We are offering a new information format for the Automotive Aftermarket

With the launch of our “Aftermarket Podcast” we offer a completely new information and entertainment format for the industry. In discussions with decision-makers from industry, trade and workshops, we provide exciting insights into the market. Interesting characters of the big “players” but also “hidden champions” get a platform to discuss their perspective on current topics. Experts on relevant aspects such as digitalisation and new work will also have their say in the coming months.

In the first episode, TecAlliance’s VP Marketing Christian Müller will talk to Matthias Moritz, Managing Director Asia at TecAlliance, about the consequences of COVID-19 for the aftermarket business in China. How has the exceptional situation affected the Chinese aftermarket? What measures have companies taken in response? What is the current situation after the gradual lifting of quarantine measures and what will happen after the crisis?

“We have been asking ourselves for some time why there is actually no large podcast channel for the automotive aftermarket. As a key link in the market, we are in daily contact with decision-makers and bright minds along the entire value chain. All companies face the same challenges and there are many innovative ideas and solutions to which we want to offer a contemporary platform. Actually, the launch was originally planned for Automechanika Frankfurt,” explains Christian Müller, Vice President Marketing at TecAlliance. “But then the corona virus turned many things upside down. We want to take the chance of this exceptional situation: Everyone is inevitably spending more time at home, and with our podcast they can find out about important developments and trending topics in the aftermarket in a very entertaining way, even in the home office”.

In our first episode, Matthias Moritz is our guest in the Aftermarket Podcast. He has lived and worked in Asia for almost twenty years and, as Managing Director, heads the TecAlliance subsidiaries in China and other Asian countries. In the podcast, he reports on the impact of the pandemic outbreak on the local aftermarket. How the situation currently unfolds and how he assesses the development until the end of the year and beyond. But also about how he and his employees experienced the outbreak of the pandemic, how they mastered the situation and what experiences they had with home office and virtual collaboration. He also provides insights into how the situation in other Asian markets as well as in other industries such as tourism or retail has changed due to the virus and what long-term effects can be expected.

The Aftermarket Podcast is available everywhere where podcasts are available – including Apple Podcasts, Google Podcasts, Spotify, Deezer and Amazon. New episodes of about 40 minutes each are uploaded on a regular basis.

Our podcast is in German but you can find a transcript of the first episode below.

In your opinion, how does the Asian or Chinese aftermarket differ from the European or global one?

The Chinese aftermarket is digitally very highly developed. There are many innovative data solution providers supported by major platforms such as JingDong, Alibaba and Baidu. There are many non-industry financial investors. The competition is therefore very strong.

What is the situation for the catalogue business? Is it more diversified, so there are more parts manufacturers and therefore more potential data suppliers?

There are many manufacturers of vehicle spare parts. A lot of them also produce really good quality, which of course has also developed because many vehicle manufacturers build vehicles in China and the parts industry is following behind. There is a large pool of potential data suppliers for us.

What is then done with the data is of course more than just putting the data in a TecAlliance catalogue. It’s really about making sure that the data ends up on the platforms. This is not only the reference data with the parts, but also a clear vehicle identification. For this we had to improve our VIN to vehicle identification. The vehicle description is much longer than with the K-Type in Europe. We call this China-ID. There are also many data suppliers who offer non-technical parts like fenders, bonnets, interior mirrors and so on. There it depends more on the actual vehicle model, the sales model.

In Europe data quality is always an issue. It starts with the manufacturer when they enter the data. What is the situation in China?

It’s the same with us. Every data supplier receives a quality report once a month. In this report we show how many part numbers he has, how many part numbers are linked to OE numbers and how many vehicle linkages are available. We also show how things can be improved and offer the customer a performance dashboard.

Before we look at the current situation in the Chinese aftermarket, let’s take a look back at the initial situation. We met for the last time last December at Automechanika Shanghai. What was the general mood there? How was the market positioned?

