Analysis of China's Auto Aftermarket: Challenges and Developments in H1 2023

As July comes to an end, key data from the first half of the year is gradually being released. The F6 report shows a year-on-year decline of 5% and 4% in market output and transaction volumes, respectively, from January to June, with all months in the second quarter falling below last year's levels. Regionally, maintenance demand has shown significant differentiation: in first-tier cities and above, the number of vehicles entering service centers has decreased by over 5%, while in third-tier cities and below, the decline is gradually narrowing, with demand in the fifth-tier market remaining relatively stable. In terms of business categories, demand across various segments has weakened: during the first half of the year, sales of batteries, gear oil, and air conditioning filters saw slight year-on-year growth of 1%-2%, while engine oil and automatic transmission fluid fell by over 5%. In the second quarter, tire, maintenance, repair, and bodywork businesses faced a dual decline in both year-on-year and month-on-month output. Typically, a downturn could benefit the aftermarket, but the pressure from new energy vehicles has put most automotive service stores under stress. Research by AC Automotive reveals a harsh reality for the industry: in the first half, 84% of repair shops saw both output and profits decline; 77% of stores experienced a drop in per vehicle output, and 75% saw reduced transaction volumes, indicating that the industry's sentiment has plummeted to a freezing point. Significant incidents in the industry this month include major fires in automotive service companies, prompting a reevaluation of safety; the balance of 'unwritten rules' for accident vehicles has been repeatedly disrupted, leading to new explorations in claims; and two auto parts platforms have reportedly 'collapsed', leaving franchisees to write a 'manual' for reclaiming their investments. On the chain side, Tuhu Auto Service launched a 'billion subsidy' program to provide new rounds of support; JD Auto partnered with BYD for after-sales services targeting all brand owners; and Tmall Auto launched a '1+N' model to deepen ties with 4S groups. Additionally, major manufacturers and 4S dealers are actively responding: the Ministry of Industry and Information Technology is closely monitoring payment periods and competition issues; joint ventures are emphasizing 'smart fuel preservation' with new strategies; and multi-brand 4S stores are promoting 'worry-free insurance' for vehicle accidents. The automotive market has undoubtedly entered a more deeply concealed battleground, with systematic shocks to the aftermarket that go beyond simple 'price competition and service comparison'.