The automotive industry is facing serious upheavals. In this QAD
Precision Report we look at these challenges and how e-commerce is a
growing market for automotive OEMs.
Even before the impact of the global coronavirus pandemic, the
automotive industry had been facing significant disruption in the past
few years. These include electric vehicle start-ups, changes in
regulations, globalisation and the tendency for consumers to replace
car parts instead of purchasing new vehicles.
Electric vehicle (EV) technology — and the increasing consumer
adoption of greener alternatives — has begun to make serious inroads
into the automotive market. The biggest name here is, unsurprisingly,
Tesla. In June and early July, Tesla’s
stock soared and the EV maker is now the most valuable car
manufacturer in the world. The total cost of ownership is lower for
EVs than their internal combustion engine — or ICE — counterparts. As
a result, EVs are being considered as suitable replacements for taxis,
vehicles and corporate fleets.
ICE manufacturers in the European Union have a second green challenge
to contend with — Regulation (EU) 2019/631. This regulation sets a CO2
emissions target of just 95 g/km across the fleet of new cars and
light commercial vehicles sold in the EU from 2021. A year and a half
ago, the average EU fleet had an average CO2 emissions measurement of
120.4 g/km. Reaching the 95g/km is certainly a challenge.
Manufacturers responded with mild-hybrid, PHEV, BEV and regenerative
hybrid systems that should reduce C02 emissions in traffic. And then
As the global coronavirus pandemic spread, car manufacturing
facilities around the world shut down or were temporarily suspended.
In March, many of Europe’s biggest automotive manufacturers, including
Fiat Chrysler, Jaguar Land Rover, Volkswagen and Peugeot halted
or reduced operations in response to the outbreak. The situation
was similar in North America. By early April, Covid-19 had shut down
percent of US automotive manufacturing.
The fallout from the pandemic continues. This week, Jaguar
Land Rover announced plans to cut 1,100 agency jobs. JLR, the
UK’s largest automotive company, lost £500 million (approximately
$627m) in three months due to production stoppages and closed car showrooms.
As JLR illustrates, the coronavirus pandemic hit automakers in ways
other than halted production — namely the shutting down dealerships,
which negatively impacted sales. The pandemic slowed showroom traffic
as people responded to “shelter in place” and “stay at home”
guidelines. In addition, many countries closed dealerships as
“non-essential” during the stricter phases of lockdown. Car
dealerships responded by leveraging technology, such as virtual tours,
Despite these innovations —many of which are likely to continue
post-pandemic — high unemployment rates, prolonged furloughs and
economic uncertainty has also impacted sales. Simply put, in difficult
economic times, people are less likely to spend money on new cars.
J.D. Power, the car review and automotive data company, reported that
sales fell 59 percent.
That consumers are reluctant to part with money for new vehicles long
predates the Covid-19 crisis. In 2019, the average age of cars and
light trucks on the road reached a record
high of 11.8 years. To put that into perspective, in 2002, the
average vehicle age was 9.2 years.
While people may be waiting longer to buy new cars — a trend that is
likely to continue due to the economic toll of the pandemic — they are
certainly purchasing replacement parts in order to keep their vehicles
on the road. Here automotive OEMs are facing another challenge — the
impact of e-commerce.
E-commerce has upended the traditional parts distribution model.
Instead of purchasing parts from a dealership, car owners are turning
to online marketplaces such as Amazon, eBay and Alibaba, or even
classified advertising platforms such as Craigslist to buy replacement parts.
Although the pandemic negatively impacted the online auto aftermarket
sales as well as new car sales, this market is in good shape and
almost certainly set to grow. In the US in March, online sales of
original equipment manufacturer (OEM) auto parts plunged
up to 39 percent, however, sales figures began to recover in mid-April.
Furthermore, this is a market that is steadily growing. The US online
market for aftermarket replacement parts is forecast to reach $19
billion by 2022. In Germany, online shoppers spent over €1.6
billion on car and motorcycle parts in 2019, up from €1.2
billion in 2016.
Some car owners will always choose to replace parts with originals.
Others will opt for generics — particularly if the price and delivery
windows makes this option significantly more attractive.
Automotive OEMs have responded to these trends by increasing their
e-commerce operations, particularly the need to ship more parts with
express carriers. However, this can be a challenging pivot for
companies that have traditionally relied on freight shipments.
A further consideration is that automotive OEMs are not just sending
more parcel shipments — they are servicing customers in a larger
number of countries than ever before. The automotive industry has
become global in nature. Car sales in the so-called BRIC countries —
Brazil, Russia, India, and China — grew from just under 11 million
cars in 2005 to over 34
million vehicles in 2019. Last year, consumers in one of the
BRIC countries bought four out of every 10 new vehicles sold.
Not that long ago, automotive OEMs and aftermarket parts supplies
sent large freight shipments of parts to distributors. These
distributors were responsible for moving these parts to repair shops
and customers. However, online automotive parts sales are becoming a
more important channel for auto manufacturers. As a result,
manufacturers increasingly need to send smaller numbers of shipments
to individual customers as well as repair shops.
These shipments can be time-critical, particularly if a
revenue-generating vehicle is off-road and waiting for parts to
arrive. Rapid delivery is important here, meaning an express shipment
Transportation management solutions designed for freight shipments
are not optimized for express shipments. Logistics managers and IT
teams at OEMs have had to get creative, often cobbling together a
solution to manage parcel shipments.
However, as parcel and express shipments become an increasing part of
an automotive OEM’s transportation mix, these kinds of ad hoc
solutions become increasingly inefficient and expensive to maintain.
Global manufacturers with multiple production facilities and
customers in hundreds of countries therefore need transportation
solutions in order to service all these customers, wherever they are.
QAD Precision works with the world’s largest OEMs and aftermarket
parts suppliers, including two of the Top 5 manufacturers of
heavy-duty trucks. We help automotive OEMs and aftermarket streamline
and simplify global and domestic shipping operations.
QAD Precision offers a range of solutions that help automotive OEMs
and aftermarket parts suppliers streamline their global trade and
transportation operations. These include our global multi-carrier,
Execution solution; Delivery
Exception Management, for 360 degree visibility into all
shipments with all carriers, along with exception alerts; Export
Management automate export processes, documentation production and
customs reporting; Restricted
Party Screening to verify vendors and trading partners; as well
Management and Free
Trade Agreement solutions to optimize trade operations, improve
visibility and control, and help manufacturers remain in compliance.
If you would like to subscribe to the QAD Precision Report, or would
like to receive notifications about QAD Precision events, webinars and
news, please click here.
QAD Precision, a division of QAD Inc., provides industry-leading global
trade compliance, and multi carrier transportation
execution solutions from a single, integrated platform. An
ISO-certified company, QAD Precision assists companies to streamline
and transportation operations, optimize deliveries, and increase
logistics ROI. QAD Precision’s scalable and extensible solution easily
integrates with existing ERP and WMS solutions. Industry leaders in
every region of the world rely on QAD Precision’s global support
centers to leverage thousands of carrier services and manage millions
of global trade and shipping transactions every day. For more
information about QAD Precision, visit www.qadprecision.com.