The mood during Automechanika was good. Everyone wanted to expand further and demonstrated their products. It was a completely normal trade fair with the exception that the large platforms now also offer vehicles, vehicle parts, used cars and their own workshop chains. That is of course a novelty. You have to imagine it as if Amazon were to set up a workshop chain in Germany and at the same time take care of new and used cars and also produce and sell spare parts. Apart from that it was a normal trade fair where we didn’t expect a big dent in front of us, which was then caused by the virus.

There were many young people at the fair. Can you generally say that the market in China is younger than in Europe in terms of employees?

The Chinese population is generally younger than the German population. The average age in our company is around 30. I am the Methuselah at 53. It’s similar in other companies. But the Chinese population is also getting older. There is little offspring, triggered by the one-child policy that was in place for many years. Even now with its repeal, it is not really the case that young people suddenly have two or three children. They also prefer to work, earn money, want to travel and still have only one child.

Is technology an issue here? At least I had the subjective impression that an older decision-maker or manager was always accompanied by someone younger who explained the technology to him. Or is it due to educational policy that it is only now that this millennial generation is growing up with these topics of digitization?

I’m not sure whether this is really taught in schools. It is quite simply the general environment. You are confronted with it practically all the time. It is simply convenient. The situation we are in right now, this quarantine would not exist if it were not digital. For example, we pay all our bills online through an app. You’re practically in this environment and you can’t help it. Older people have to live that way, too. The solutions are also designed to be really easy to use. The whole infrastructure is right for it. You register your car digitally and when you are flashed on the high street with this car, the license plate number is recognized. This is displayed on the next exit and the fine is automatically debited from your account. Digitisation simply works here, and companies must keep up with their developments on this journey. A PDF is not digital in that sense, everything must be online. Everything must be available on mobile devices. Laptops do not play a major role in everyday life. At work yes, but in daily life, if you need to do something, there is a mobile solution.

How did you guys in Shanghai perceive the COVID-19 outbreak in Wuhan at the end of December? Were you already prepared at that time for the fact that the whole thing could “escalate” and thus have effects on your business in the foreseeable future?

At the end of December we had heard about it, but of course Wuhan was very far away at first.  To be honest, people didn’t really take it seriously at first. Then Christmas and New Year came and the number of cases had increased. But Shanghai was still very far away.

So it was already an issue, because in Hubei province there are also many car manufacturers, like Honda, PSA or Porsche. But until mid-January we hadn’t been worried about it. Then it was Chinese New Year and everybody had his upcoming family visit, back to his home provinces, on his mind. Before that we had an internal financial review and in the evening we had a serious talk about it for the first time over dinner and wished us good health for goodbye.

Then the Chinese New Year holidays started and one week later the Hubei province was closed down and we already had regular calls with our management team to make a plan in case it would affect Shanghai. How do we get the employees back from vacation and how can we make sure that they can work from home. From then on, there were new messages practically every day. The employees who came back had to spend two weeks in quarantine and the schools were also closed. In agreement with the Neighborhood Committee, the local government, we had to comply with regulations such as monitoring the temperature of the employees, providing disinfectant and ensuring a minimum distance in the office. We then took it upon ourselves not to have more than 20 percent of the workforce in the office, divided over two shifts. The rest worked from home. We also have a lot of people who continue to work from home despite the relaxation because they don’t want to travel several hours a day on public transport.

Have you felt any immediate effects on the market after the start of these quarantine measures? How has this affected the automotive aftermarket?

For the time being, not at all because of Chinese New Year. All companies prepare for it every year and place additional orders in advance, which are then delivered. I have also spoken to friends in Germany who are also working for our data suppliers. They said that we hadn’t noticed that there was no work or production in China, we were stocked up. The only thing you probably noticed was that you had to wait two weeks longer for a shipping container.

So, could you cynically say that it was a lucky coincidence that this happened at the same time as Chinese New Year, because then everything comes to a standstill anyway?

Definitely and then Chinese New Year was extended by practically another month. At the beginning of March, we conducted a survey with our customers, who are also parts manufacturers: their production had increased to at least 80 percent again. The vehicle manufacturers had produced again, and so had the suppliers and also the independent aftermarket. The problem only came when the markets in North America and Europe collapsed. We have some customers who are data suppliers for these regions. They asked whether they could cancel their contracts because they are not receiving any orders now and probably not for a long time. Of course, this is really a disaster and it may take a very long time.

