In conversations with venture capitalists in particular, we’ve been asked whether electric vehicles (EV) are the death knell for the parts industry: an industry that currently generates over $450bn in annual sales globally.
Our answer is of course “No”, but there will however be some fundamental changes in what gets sold, and critically there needs to be an understanding of how the nature of car parts changes over time.
Is an electric vehicle really all that different?
Internal combustion engine (ICE) based cars have a few hundred more parts than an EV, and those parts experience a lot of wear and tear.
This suggests that the nature of parts retailing will change dramatically, with a shift away from service parts that enthusiasts repair and replace themselves. This type of part currently makes up a large amount of existing retail sales so a shift could have a profound effect on businesses such as Euro Car Parts or Halfords, and the aftermarket manufacturers that supply them.
However, fundamentally cars will continue to have maintenance needs and customers will continue to purchase accessories and upgrades. A car consists of a great deal more than just an engine. Whether a vehicle is electric or otherwise, it needs suspension, lights, a replacement coffee cup holder, car mats, and so on.
It is also the case that some of the new technologies in EVs create new opportunities.
Regenerative brakes, the plethora of sensors, and the software to manage them all, will lead to different types of products being manufactured and sold, often at higher price points. And those battery technologies too of course will need maintenance.
Does it matter in our lifetime?
In the UK, around 5,000 EVs are sold every month. However, there are 36m vehicles on the road. This suggests that it’ll be a long time yet before they’ve all been replaced, especially since the average age of a vehicle on the road is 9 years.
No doubt some clever scrappage schemes will be introduced. And the current lack of infrastructure and the challenges around how the grid will support all those cars, all being plugged in at 6pm, will need to be addressed.
So we can expect an acceleration of sales but right now there is far more hype than reality. The UK House of Commons report opened with
The Government has set ambitions to ensure that almost every car and van in the UK is a zero emission vehicle by 2050, and to make the UK a world leader in EV and battery technologies. However, its targets for 2040–to phase out sales of new ’conventional’ petrol and diesel cars and vans, and to require all new cars and vans to be ‘effectively’ zero emission–are vague and insufficiently ambitious to deliver on its longer-term aims.
And of course, while Tesla garners lots of press attention, when most people think about low emission vehicles, they tend to think of the Prius, a hybrid with both IC and electric engines.
Changes and opportunities
In conclusion, electrification will substantially change the industry, and there will be winners and losers. But as a business that focuses on the long-tail rather than service parts, and that is growing market share rather than being an incumbent, Glovebox Direct’s future looks bright.