French Aftermarket Slump Mirrors New-Vehicle Sector

PARIS – The aftermarket is doing just about as badly for French parts suppliers and service providers as the new-car market is for auto makers.

French and European new-car sales were down 13.8% and 7.6%, respectively, through September, and in the first half, suppliers in France saw sales fall 11%.

Unlike some cyclical declines, sales of aftermarket parts also are down, off 10.2%, according to Fiev, the French suppliers’ organization.

The situation varies from some past recessions. In 2011, for example, car sales were down 2.1% in France and 1.7% in Europe, but French suppliers’ sales to the aftermarket rose 3.6% to €2.9 billion ($3.8 billion).

“The strategy for suppliers (to the aftermarket) in the short term is to maximize business,” Fiev President Claude Cham says at an event here, where he presents details of next year’s Equip Auto aftermarket exhibition. “In the long term, it is to get ready for new rules.”

The new rules are not just the government requirements that auto makers make electronic information available to independent garages, encouraging a competitive landscape in Europe. They’re also the new rules of the game, which include the fact maintenance costs are falling as parts get more reliable.

“The cost of auto repair and parts has declined steadily in Germany in recent years,” notes the Boston Consulting Group in a study. “From 2003 to 2010, maintenance costs per year and vehicle sank by an average 21%,” largely because parts are lasting longer.

France and Germany have similar aftermarkets, say the consultants, because both countries have local auto makers whose dealers take in about 50% of total aftermarket revenues, while dealer networks in the U.K. and Spain draw less than 40% of the business.

The analysts say in Germany, France, Spain, the U.K. and Poland, aftermarket business totaled about €115 billion ($149 billion) every year from 2005 to 2010.

“The minor changes in market share together with barely existent growth are an indication of balanced competition,” BCG says. “Independent and authorized repair shops are all fighting for customers, and neither of the two can be proclaimed the clear winner.”

Not only are parts getting better, but as fuel prices climb in France, people drive fewer kilometers.

“The consumer’s budget for cars is a closed envelope” in France, says Patrick Bailly, president of the French CNPA organization of aftermarket distribution professionals. “With higher fuel prices, he drives less, so there is less use, less wear and tear.”

The CNPA says aftermarket activity dropped 2% in the third quarter, after a 5% decline in the previous three months.

“All the categories are affected,” the CNPA says in a news release, noting business is off 1% for franchised dealers, 3% for authorized repair shops and 2% for independent repair shops.

Survival in this environment has meant consolidation, with repair-shop chains growing in importance. In France, the 10 largest independent operators have 29% of the outlets in the country. That’s nearly as concentrated as in Germany, where the top 10 have 30%, according to the BCG study.

Wholesale parts distribution also is consolidating in Europe, with four big groups, including the French wholesalers Groupauto International and AD International, controlling 37% of the market. Of the top 100 independent part wholesalers in France, 26 are affiliated with Groupauto and 20 with AD International.

Those 100 did €1.9 billion ($2.5 billion) in business in 2011, up 8.4% from 2010. Larger operations performed better. The midpoint for the 100 wholesalers was revenues of €10.3 million ($13.3 million), but the average for the 100 was €19.0 million ($24.6 million), a sign that the top of the list has some heavy hitters.

In fact, four French wholesalers had revenues of €90 million ($116 million), and No.5 on the list was at €63 million ($82 million).

The big service chains such as Carglass and Norauto “have the financial means to both train employees and acquire the diagnostic tools for standardized services,” BCG says, “while at the same time cultivating very close relations with suppliers and wholesalers who are often involved in large chains’ training offers for employees and quality improvement in services.”

Christian Reguis, president of the Federation Francais de la Carrosserie, a body-shop organization, says the outlets that are doing the best business are those offering extra services beyond painting and body repair. Half a dozen body-shop networks now operate in France, some by association and some organized by paint suppliers.

“For those that are all alone,” he says, “their future is difficult to imagine.”