• Rising valuations in the segment.
• Increasing variances in demand and value trajectory among component clusters and vehicle categories. This is particularly obvious when compared to traditional expectations of steady low-digit growth.
• Quality original equipment (OE) products leading to older vehicles. The average age of vehicles has increased from 8-9 years old to 12+ over the last 20 years. OE reliability generates skepticism around the validity of ‘like-for-like’ premium part replacement cycles.

DuckerFrontier’s automotive aftermarket experts constantly monitor and deliver granular feedback on these segment trends and product-specific growth in this sector, with a focus on investment opportunities and risks. As a result, we have seen three questions consistently arise. Here are DuckerFrontier’s insights on how your business should consider the level of threat to your individual acquisition and growth plans.

Q:

How will ‘fully’ autonomous vehicles affect the products I sell in the automotive aftermarket?

A:

Despite some autonomous adoption, the automotive aftermarket parts industry will see limited ‘fully autonomous’ market impact until 2035-2040. Even then, the impact will remain minor with <5% of the population classified as level 4 autonomous. However, with steadily increasing OEM technology content, parts and service providers will need to pivot with the ‘new’ market. This includes utilizing traditional market participants to new entrants that specialize in these evolving technologies.

Q:

How will increasing electrification affect my automotive aftermarket product portfolio?

A:

Conversion to electric vehicles will have a profound effect on the need for traditional time- or mileage-based wear part replacements. EVs do not require brake pad replacements, nor oil/filter changes at the same rates of traditional ICE vehicles.

Q:

How will Mobility as a Service (MaaS) affect purchase/replacement of my automotive aftermarket parts?

A:

Original equipment manufacturing (OEM) market evolution points to rebranding and a strategic focus on “mobility service providers.” The impact of these service providers can reach far into the critical domains of traditional aftermarket suppliers. OEMs seek to build consumer connectivity that surpass dealer-based hand-off – where the relationship after the sale is funneled through the dealer and opens to the aftermarket – and build consumer relationships. In many cases, aftermarket parts suppliers need to rethink their overall go-to-market strategies to capture an increasingly fleet- and subscription- based Vehicles in Operation (VIO) strategy.

With over 60 years of experience, DuckerFrontier’s in-depth automotive aftermarket research leverages a mix of market analytics and industry access. Therefore, our team delivers quality commercial diligence and research for a broad mix of financial sponsors, advisors, corporate entities and industry associations. DuckerFrontier has conducted over 50 commercial growth and sponsor diligence assignments over the last 4 years. How can we help deliver better outcomes for your business? Contact us here to connect with a team member.

In this short video, Abey Abraham, Managing Director, sits down with Bertrand Rakoto, Senior Engagement Manager, and James Murphy, Engagement Manager, to discuss key trends we are seeing in the industry. They share our outlook for the automotive space in 2020, highlighting the major impacts and how executives should prepare.

DuckerFrontier’s Automotive team is at the forefront of key trends impacting the industry. How can we help you deliver better outcomes for your business? Contact us here to connect with a team member.

Editor’s Note:  President Trump signed the revised North American Free Trade Agreement into law on Wednesday, January 29^th, 2020. The signature of the USMCA effectively eliminates most cross-border supply chain concerns for movement of goods and services between Canada, Mexico, and the United States. For countries looking to produce goods and services for final consumption in the US, the main appeal will be cross-border investment into Canada and Mexico – where years of uncertainty and relatively weak growth have led to weak exchange rates and significantly lower domestic wage costs. Especially amid immigration restrictions in the United States that have impacted skilled service workers, tapping into the human capital rich cities of Vancouver and Toronto will be attractive for many firms.

Over the last 25 years, the United States, Mexico, and Canada have formed highly integrated automotive supply chains; auto exports from Mexico to the United States nearly doubled between 2011 and 2018. Proposed changes to the rules of origin (ROO) and wage requirements in the USMCA will impose higher prices on OEMs and automotive firms, straining supply chain relationships and hurting consumer confidence and demand.

Many firms have yet to define their strategy to transition from NAFTA to the USMCA. In our latest whitepaper, Analyst, Emilie Newton and Managing Director, Abey Abraham outline DuckerFrontier’s base-case, upside, and downside 2020 scenarios for automotive firms surrounding USMCA legislation. Firms should use this scenario-based planning to prepare for continued uncertainty through the United States presidential election in November 2020. Executives should revise production portfolios to match slowing demand and reach profit goals, as well as reassess investment expansion strategies and costs both in Mexico and outside of North America.

To build the right plan for your business to navigate uncertainty surrounding USMCA legislation, contact a DuckerFrontier automotive expert today.

The amount of aluminium used in cars is expected to see a significant increase by 2025, according to the third edition of the Aluminum Content in Cars study from DuckerFrontier commissioned by European Aluminium. The study predicts that the aluminium content of cars produced in Europe will reach nearly 200 kg per vehicle by 2025, up from 179 kg today. This is in line with the most positive scenario developed by DuckerFrontier in 2016. The study also shows that electric and plugin hybrid vehicles use significantly more aluminium than the average car.

Carmakers’ preference for aluminium is largely linked to its lightweight nature, making all cars more energy-efficient, no matter if it is a petrol, diesel or electrified vehicle. Due to its inherent strength and its excellent ability to absorb crash energy, well-engineered aluminium car parts can be made safer than steel but up to 50% lighter. Lighter cars substantially contribute to reducing CO₂ emissions and improving fuel efficiency.

