The roads are full of cars. You have the small sized Alto, the medium Dzire or the longer Civic but one thing remains is that the components that go beneath the machines. The sight of cars functioning with evolving features like navigation device for directions, Internet connectivity, traffic control system, collision alert and emergency calls, is already a well-known fact.
According to a recent report, electronics will account for 40 per cent of the vehicle costs globally in about four years. Currently the share stands at 20 per cent. As the demand for safety, navigation, entertainment and multimedia features increase, the global vehicle electronics market is set to grow at 22 per cent each year to touch $4.5 billion by 2016, which will drive consolidation in the vehicle service market, as small un-organised workshops cannot meet the need for advanced diagnostic equipment, technical expertise and high upfront capex.
One of the best examples for this is Reliance Autozone, which has a network of 13 retail stores selling vehicle electronic gadgets and accessories. The automotive aftermarket in the country, which has been fairly recession-proof till date, is likely to decline by 10 to 15 per cent this year. Profitability is a huge concern at this point. But the long-term growth story looks good. The Rs 280 billion parts aftermarket is expected to grow to Rs 370 billion in three years.
The report highlights that inorder to maintain sustained growth, these players must concentrate on the top 100 districts in the country.