Parts and service remain the largest profit generators for car manufacturers. This substantial high margin business has attracted independent low cost repair shop networks, which have increasingly become preferred supplier to car insurers who are striving to keep costs at bay. Most automotive OEMs have started to counter this business drainage by pushing their own label insurance products into the market – however, the results so far leave room for improvement.
Independent car insurers keep professionalizing and optimizing their claims management not least by routing accidents to their preferred supplier repair shops. On top of that they are issuing more and more insurance products with binding repair shop regulations. Research suggests that by 2015 every fourth car police will include a statute on where to repair accidents
While it is a commonly known fact that OEM-network usage for car repairs and accidents is decreasing with car age, these days we observe that increasingly even cars younger than four years are routed into independent networks. This trend further decreases the OEMs market share from today approximately 25% of cars to 15% or even less within the next five years. In other words: more than three-quarters of this highly profitable business is lost. Studies claim that the car industry generates ~20% of its revenues in aftersales, generating ~50% of the profits. This source of substantial profits must not be neglected or run half-heartedly. Therefore, to prevent further erosion, many OEMs already cooperate with insurance companies and provide their own-labelled insurance products to their customers. However, they still fall short to penetrate cash buyers or the used-car market with their captive insurance products, hence giving away millions of Euros in insurance commissions and – of course – revenues and profits from parts and service fees