Aluminium is a true enabler of electro-mobility. The combination of aluminium sheet, extrusions and castings bring perfect solutions for electric vehicles. Both as protection of the batteries and to reduce the weight of the vehicle to increase its performance or range, said Dieter Höll, Chairman of the Automotive & Transport Board at European Aluminium.

The study points to electrification as one of the main drivers for the future growth of the aluminium content in all product forms. Battery boxes, electric motor housings, but also body closures and body structures are highlighted as key applications for increased aluminium penetration in the future. Depending on the car segment, the average aluminum content per vehicle is forecasted to increase from at least 2.9 kg by 2025 in the A-segment and up to 38.0 kg in the D-segment.

The aluminium industry is closely collaborating with car manufacturers to drive lightweighting even further. Only during the last two decades, hundreds of new alloys have been developed to better answer to the demand of the vehicle manufacturers. Higher strength, better formability and improved energy absorption are a few of the areas the industry is focusing on. The aluminium industry is also investing in innovations that will help the transition to electro mobility. Charging stations, electric power cables and wind power plants are some of the products where aluminium is already playing an important role.

The study includes data from automotive OEMs and suppliers and European Aluminium member companies and has been developed by DuckerFrontier. It is based on a detailed analysis of the use of aluminium castings, extrusions, forgings, and sheets for 38 component groups and covering 95% of the EU28 car production in 2019.

The summary of the study can be found here. For more information, please contact Patrik Ragnarsson (ragnarsson@european-aluminium.eu)

About European Aluminium

European Aluminium, founded in 1981 and based in Brussels, is the voice of the aluminium industry in Europe. We actively engage with decision makers and the wider stakeholder community to promote the outstanding properties of aluminium, secure growth and optimise the contribution our metal can make to meeting Europe’s sustainability challenges. Through environmental and technical expertise, economic and statistical analysis, scientific research, education and sharing of best practices, public affairs and communication activities, European Aluminium promotes the use of aluminium as a material with permanent properties that is part of the solution to achieving sustainable goals, while maintaining and improving the image of the industry, of the material and of its applications among their stakeholders. Our 80+ members include primary aluminium producers; downstream manufacturers of extruded, rolled and cast aluminium; producers of recycled aluminium and national aluminium associations are representing more than 600 plants in 30 European countries. Aluminium products are used in a wide range of markets, including automotive, transport, high-tech engineering, building, construction and packaging.

For further information, please contact: communications@european-aluminium.eu, +32 2 775 63 63

About DuckerFrontier

With 9 offices across the globe – Washington, New York, Troy, Paris, Berlin, London, Shanghai, Bangalore and Singapore – DuckerFrontier is dedicated to support corporations in their growth mandates through custom B2B market intelligence and consulting services. DuckerFrontier’s deep sectorial expertise covers diverse industries, with strong focus on Automotive & Transportation, Building Materials, Heavy Equipment, and Industrial Assets. Thanks to a 60-year experience, proprietary datasets, the FrontierView^TM market intelligence platform, and unique primary research capability, DuckerFrontier is able to deliver best-in-class independent, fact-based market insights as well as strategies to navigate market risks and unveil growth opportunities in existing or adjacent markets. DuckerFrontier also supports inorganic growth plans, scouting qualified acquisition targets, providing commercial due diligence, and testing receptivity of target owners. DuckerFrontier has been monitoring and analyzing the evolution of aluminum markets for over 20 years (since 1996 in North America, 2006 in Europe), and is at the forefront of lighweighting materials for automotive applications.

For further information, please contact: info@duckerfrontier.com, +49 30 92 10 16 61

Telematics is an interdisciplinary field, relying on collaboration between government regulatory bodies, OEM suppliers, telecom service providers, and component manufacturers. Service providers play a key role in enabling connectivity by partnering with OEMs to provide mobile signals and 4G network connectivity in vehicles. The European Union is using this technology to mandate a device called eCall, which will automatically call emergency services when it detects a serious accident. OEMs in developed countries are testing more advanced connected cars with self-driving capability, and providers are starting to offer both web-based and mobile application solutions including driver management, asset management and workflow solutions.

Telematics plays a key role in five elements of successful fleet utilization and monitoring.

• Productivity and improved customer service through real-time GPS tracking, trip reporting, and dispatching and routing tools
• Safety with the availability of in-vehicle driver coaching, risk and driver behavior reporting, accident notifications and reconstruction, and the ability to locate a stolen vehicle
• Optimization of vehicle maintenance with predictive maintenance abilities and remote diagnostics, as well as optimization of fuel management by tracking idling and other fuel-guzzling habits
• Compliance with solutions for electronic logging, IFTA reporting, and vehicle inspections
• Integration of other software systems such as onboard camera technology or CRM software

Telematics is highly dependent on telecom networks for its growth, as these networks are slowly adopting 5G technology worldwide. However, executives should plan for a one-year lag between the introduction of network connectivity in developed markets and emerging markets. While more than 50% of Southeast Asia’s population uses the internet – with mobile use driving much of this growth – Asia still falls lower on the Connected Consumers Index than European and North American countries. Smart phone usage and mobile data subscriptions are still too low in emerging countries, slowing telematics adoption. We expect 5G network capability to penetrate the market in one year, with connected vehicles at a halfway point on their journey from telematics introduction to self-driving cars.

DuckerFrontier’s Automotive team is at the forefront of key trends impacting the industry. Thus, our goal is to help clients deliver growth solutions to support critical business decisions and growth strategies. How can we help you deliver better outcomes for your business? Contact us to connect with a team member.