) – though the market still has a lot of evolution in front of it.
Each quarter, AASA surveys members of its executive peer group in China, the AASA China Aftermarket Forum, about current conditions in the market. To date this year, CAF members have expressed optimism about China aftermarket growth.
While many forecasts for market growth have been overstated, there is no doubt that the growth rates in the Chinese aftermarket will outpace new vehicle growth rates for the foreseeable future. China’s automotive aftermarket is the world’s fastest growth market in dollar terms and is expected to match total sales in the U.S. aftermarket by 2030.
Q: Are there opportunities available for U.S. aftermarket businesses to consider entering this marketplace?
A: There is absolutely opportunity for U.S. aftermarket businesses in the Chinese aftermarket.
The market is changing significantly and as vehicles age, customers increasingly demand better value in vehicle maintenance, repair and collision work. There is an increasing need for quality aftermarket parts that Chinese consumers can trust. Chinese dealerships garner 60-plus percent of the repair market compared to a 28 percent share in the U.S., which is changing as vehicles age. The independent aftermarket will gain share.
In addition, lifestyle developments and older vehicles are opening up the opportunity for additional market segments, including replacement parts and accessories, which has led to more of our members becoming involved in AASA CAF.
Q: With the controversies over tariffs between the two nations, what are some of the implications for the aftermarket?
A: MEMA and AASA have been a leading voice on tariffs issue.
On behalf of suppliers, we have had multiple meetings with the U.S. Department of Commerce, including with Secretary of Commerce Wilbur Ross, and with U.S. Trade Representative Robert Lighthizer. We have testified and met with senior administration officials and members of Congress, including during our Legislative Summit and special “fly-in” visits, to fight on behalf of suppliers’ interests and advocate for fair and reciprocal trade.
The reality is that tariffs have already affected suppliers and the impact will likely increase. Impacts have run the gamut, including cost increases, profit decreases, improvements in competitiveness, declines in competitiveness and resourcing. Impacts have varied widely by supplier and by product segment – many negative, some positive.
A key challenge for suppliers regarding tariffs is the degree of uncertainty around business planning. What level will tariffs be from the U.S.? From China? How long will they last? Is this a negotiating stance or a new long-term reality? Each of these has different implications of what suppliers need to do to stay competitive and adjust their production and sales. As a result, our members are striving to be agile and flexible to respond to market needs.
The focus of negotiators on both sides on the auto-parts and automotive industry highlights the importance of our industry. Suppliers matter. A healthy supply base is vital for the aftermarket and for consumers globally.
Q: Where can U.S. aftermarket businesses obtain the type of advice needed to facilitate trade with China?
A: Certainly, one resource valuable for suppliers is CAF. For the past 13 years, CAF has been the executive forum for leaders of the Chinese aftermarket businesses of international suppliers. This peer group’s mission is to support the growth of member companies’ business within the Chinese automotive aftermarket. It provides opportunities for executives to network, gain market knowledge and share best practices with industry peers.
More information about the associations’ efforts and ways for suppliers to get involved is available on our MEMA Trade Resources Page.
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