Global View: Inside China’s collision repair industry

China has been very quick to develop a comprehensive set of mobility services around taxi-hailing platforms, chauffeur services, ride sharing, car sharing, and peer-to-peer car sharing. This may lead to a situation where the country has fewer car owners than at its peak, but more vehicles on the road.

By Barett Poley

Peterborough, Ontario — November 24, 2016 — The International Bodyshop Industry Symposium (IBIS) draws together key influencers and thought leaders from across the globe to discuss the trends and factors impacting the collision repair industry both at home and abroad. Collision Repair magazine is the exclusive Canadian Media Partner for IBIS.

We are pleased to present the following information on China’s collision repair industry. The information was originally prepared for IBIS by David Marchand of Frost and Sullivan.

In China, more and more people are giving up their privately owned vehicles, but this doesn’t necessarily mean there are expected to be fewer cars on the road. Quite the opposite is true. In a country with over 360,000 licensed auto repair shops, 129 different brands of vehicle and an expected aftermarket purchasing growth of 100 percent in the next five years, cars aren’t going away any time soon. Despite this, a record 42 percent of Chinese motorists admitted that by 2020, they may be willing to give up their personally owned vehicles, according to the IBIS report. This is compared to just 21 percent of European car owners.

Cellphones may be the key. Simply put, cellphone apps which serve as mobility platforms are changing the mindset of Chinese consumers, particularly in the urban areas of the country. In addition to ease of transportation, the apps provide ease of pay through apps like Alipay or WeChat pay.

By 2020, China will have around 7.5 times more motorists than the entire population of Canada. With a staggering 262 million cars on the road, in the next five years they are poised to catch up with even the American market. The steadily increasing mobility services which parallel the likes of Lyft and Uber are more than partly responsible for this.

A traffic jam on China’s G4 Beijing-Hong Kong-Macau Expressway in 2015. China is expected to have some 262 million vehicles on the road by 2020.  
A traffic jam on China’s G4 Beijing-Hong Kong-Macau Expressway in 2015. China is{source}<br/>{/source} expected to have some 262 million vehicles on the road by 2020.  


With the merger of two such services, Kuadi and Didi, creating more than 250 million new users last year, “A mobility revolution is under way in China, enabled by digitalisation and a unique ecosystem,” according to the report China: The Next Pioneer in New Mobility, prepared by consultancy firm Arthur D. Little. Similar advancements have been made in Canada and the US, but in China everything is closer together and more tightly packed than in any North American or European country. This leads to the unique utility of such mobilization services, which will culminate with a predicted 400 million customer userbase by 2020.

As a result of this mobility revolution, more cars are expected to be on the road, which opens up some interesting opportunities in the ecosystem for aftermarket companies. In addition to the doubtless increased rate of collisions which comes with such massive numbers, investors and businesses should consider the massive influx of aftermarket modifications to such vehicles; large fleets of vehicles will require not only a depository of OEM and aftermarket parts in case of repairs, but also mass modifications for comfort, telematics, and even powertrain and potential for autonomous operation technologies.

This also provides some difficulties for manufacturers or companies that can’t keep up with the demand, according to David Marchand. “Independent aftermarket operations that are not growing by close to 27 percent every year might have difficulties to keep momentum,” he writes.  

There are just as many new business opportunities as there are potential pitfalls. Some Chinese insurance companies, such as Ping’an Insurance, are even offering specialized insurance for passengers of Didi’s chauffeur service.

The automotive repair sector in China is robust, with more than 360,000 accredited auto shops. In China, so-called “4S” shops are the most popular type, taking up around 53 percent of the market. A 4S shop deals with vehicle sales, spare parts, service and surveying (referring to customer feedback).  

We suspect we’ll see the market for repair facilities to change in China, as consolidation and efficiencies of scale begin to take hold.

“Fully understanding this new mobility landscape is essential for companies to position properly as mobility operators, investors, or vehicle, equipment, fnancing and service providers, and to grasp future mobility-service opportunities,” writes Marchand.


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