Gaël Escribe, Nexus: "Transitioning from a purchasing consortium to a group structure"

Gaël Escribe: As of the end of September, China emerges as the definitive weak point of the year, experiencing the poorest aftermarket performance globally. The post-Covid-19 recovery has proven challenging, significantly impacting Chinese consumption. Furthermore, the city of Shanghai, renowned for its high electrification rate, has affirmed the adverse effects on after-sales activities caused by a fleet that is both extensively young and electrified. Serving as a real-world experiment, this city, with 60% electric registrations, exemplifies the repercussions. 

If Shanghai were a country, it would rank 50th globally, given its 30 million inhabitants. Conversely, Europe, particularly Eastern countries, has spearheaded growth. Despite the Ukrainian crisis, Eastern Europe demonstrates the most robust expansion this year.

G.E.: Yes, indeed. Similar to other markets where automobile mobility is facilitated through older vehicles. In the context of spare parts, the challenge in Africa revolves around the penetration of Chinese manufacturers, a trend that is becoming more evident at the expense of Western equipment manufacturers, supported by Nexus. This is particularly noticeable in countries where financing or credit insurance arrangements don't align with the standards demanded by traditional equipment manufacturers. Chinese manufacturers exhibit greater agility and a willingness to take risks compared to their Western counterparts. 

This same dynamic is reflected in vehicle sales, with Chinese industrialists demonstrating aggressiveness and pragmatism that European or American leadership, somewhat distant from African realities, often lacks.

G.E.: Integrating with the global aftermarket culture is not yet part of their culture. It is currently challenging to envision seamless collaboration between their methods and ours. Moreover, at present, they lack a mature aftermarket organisation to engage effectively with structures like ours. 

I emphasize "for now" because, both in terms of quality and quantity, the Chinese parts industry is bound to progress. According to McKinsey, Chinese after-sales (parts and services, including tyres) are projected to reach €233 billion by 2030, compared to "only" €91 billion in 2017. This would represent 19.5% of the expected global €1,196 billion at the end of the decade. The Chinese market will then be in the global top three, behind the €337 billion in North America and the expected €295 billion in Europe.

Chinese vehicles on the road (cars, light vehicles, and trucks) already numbered 318 million in 2020, accounting for half of the entire Asia/Middle East region and over five times that of Africa. Therefore, we cannot entertain global ambitions without considering the potential of the Chinese market and its players.
 

G.E.: The challenge lies in the diversity of the Nexus community. Our members serve different markets with different suppliers. Currently, we are still below 30% in terms of purchase consolidation, but we are making progress, particularly due to our excellent performance in the United States, resulting from the strong integration of American activities within Nexus. 

We have fantastic prospects for further advancement. A portion of this journey will involve the gradual integration of American and Japanese parts manufacturers. They will leverage Nexus' global footprint to expand their activities beyond their borders. Our size presents an opportunity for them, as we are recognized as the largest global reservoir of growth, and we have bolstered our North American and Asian teams to best support them in their ambition to conquer new markets.
 

G.E.: We aim to be a growth accelerator. To support our members and supplier partners in their growth, we are transitioning from a purchasing consortium with numerous peripheral initiatives to a group structure. Despite this shift, we continue to strengthen our purchasing expertise and service centre because Nexus’ global footprint still holds many untapped opportunities. Additionally, we have established the company SmartParts, which will develop the Drive+ brand with the aim of becoming a global player. Its mission is to address the rapidly growing segment of the aging fleet worldwide, complementing rather than competing with premium parts and allowing equipment manufacturers to precisely segment their offerings. The team is in place, and an ultra-modern warehouse is already operational in Poland. Initially, Drive+ will focus on Europe and Latin America before expanding its offerings globally.

On the investment side, we are continuing our start-up incubation and we are strengthening our Mobilion investment fund which is establishing itself this year in Europe before, again, going global. Furthermore, like the consolidation strategies of the International Warehouse Distributors (GPC, LKQ, PHE, Uniparts, SAG), we must also become an actor in this movement which concerns our members. We have therefore created Autoparts United, a company with a team dedicated to regional consolidation projects, particularly in both the heavy goods vehicle and light vehicle sectors.

Our outlook for the next ten years is good. We are giving ourselves the means to exploit all the opportunities of an aging fleet, to not suffer from electrification which will in any case not have the devastating effects predicted (Editor's note: see page 22), all supported by our three pillars: central purchasing, SmartParts and Autoparts United to support the consolidation of our members.