Russian aftermarket specifics. Can we expect a recovery?

Russian aftermarket specifics. Can we expect a recovery?

Announcement ImageAnnouncement Date : Apr 23 , 2020Categories: 2020, News

We are all are in crisis mode, but when it strikes (like right now) professionals are willing to take the decisions based on solid analysis. GiPA has acted fast to measure the immediate consequences, and performed a study on the COVID-19 impact on the Russian aftermarket, tracking workshop activity rate bi-weekly.

So, if you want to know more about this, please continue reading.

 

A quick view of the crisis

Of course, it is obvious that the COVID-19 limitations and restrictions will globally disrupt activity, and a lot of professionals are already suffering due to:

  • The self-solation of the potential customers.
  • The necessity of cutting down expenses.
  • The reduction of personnel.

This, ultimately, lead to the review of the plans and, of course, of the overall strategies.

So, observing in detail the Russian aftermarket, we can see:

  • A 44% post-factum inactivity of the market due to the restrictions.
  • A loss of around 3 out of 4 robles at the beginning of March, during only 1 week.

Leaving us with a strong hope: that the disease will not spread faster, and an almost unique activity: to keep on tracking the key market activity indicators.

For any further information, please click here to contact GiPA

 

But there are also positive signs?

 Here we would also like to observe if there are any positive signs for recovery in the aftersales market, so we can track them professionally to analyze the consequences of the crisis.

Firstly, we have to remember that the market volume depends on the car parc and the number and types of operations performed, leaving us the number of cars on the road as the first key indicator to understand the next period’s aftersales volumes.

Talking specifically of the Russian aftermarket, we will also need to know and understand the following facts:

  • The new cars´ volume sold for the 3-year’s rolling cycle at the result of 2019-2016 is just slightly less than 5 mln vehicles, which is quite close to the first recovery years of 2016-2014 period.
  • Car sales in March 2020 were over 30% higher compared to March 2019 due to the inflation expectations.

 

Which lead us to think that:

  • The car parc in Russia will be stable for the next 3-year period (considering that the declared isolation period will last for around 2 months in a row).
  • The new car sales will not definitely grow but it will be compensated by the reduction of the accidents rate.

Only 1 out of 3 drivers are still using the car as usual according to the latest COVID survey results.

 

And the aging of the car parc?

Secondly, we also need to understand and keep track of the cars´ age. Will it become less after the end of the crisis? Well, to know this, let´s check the following Russian aftermarket data:

  • In the last years, the income growth has been lower than the inflation rate; in 2018 and 2019 the difference was more than 1% in favor of the inflation, not helping to spend more on car operations.
  • The parc is aging faster than many other European countries, because the focus is being switched to the cars with the average age over 9 years closer to 10.

Everything points that this ageing will be even more drastic as many drivers will feel less safe and protected than before. They will consume less and will have to pay their accumulated debts at the period of COVID isolation.

 

And the positive signs?

We can also find the indicators that bring positive signs for the potential of recovery for the local market.

So, in terms of the new car sales and the market capacity, of course, it is worth mentioning that:

  • The number of the new driving licenses in Russia is growing. In 2019, young millennials were motivated to begin driving, which helped increase the number of licensed drivers.
  • Russians prefer to travel by car. Even the modern and well-developed mobility ways are not pushing the Russian drivers from the intention of choosing their own cars or using corporate ones versus the public transportation, including the railways.
  • COVID-19 threat only added to the feeling of personal safety and reliability of the personal car. Actually, the vast majority of the respondents (the figure exceeds 95%) refuse to use any other means of transportation, and this habit will most likely remain during the post-isolation period, helping the aftersales market to recover by consuming more mileage in the future.
  • We are seeing an extremely fast reaction speed and optimistic expectations from the professionals. Our recent research demonstrates that currently, the vast majority of the dealers and the independent garages have a clear intention to open as soon as possible. 90% of parts and accessories stores are ready to open doors to the customers immediately as well.
  • Taking into account the share of do-it-yourself and buy-and-fit operations that is over 30% for a long period of time, we locally used to buy the parts at the stores, both online and offline, and the crisis period will make this position even stronger, forming the new habits of the drivers.

So, the share of the operations done by own means and the share of independent chains in sales will demonstrate the next key indicator of driver’s aftersales behavior and the market capacity as well.

For any further information, please click here to contact GiPA

 

Conclusion of the Russian aftermarket recovery

It is a duty – given the key data mentioned above – that we continue tracking the situation on the automotive market in a precise manner and keep updating on a regular basis.

Our customers will get the extended report and the analysis from our side of the world, which will allow us to think of the trends and the expectations of 2020 results.

To close, we leave you with one more positive fact: The majority of people interviewed for the recent week’s period, are uncertain of the maintenance time but are ready to make an appointment as soon as the isolation period is over.

Excellent news, so we only have to wait! Be well and stay safe!

For any further information, please click here to contact GiPA