Manufacturing, autos and logistics
Aftermarket
Parts, service, repairs and upgrades sold after the original equipment.
Last reviewedWhat does Aftermarket mean?
The aftermarket is everything a customer buys after the original equipment sale: spare parts, maintenance, repairs, upgrades and service contracts. It is usually more profitable and steadier than new equipment sales, because customers need it whatever the economy does and often have few alternatives for original parts. Example: a jet engine maker may sell an engine for 15 million at little or no profit, then earn about 1 million a year for 20 years from a service contract, far more over the engine's life. Rolls-Royce, GE Aerospace, Otis and many machinery makers rely on this model. The risk is independent repair shops and parts makers competing for the work.
Where does it come up in case interview prep?
- How the automotive industry works: OEMs, suppliers and dealersLesson in Automotive and electric vehicles
- How industrial companies make money: equipment, aftermarket and backlogLesson in Industrial manufacturing, machinery and aerospace
- Industrial economics and operations: installed base, OEE and make or buyLesson in Industrial manufacturing, machinery and aerospace
- Industrial and aerospace players, trends 2024 to 2026, and how to crack the casesLesson in Industrial manufacturing, machinery and aerospace
- How the defence and space industries workLesson in Defence and space
Related terms
- Installed baseThe number of a company's machines or systems currently in use at customers.
- CLV (customer lifetime value)The profit a customer is expected to bring over the whole relationship.
- Switching costsThe cost or effort for a customer to change supplier.
- MarginProfit on a sale, as an amount per unit or as a percent of price.
- OEM (original equipment manufacturer)In autos and machinery, the company that designs, assembles and brands the final product.
- Tier 1 supplierA supplier that sells complete parts or systems directly to the carmaker.
- Vehicle platformA shared set of engineering underpinnings used for many car models.
- Battery pack costThe cost of an electric vehicle's battery pack, usually quoted per kWh of capacity.