Exhaust service just isn’t what it used to be. Remember when a two or three year old vehicle needed it’s first system? That consumer bought a spectrum of product, from “quick and dirty” to “lifetime warranty”, and in almost every case, a good installer could expect to see the vehicle again and again. Those days are a decade-old memory, but there are signs that a return to stable exhaust service volumes may be here, and possibly for a long time to come. According to Dean Clarke, Tenneco Automotive’s regional manager for Central Canada: “We used to see those new cars after two or three years in the aftermarket; now it’s taking six to eight years before we see them. Hopefully we’ll get one more replacement out of them before the car goes to the junkyard, whereas we would have seen three of four possibly, in the past.”
With the average Canadian vehicle approaching it’s ninth birthday, installers are poised to capitalize on what should be a large number of vehicles whose stainless systems have finally given up. From a replacement point of view, the realities of a decade-old automobile suggest entry-level replacement products, driving older vehicles back into the traditional exhaust replacement cycle. It sounds great, but is it sustainable in a slowing economy? Much depends on whether or not the country officially goes into recession, and whether vehicle owners elect to stretch out their current vehicle life as a precautionary measure. An oversupply in the new car market and low interest rates, on the other hand, may encourage owners to purchase or lease new, especially with current new-car warranty offerings allowing sensible financing over terms as long as five or even six years. Low monthly payments are persuasive to consumers facing expensive repairs.
In Ontario, B.C. and now Quebec, emissions testing demands tight systems as a pre-test condition, accelerating repairs that used to wait for total system failure. While mandatory I/M may generate immediate bay traffic, the downside, especially in Ontario where exemptions are slated to end this spring, is that I/M may pull older candidate vehicles off the road. If the result is a move toward new or late model used vehicle sales and leasing, the pool of older vehicles needing replacement will shrink.
Where is the business?
While exhaust system business is still on the street, the composition of what’s hanging under the Canadian vehicle fleet has changed. In this market, however, it’s technological change from about a decade ago that has flattened growth in the exhaust aftermarket. John Hart, vice president of sales & marketing for ArvinMeritor’s Light Vehicle Aftermarket group notes that in any mature market growing your share must come by taking it away from competitors. Hart states the problem simply: “Vehicles built from about “86 onward were built with stainless steel exhausts that have a very long life. Those vehicles are just starting to come into the market”.
In theory, that fact should point to a return to stable exhaust replacement business now that the bulk of the light vehicle fleet has switched to stainless systems, the only difference being the age of the vehicles being serviced. At street level, however, that fact that the first replacement on a typical Canadian car or light truck may take a decade means that the demographics are driving a shift towards entry-level products. Owners of ten-year-old vehicles generally have lower disposable incomes, and shorter expectations for the remaining life in their vehicles, making it difficult to recover profitability by replacing volume with the extra margins from upsell products. “Just get me through the winter” is a too-common customer request, although improving vehicle longevity may give lower-demographic owners a reason to move up to mid-range product, driven by warranties in the two to three year range.
Will new tech drive
The answer to that question depends on whether new technology will add complexity to exhaust systems, creating new opportunities, or add even greater durability, turning exhaust into a low-volume specialty. On the upside, tightening emission control regulations are changing the structure of exhaust systems in ways that may add profitability to the segment.
One is dual O2 sensor systems, with one in the conventional location, and the other downstream of the catalytic converter. The object for the vehicle designer is to sense converter light-off and operation, but for the aftermarket installer, it may add a new dimension to “cat-back” installations. Will consumers balk at O2 sensors as part of exhaust work? Packaged as a component of pre-test service, it can look cost-effective, especially where the consumer is in a marginal pass/fail vehicle. Another possibility is exhaust work that flows from a scheduled maintenance O2 sensor replacement. If the pipe is getting marginal, and you’re there for the sensor anyway, why not replace?
Another factor that may improve exhaust profitability is the emergence of Super Low Emission Vehicles. SLEV’s have been developed to comply with a California Air Resources Board requirement for drastically reduced emissions, and several US states are considering adapting the strict California standards. If the trend continues, multiple catalyst systems could become common, with as many as three converters, all monitored closely by OBD. As these vehicles age, trouble codes may flag exhaust system issues such as leakage or restriction between converters. If regulations demand 100,000-mile emission system durability, however, the result could mean replacement service as a “last cat back” installation, reducing the overall amount of pipe in play, with the rest going to the OE warranty.
Although this would suggest less room for the aftermarket installer, another possibility might take the market in the other direction. Three or more catalysts may become common, but the need to decrease the time required for modern engines to achieve closed-loop operation has driven a trend toward moving the catalyst as close as possible to the exhaust manifold.
As more and more converters become part of the exhaust manifold assembly, future exhaust systems may come to resemble the pre 1975 pipe-muffler-resonator systems, with more linear feet (or meters, if you prefer) of system prone to leakage, and available to the aftermarket. Advantages to the OE’s aren’t just faster cat light-off for closed loop operation. By pulling as much of the emissions system under the hood as possible, manufacturers can engineer the durability needed by regulation without the need to over-engineer the exhaust system. If the technology goes this way, the aftermarket may strongly benefit, especially if reduced smog test failures keep more older vehicles on the road.
The unknown quantity in the long term is the possibility of advanced materials taking exhaust out of the traditional aftermarket entirely. High temperature thermoplastics is one, with composite high performance mufflers and resonators already available for limited high performance and racing use. If polymers appear on mass-production vehicle systems, look for applications at the rear of the vehicle first, possibly integrated into the floor pan or rear suspension. And if the drive for ever-higher fuel efficiency means better heat damming at the combustion chamber, downstream exhaust temperatures may be low enough to allow plastics to replace metal. It won’t happen soon, and it may never happen, but if it does, “exhaust” as a stand-alone service might disappear into general emission system maintenance.
Will the exhaust aftermarket return to growth and good profitability? With stainless steel technology now about a decade old, replacement rates should recover. As ArvinMeritor’s John Hart says: “There is a group of vehicles moving through the fleet, in terms of age that should present opportunities for many products over the next few years.” Tenneco’s Dean Clarke agrees: “We are starting to see it. For a number of years we saw a gradual decline in the exhaust business, but now that stainless-steel exhau
sts have been around for eight or ten years, they’re starting to fail, and we’re starting to get some of that business.” And installers who are ready to promote exhaust service can get some, too. SSGM