Replacement Market

Published by MBA Skool Team, Last Updated: January 22, 2018

What is Replacement Market?

It is another term for aftermarket. It is the market for replacement or repair parts, equipment or accessories for the maintenance or enhancement of the original product, after it has been sold to the customer. It is a term commonly used for the automobile industry.

 

Replacement market products can be divided into two distinct categories:

a. Replacement parts: These parts replace the ones provided by the Original equipment manufacturers (OEMs), once the original ones wear out. For examples, it may be required to replace clutch plates of an automobile after certain years of using the car. Thus, the new clutch plates will have to be bought from the aftermarket.

 

b. Accessories: These are add-on parts, which are purchased for enhancing comfort, luxury, performance or safety. For example, if a customer does not opt for a car model with an inbuilt factory fitted music system, she will have to buy a new car audio system from the after market for car audio systems. Similarly, adding decorative vinyl or stickers to the car exteriors will also have to be done in the car exterior modification aftermarket.

 

Replacement market for automobiles can be divided into two categories:

Parts:

a. Accessories

b. Appearance products

c. Lubricants and Tires

d. Replacements parts (wiper blades, brake pads)

Services:

a. Repair services

b. Telematics/Navigation

c. Entertainment

 

The aftermarket for automobiles in India is expected to reach $16.5 billion by 2021, as per Frost and Sullivan. The organized players i.e. the OEMs are increasing their share of this market, but will face the following challenges:

1. Price competitive unorganized sector that does not pay excise duties and sales taxes

2. Counterfeit components due to lack of mandatory standards and the unchecked production and import of substandard goods

3. 70% customers switch to local independent aftermarket services after 2 years due to attractive prices

 

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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