Aftermarket Parts | Big Profits for Auto Manufacturers and ...

As we continue navigating through the current year amidst the ongoing pandemic, the automotive sector is encountering significant challenges with the retail sales of new vehicles. Factors such as semiconductor shortages have led to constrained inventory levels, and while this situation is expected to improve, the question remains: how can automotive manufacturers and dealerships bolster their revenue and profit during these trying times? The answer may lie in leveraging sales from aftermarket parts.

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The Aftermarket Parts Industry

The aftermarket parts sector is a lucrative business for automotive manufacturers and dealerships across North America. A recent report co-authored by Hedges & Company and BGL revealed that the U.S. light-duty auto parts aftermarket is projected to reach $290 billion, while the overall U.S. automotive aftermarket, which includes medium-duty and heavy-duty vehicle parts, is expected to hit $390 billion. Additionally, Canada’s aftermarket parts sales are estimated at around $39 billion. With projected annual growth of approximately 4% over the next three years, there is a tremendous opportunity for manufacturers and their dealerships to enhance their aftermarket parts business.

The Marketplace

Currently, there are 535,000 individual businesses operating within the U.S. automotive parts marketplace, which includes independent manufacturers, repair shops, distributors, marketers, and retailers. These establishments cater to over 280 million registered light, medium, and heavy-duty vehicles in the U.S. Canada boasts around 4,600 auto parts retailers and approximately 23,000 auto repair/service shops. The diversity within the aftermarket parts dealers creates vast business opportunities, with no single type dominating the market. This competitive landscape presents automotive manufacturers and dealerships with the chance to grow their aftermarket business by establishing strong relationships with local repair facilities and fleet accounts seeking quality original equipment (OE) parts.

Despite these opportunities, many dealerships and manufacturers have witnessed stagnation in their aftermarket sales, with most of the market share shifting towards Independent Repair Facilities (IRFs).

Independent Repair Facilities (IRFs)

The average age of cars and light trucks in the U.S. has surged to a record-high 12.1 years, signifying that consumers are keeping their vehicles longer, which leads to an increase in repair demands. IRFs account for approximately 75% of the aftermarket auto repair market, leaving dealerships with only 25%. This reality necessitates a targeted approach towards IRFs, as they tend to prefer purchasing from local OE dealers when competitive pricing is offered, ensuring their customers receive top-quality parts.

Commercial and Fleet Business

As per a recent article by V12, the average age of the U.S. vehicle fleet has grown by 17% over the past decade. This trend demonstrates that commercial and fleet companies are holding on to their vehicles longer to optimize profits, creating a high demand for replacement parts. Each vehicle that requires servicing results in significant financial losses, highlighting the critical need for original equipment parts. This scenario represents an excellent opportunity for automotive manufacturers to collaborate with their dealerships to provide OE parts for commercial vehicles.

How to Grow Your Aftermarket Parts Sales

1. Maintain Proper Inventory: Knowing what inventory aligns with local market demands is essential. Assess the makes and models popular in your area, ensuring that you stock the right parts.

2. Offer Expedited Delivery: Quick delivery times are vital in the auto repair business. Evaluate the delivery needs of your customers to minimize downtime and service delays.

3. Assure Competitive Prices: Survey your local market to ensure that your pricing aligns competitively with independent workshops and fleet operators.

4. Keep Feet on the Street: Proactively build relationships within the market to foster customer loyalty and increase sales.

In summary, creating an effective go-to-market action plan is crucial for success in the aftermarket parts industry. This plan should include establishing a defined territory, targeting a specific number of contacts daily at independent repair shops and fleet operations. Many dealerships may find it beneficial to partner with sales acceleration firms like MarketSource to implement such strategies effectively.

Building a thriving aftermarket parts business requires dedication and a keen understanding of the local market and competition. By identifying ideal customers and providing focused training, automotive manufacturers can ensure sustainable growth.

If you're interested in enhancing your aftermarket parts sales and overall profitability, feel free to reach out. Let's collaborate to make it happen!

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