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Filtering Through The Filters Ma…

Filtering Through The Filters Market

Like many emissions-and fuel-related components, the filter market can be volatile, often affected by legislation, environmental concerns, or just shifts in consumer interest. Jobbers need to take a 30,000-foot view from time to time, just to keep up. Here is a recap of the various factors driving filter purchases today.

Fun With Fuel Filters

According to research from Frost and Sullivan, failure to replace fuel filters regularly means longer replacement cycles and lower unit shipment demand in the aftermarket. “The two factors that contribute chiefly to extended replacement cycles are larger fuel filter trap capacities and cleaner fuel,” says Frost and Sullivan industry manager Jasmine Sachdeva.

Since fuel-injected vehicles have almost fully phased out carbureted engines, fuel filters have naturally become more complicated, as these new vehicle models call for sturdier filters that survive greater pressures. Therefore, original equipment manufacturers of fuel filters are developing products with increased capacities to allow for less frequent aftermarket replacement. Another factor that contributes to depressed demand is the improved quality of gasoline, which contains fewer contaminants to clog up filters, also lowering replacement rates.

To ensure that filters are replaced in accordance with vehicle manufacturers’ suggestions, jobbers can enlist the support of the technicians that change these filters. Thus, these technicians can play an important role in driving the industry.

Large retailers yield inordinate bargaining power over small fuel filter suppliers. Distribution channels have consolidated, and large distributors can use their sheer volume to exert pressure on manufacturers to offer better supply terms or risk losing their business. To satisfy this trend, filter suppliers have taken to sourcing their products directly from overseas manufacturers in order to keep costs down. The net effect of this has been a commoditization of the product. Brand name vies with price as the crucial differentiator in purchase decisions. Since imported filters, even the lower quality ones, generally perform satisfactorily, their lower price can make them more appealing than the more expensive North American units.

“To stem the commoditization of their products, manufacturers need to promote brand awareness among installers and end-users, so that they will be willing to pay a premium for some brands,” says Sachdeva.

Despite the challenges, other filter segments represent significant opportunities for jobbers, if they watch their own local markets carefully.

Diesel Developments

Diesel engine technologies have registered tremendous growth in recent years, driven by the increasing market share enjoyed by diesel engines worldwide. As modern diesel engines are being compelled to comply with today’s stricter emission regulations and performance requirements, it’s helping to drive the evolution of the technology to ever more radical innovations.

Essentially, the growth of individual technologies depends upon the extent to which they enable diesel engines to fulfill certain important requirements. For instance, boosting techniques, engine management, and after-treatment systems enable diesel engines to provide reduced fuel consumption and emissions; increased power density and performance; and diminished noise, vibration, and harshness (NVH) characteristics. These advantages strongly favour such technologies.

Among exhaust gas after-treatment systems, diesel particulate filters (DPFs) are projected to significantly grow during the study period (2001-2012), with penetration rates likely to reach 35 per cent in 2010. Manufacturers are recognizing the strong potential of DPFs with regard to particulate matter and oxides of nitrogen reduction.

At the same time, governments around the globe are offering generous fiscal incentives for vehicles equipped with DPFs. This, combined with increasingly strict emission norms, has been greatly instrumental in encouraging the adoption of DPFs and boosting their penetration rates as well as revenues in the overall market.

Opportunities in Oil and Air

Unlike fuel filters struggling with more robust product, and less contaminated gasoline, the North American aftermarket for selected filters is likely to benefit from the increase in average annual miles driven per vehicle. This, along with aggressive advertising for oil and filter changes at regular intervals, is expected to significantly drive replacement demand of oil filters. Likewise, the demand for transmission filters will increase due to the growing installation of automatic transmissions. Changes in engine design will necessitate frequent changes in air filter design, thereby driving unit shipments of air filters. Demand for selected filters is expected to increase with the increasing average age of vehicles in use and the growth in the number of light vehicles in operation. Vehicle owners are keeping their vehicles on the road longer, and this necessitates periodic replacements, as automotive filters are critical for the proper functioning of the powertrain.

“The oil and air filter segments are the two biggest revenue-generating segments, and their growth in terms of unit shipments as well as revenues will drive the growth of the total selected filters aftermarket,” notes Frost and Sullivan GIC industry manager Avijit Ghosh. “In addition, price growth in the transmission filters aftermarket is also likely to contribute to the overall market’s revenue growth rate.”

Despite this, the increasing durability of filters is likely to be a major challenge for market participants, as it reduces replacement rates and consequently restrains unit shipments. While the average age of an engine air filter is approximately two years, this is steadily increasing as aftermarket suppliers focus on building more efficient and durable high-capacity filters to meet the changing requirements of automakers.

“The shift to in-tank fuel filters and in-tank modular systems is expected to reduce the aftermarket for in-line and screw-on fuel filters. The shipment of transmission filters is likely to decline, as suppliers build more durable transmission filters,” continues Ghosh. “Moreover, oil filters are also likely to be negatively impacted by the prolific use of synthetic oil, which tends to be more durable and thus delay replacements.”

Overall, the total market’s growth rate is predicted to fall between 2006 and 2009, partly due to the increasing durability of covered filters and penetration of lower-priced Asian filters, as well as decreasing demand for steel in Asia. However, the growth rate is projected to increase from 2010 onwards, as more vehicles on the road enter replacement age. Technology enhancement will also drive prices and mitigate competition from Asian filters, because of replication difficulties.

Watch Your Heavy Duty Demands

With new EPA regulations as of 2007, heavy-duty fleet managers have been forced to purchase new trucks that comply with the modified emission norms. Recognizing this opportunity, aftermarket filtration component manufacturers and jobbers, who have seen relatively modest gains in the lightvehicle replacement components market, are paying particular attention to their heavy-duty offerings.

However, as filtration component manufacturers branch out from their OE ties to create aftermarket brands, they face pressure to reduce prices. These pressures intensify as North American fuel prices continue to pass one price milestone after another.

In addition to the impending EPA regulations, the continued increase in the trucking share of freight movement is expected to be a key driver for the North American heavyduty selected filter aftermarket. North America has, by and large, preferred on-road shipping to rail transport because of its ability to provide more consistent, just-in-time, and door-todoor delivery of goods in smaller quantities. The loss of freight carri
ed by rail has been a gain for road transport; and in keeping with this growth, fleet managers are further reducing the average age of their trucks through new purchases.

“Much of the growth in the North American heavy-duty selected filter aftermarket is being fuelled by new EPA emission guidelines,” says Ghosh. “The burgeoning demand for Class 6-8 trucks is also expected to be a significant growth propellant.”

The filters market is a mixed bag when it comes to market advantages and challenges. With each individual segment suffering its own peaks and valleys, jobbers today have their hands full; but at least now you’ve got some big picture insight on your side.

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