Marine engine manufacturers in the aftermarket
Engine parts, repairs and service have become more accessible for shipowners. With the popularisation of online platforms repair kits, long-term contracts, and other solutions are on offer. In the digital era, maintenance is one click away, which is very valuable in a bustling industry that carries around 90% of world trade and depends on quick reaction times and timely performance.
But there is another side to all of these advancements – the possibility for engine manufacturers to foreclosе independent operators from the marine engine aftermarket. In the paragraphs below, you can read more about our concerns with the developments in this regard, focusing on new technology and long-term service agreements.
A ship engine’s lifecycle
A marine engine usually starts its operational life in the shipyard where the ship is built. The vessel’s owner rarely has any say about the specific engine that goes in the ship as the shipbuilder makes that choice at the design stage. Engine manufacturers supply new engines directly to the shipyards. This is seen as the primary market for marine engines. Once the ship is operational, the engine needs an overhaul, maintenance, spare parts and service. The market, which provides these, is referred to as the aftermarket.
Focusing specifically on two and four-stroke diesel engines, the engine manufacturers take up a large portion of the medium and low-speed engine market and have a lot of power. Engine manufacturers have been integrating into the vertical supply chain. They provide not only the engines but also parts, service, maintenance, and consultancy, thus entering the aftermarket as well. During the engine’s operational life, repairing and maintaining it is a big concern of the shipowners. The cost, quality, safety and availability of parts and services are decisive factors when choosing with whom to work.
Digital services allow monitoring the engine and gathering operational data to optimise maintenance and maximise the time between overhauls. Such digital solutions could also allow the shipowner to plan maintenance and minimise the risk of unwelcome surprises. Further than that, monitoring the engine offers the possibility to run it optimally, resulting in fuel savings and potentially less wear and tear on the parts.
However, the digitalisation of services can also affect the shipowner negatively. Now many engines are fitted with Electronic Control Units (ECUs). Having access to the engine software has become a crucial part of maintenance and fitting parts. In many cases the shipowner does not have access to the passwords for its engine software and as such their only option is to call upon the engine manufacturer (or their authorised partners for repairs). This increasing dependency on digital access from one particular market player should be a major concern for ship owners. One should not forget that a competitive environment allows better quality at lower prices and more innovation. Lack of competition could soon be to the detriment of shipowners.
Long-term service agreements
Often, when buying a vessel, shipowners can choose for a long-term service agreement (LTSA) which typically lasts around 25 years. Coincidentally, the operational lifetime of a ship (and its engine) is on average between 20 and 30 years. LTSAs come in different levels. A good analogy might be a subscription to an online streaming service – the more you pay, the more access to services you have.
The issue with LTSAs is that they limit the choice of the shipowner. Working with an independent service provider or supplier might not be allowed under the agreement, once again forcing the shipowner to get repairs from the engine manufacturer or via its authorised network only. Moreover, some agreements can last throughout the whole operational life of the engine, completely foreclosing access to that engine for any independent company offering parts or service for it.
The implications for the aftermarket
We believe that effective competition can only be achieved if shipowners are in control throughout the lifetime of their engines and remain free to choose who can provide services to their engines and where they buy their spare parts. The different offers from engine builders increasingly tend to foreclose the aftermarket for independent service providers and independent spare parts. As a representative of independent spare parts companies, EMISA believes that shipowners should remain in control of their engines. The advantages of digitalisation can be achieved without foreclosing aftermarkets. Shipowners should be enabled to choose their preferred supplier and service provider at all times. Shipowners should have access to the following benefits of working with independent manufacturers, suppliers, and service providers:
- Competitive prices of parts and services;
- Good quality and technical expertise;
- Innovative solutions;
- Wider variety of choice;
- Worldwide service;
- A client-based approach focused on building a strong connection.