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Overcoming Technology-driven Disruption
Overcoming Technology-driven Disruption
- Business Strategy Development
Established in 1987, Eng Soon Auto has been a leading distributor for automotive parts. As a major stockist in Singapore, they carry more than 30 brands, with an inventory of over 100,000 items.
The automotive aftermarket industry is at the precipice of a technology-driven disruption. The transition from internal combustion engines (ICEs) to electric vehicles (EV) is happening at a rapid rate across the globe.
Eng Soon needed to re-think about the relevance of its spare part business and solve the challenges of ‘electrification’ to ensure successful transitions.
Business Strategy Development
An Electrification Business Plan was developed to help Eng Soon get on the path to a successful EV transition. It consists of a creation of an electrification business strategy and transformation model.
A brand extension – “ES R-EV-OLUTION” was proposed.
Various initiatives were recommended by considering both the upstream and downstream along EV implementation. The EV opportunities are grouped into primary and secondary activities:
Primary – supply of EV parts, Li-Ion EV battery, home charging hubs, mobility solutions, performance products, etc.
Secondary – battery remanufacturing, certified electric vehicle technician (CEVT), etc.
Five core fields of sustainability and related initiatives were also proposed:
- Green parts
- Remanufacturing
- Green logistics
- Green workshops
- Analytics and technologies
A 3-step approach was recommended for Eng Soon to embark on the transformation journey in the new aftermarket paradigm:
i. 360-degree diagnosis and full potential assessment
ii. Initiative generation and action planning
iii. Initiative implementation and value capture
- EV sales are expected to continue to grow at an average annual rate of 40% YoY from 2022-2030, with a penetration rate of around 9.6% of total vehicle sales. However, change might not be immediately evident in the everyday operations of aftermarket players like Eng Soon.
The relatively gradual EV penetration presents both upsides and downsides to the aftermarket. In theory, while it is true that an all-EV fleet might result in a drop in component sales of 30% or more, it will likely be many years before that happens. Any losses in aftermarket revenues will occur slowly enough for component price inflation to compensate for much of the difference. Revenue lost as a result of declining traditional activities will also be compensated in part by fresh income from novel revenue streams associated with EV powertrain, particularly around battery pack remanufacturing and electronics systems.
2025 may be the year when the adoption of EV really shifts into high gear, where the sales of EV to ICE cars could even reach parity. It is expected that the revenue stream from Eng Soon’s new EV offerings will begin to grow rapidly, reaching 10% of total sales by 2030.