OEMs Using Service Parts to Overcome COVID-19 Struggles

June 23, 2020

New auto sales are down by 33 percent due to the COVID-19 pandemic, with the service parts industry becoming the solution to fill in revenue gaps.

June 23, 2020—With auto sales down amid the COVID-19 pandemic, many automakers are looking for ways to fill in revenue gaps, and the service parts industry seems to be the solution.

According to a report from CNBC, auto research firms expect new vehicle sales to be down by about 33 percent in May 2020 compared to May 2019. This is, however, a 50-percent increase from April of this year.

While the industry is expected to lose up to 1.6 million retail sales to the coronavirus pandemic through July, according to a recent J.D. Power study, many automakers are looking to the service parts industry to help fill in the revenue gaps. According to Clayton Slagle, business value consultant at Syncron, the industry has seen a shift in the mindset of OEMs for a while now, moving more toward providing service parts in their offerings.

"[OEMs] want to keep their customers and want to sell cars to them, and right now, especially in the midst of the dynamic change of our economy with COVID-19, they are not buying new vehicles," Slagle says. "They want to position themselves to capture sales when the market does come back."

Slagle says OEMs are doing several things to have service parts drive current revenue. And when it comes to parts production slowing as well, OEMs are planning far ahead. For example, if the OEM is dealing with connected vehicles, they are looking to supply parts that are approaching a "failure condition," according to Slagle, ensuring that the required parts are available to bring in the customer.

Slagle says independent auto repair shops can use the tactics used by OEMs to ensure they become an efficient place for the customer to bring in their vehicle, turning waiting for parts from days to just hours. Slagle says shops should have data on their customers' demands readily available, knowing the percentage of vehicles serviced, in order to know how to target their investment in parts to meet the unanticipated demand they will have in the near future.

Slagle also says shops should evaluate their current suppliers on their stocking strategies.

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