Can Bosch, a global automotive parts company, fast-track its digital transformation in China’s highly competitive automotive aftermarket industry, amidst fierce competition from digital natives and shifting market demand arising from the rapid growth of connected electric vehicles? What lessons can it draw for growth in the rest of Asia?
Wang Songtao, Regional President of Bosch Mobility Aftermarket (Bosch MA) in Asia Pacific, grappled with these questions as he contemplated his company’s future in early 2024.
Traditional Model
Bosch began operations in 1886 in Stuttgart, Germany as a workshop to produce precision mechanics and electrical engineering. Over the years, it evolved into a global technology and engineering powerhouse, and industry leader in automotive parts. As of 2019, China hosted Bosch’s largest workforce outside Germany, with Bosch MA China employing 1,876 associates, comprising 11.7% of Bosch Mobility workforce globally.
Bosch MA operated traditionally in China through a retail service network of authorised dealers, distributors, independent repair workshops and service centres. These partners offered Bosch products and services to end consumers and sourced auto parts from dealers and distributors, who stocked and sold Bosch products.
Chinese Market
From the 2010s, China’s automotive aftermarket had been rapidly changing, and Bosch was forced to compete with disruptive digital-native players like JD.com and Tuhu, and the rise of electric vehicles (EVs) that reshaped market demand. As a traditional service provider, Bosch had close links with physical service networks including distributors and workshops. In contrast, online disruptors boasted transparency, the latest technology and a very large network of workshops.
Additionally, unlike many other markets, consumers in China preferred a ‘do it for me’ (DIFM) over a ‘do it yourself” (DIY) approach, relying on professionals for services. This trend meant that global companies like IKEA, which successfully adapted to DIFM by offering furniture assembly services thrived in China, while Home Depot, which focused on DIY projects, struggled.
However, China was a lucrative market. By 2020, it had become the leading global EV market, contributing to 44.6% of global sales.
Three Phases of Digital Changes – Inside Out
To stay ahead in this cut-throat market, Songtao implemented a three phased digital transformation journey from 2020 to 2024.
During Phase 1 (2020-2021), Songtao laid the groundwork to prepare the organization for transformation. A pivotal industry event, Digital Link, brought together experts from Alibaba, Tencent, and Tuhu to discuss the impact of digital disruption. This event served as a wake-up call for Bosch’s leadership, highlighting the need to move away from traditional operational methods to remain competitive.
A Digital Working Council was established to oversee projects and track progress. The leadership team identified 20 urgent digital initiatives that could deliver quick wins to build confidence in the organisational transformation. Early successes included an AI-powered demand forecasting system that improved stock management and a new defect recognition system that reduced diesel injector inspection times from four months to just eight days.
Still, employees were initially hesitant as many lacked digital skills. Bosch introduced training programmes and cross-functional projects to encourage collaboration. Leadership also encouraged local teams to experiment more freely with digital initiatives, fostering a culture of innovation.
Phase 2 (2020 – 2021) focused on integrating digital tools into daily operations and expanding the digital ecosystem. Songtao introduced a “Three Layers, One Ordinate” strategy to connect dealers, workshops, and car drivers. For instance, by leveraging its brand influence, Bosch brought customers to workshops and generated valuable data on customers’ brand preferences and key decision-making factors.
A digital platform called the Bosch Connected Parts was launched to integrate all workshops and distributors, allowing them to place orders, track deliveries, and manage customer claims more efficiently. An Online-to-Offline (O2O) battery replacement service was also launched where customers could order a new battery online, and a trained technician would arrive in 40 minutes to install it. In addition, Bosch set up small warehouses in key cities to ensure quick delivery. The O2O service expanded quickly to 150 Chinese cities with 350 service points and 2,000 technicians.
Bosch also introduced an accelerated learning programme, where employees worked in small groups to solve real business problems using digital solutions. All new hires had to possess digital or electrification-related skills.
By 2023, Bosch was in Phase 3 of its digitalisation process and had started focusing on making better use of data. It formed a centralised analytics team to collect and analyse data; AI-powered forecasting tools helped dealers optimise their inventory, while digital dashboards made it easier to track sales and demand.
To boost customer engagement, Bosch expanded its Driver’s Club loyalty programme and gathered insights using data from millions of customers to improve its products and services. It was noted thereafter that Bosch’s Net Promoter Score (NPS), a measure of customer satisfaction, increased from 4.1 to 4.5 out of 5.
Is There A Road Ahead?
After its digital success in China, Bosch started rolling out similar strategies across the Asia-Pacific (APAC) region. The company launched an APAC Data Mart to centralise information across markets and introduced Bosch eXchange, a new platform for business-to-business transactions.
Using a bottom-up approach for employees to upskill and a simultaneous top-down approach to prioritise digital needs, Bosch China MA was able to successfully exemplify a cultural shift. Participants became ‘ambassadors’ and started influencing peers, which became the mantra for sustaining digital initiatives.
Having built an end-to-end digital architecture adapted to China’s automotive aftermarket, Bosch now faces the challenge of effectively adapting the same digital transformation strategy to other markets.
This case study 'Bosch: Joining the Digital Revolution of Automotive Aftermarket in China’ was written by Robin Speculand, Professor Liang Chen and Lipika Bhattacharya at the Singapore Management University and Liang Yu at Duke Kunshan University. To read it in full, please visit the CMP website by clicking here .