Do you therefore assume that some companies that operate exclusively internationally and do not focus on the local market will not survive this crisis?

I know of several companies that concentrate on North America and supply 90 percent to Auto Zone. If they don’t buy anything, these companies are out of business. They just missed the chance to adapt to the domestic market or other markets like Africa. Many companies were simply too convenient to build up another foothold. There are actually a couple of them and they will really suffer.

Do you think that these effects will accompany us far into next year or even beyond?

Certainly. I’m already sitting down with my management team and we’re thinking about what further value we can offer so that we can survive next year. We will also have lower costs. We will have less travel. Whether Automechanika Shanghai will take place, I don’t know. Whether the exhibition in Frankfurt will take place, I don’t know – there will definitely be opportunities to reduce costs. So this year will be OK. Next year is a completely different subject and we have to prepare for that now. So it will certainly keep us busy for a long time.

What is the situation in the other Asian markets? Are there already lessons that can be learned from China to be better prepared?

In all countries, whether Taiwan, Thailand, Malaysia, Singapore, Korea or Japan, measures were taken incredibly quickly. Of course they have already learned from China. Our branches in Kuala Lumpur and Bangkok have already closed. We are taking rigorous action there and home office is compulsory, for example.

There are, of course, countries like Indonesia that are simply huge, and the health system there is also different. But that applies to many rural regions in Asia. Nevertheless, you can see that the number of cases is relatively small at the moment, so I think we have learned from China and reacted quickly.

What do you think are the effects on other industries? Offline retail and tourism are being hit hard by the crisis. Is it the case that the whole thing acts more like a catalyst, accelerating developments that would otherwise have taken place in five years?

The first thing I can say is that the companies that were already ill-prepared for trends or digitalisation in general are the ones that are getting into trouble first. Those are the ones that go bankrupt. They will no longer exist then. I heard of an airline in Hong Kong that was already ailing and will not survive any longer. But even the big carriers like Cathay are suffering just as much as Lufthansa is suffering and with them thousands of employees. When I see all these shopping malls here, there are so many shops that were closed for a long time. They will simply not be able to afford the rent anymore. It will also have an effect on the real estate industry, because mortgages can no longer be paid. It’s going to cause a whole lot of problems.

What is the situation at the moment? The measures have now been eased and you are planning to open the office again as well.

So when I look out the window, the road traffic looks like it did before the crisis but many shops and restaurants are still closed. We’ll have to see what’s left in a month. Let’s see, all assuming the situation doesn’t get worse again.

If we look ahead, what do you think will happen to the Chinese aftermarket?

As I said, some companies will be left behind. We have to prepare for what’s coming. We must offer solutions that are needed now. And offer them to those who haven’t yet realized that they need them. We have to be flexible and we have to become more digital and more digital and more digital.

So there are already some trends that were born out of necessity, but which will perhaps be followed up anyway?

Yes, home office, for example. If we now work more from home, we can ask ourselves whether we still need the office in its current size at all or whether I can shut down a quarter of it to reduce costs.  Working from home is also well received here, especially since many employees spend several hours to get to work every day. There are certainly possibilities.  As far as our products are concerned, we have to think about how we can develop them further in order to remain competitive. We are not the only ones on the market. There are a lot of competitors here and they are not all stupid. We must become more digital, we must become more attractive, we must become faster and we must invest in this.

And I am sure that in all the companies, at our customers, in the trade sector and in the workshops segment, if there are smart people sitting there who are also thinking ahead, we will certainly learn from this crisis.

As we learned from the SARS crisis in 2003, by the way, which is why things went a little faster this time. And now we must prepare ourselves for what is coming. There is no time to rest. I can’t say that home office or quarantine has made us less busy. Of course, we don’t have to ship any goods. We don’t have a warehouse. What we do is digital, but so are others. We need to lay the groundwork for the next five years right now.