Precious Metals Push Precious Profits

In the past few years, premium and ultra-premium spark plugs have become the main contributors to growing revenues in the North American spark plug aftermarket. In fact, new analysis from Frost & Sullivan, North American Spark Plugs Aftermarket, reveals that revenue in this industry totalled $563.4 million in 2004, and could reach $614.9 million in 2011. (All figures in U.S. dollars.)

The demand for these spark plugs will remain high as long as manufacturers continue to offer longer tune-up cycles and better durability than with conventional copper plugs.

“Platinum spark plugs are devised to last between 100,000 and 125,000 kilometers, which is almost twice that of traditional copper spark plugs (50,000 to 60,000 kilometers), while in the case of ultra-premium spark plugs, it is 160,000 kilometers,” explains Frost & Sullivan research analyst Avijit Ghosh.

In addition to the heightened usage of precious metal, continual changes in engine designs by leading automobile manufacturers are resulting in design modifications in spark plugs. This is the fundamental change that NGK’s senior product manager, Jeff Desveaux, credits with the growing sales numbers. “The demands placed on OEMs to meet tougher and tougher emissions laws for longer periods of time, has, more than any other factor, forced them to install more premium plugs at that level,” he states. “So, when the OE level changed its focus, the aftermarket had to follow suit.” With a growing number of automakers switching over to fine wire applications for their vehicles, the demand for spark plugs in the aftermarket has also increased.

Currently, almost 65 to 70% of today’s vehicles are equipped with distributorless ignition systems (DISs) and coil-on-plug (COP) technologies, which necessitate the passage of more voltage through spark plugs for longer durations.

In this scenario, automakers are insisting on more durable platinum spark plugs (preferably double platinum) over standard copper spark plugs, a change also reflected in the aftermarket.

“Since almost all DIS- and COP-equipped vehicles must have a platinum spark plug to sustain the high voltage, it is likely that 85 to 90% of DIS[-equipped] vehicles have platinum, double platinum, or iridium spark plugs,” observes Ghosh.

That said, copper spark plugs–though offering lesser product life–are certainly not finished in the aftermarket, as manufacturers still feel they need to cater to the price-conscious consumer. “There is still a market there for copper,” says Sam Sgro, marketing manager at Robert Bosch. “The overall market is very price-sensitive, and so copper will always have a place there, but I think overall, it is shrinking,” he says.

In general, spark plugs must fit in all kinds of vehicles, and businesses need to make changes to keep pace with developments in underhood technologies. Thus, aftermarket manufacturers need to diversify their product line in tune with the requirements of vehicle engines. Factors such as an expected increase in the average annual miles driven per vehicle, and the speed at which vehicle manufacturers switch over to advanced spark plug systems with precious metals, are also likely to drive the aftermarket.

That said, participants in the ignition parts aftermarket have survived a drop in unit shipment, largely due to a hike in demand for premium categories of spark plugs and wire sets. This demand, along with an expected rise in the prices of engine control units (ECUs) due to technological advances, are also likely to help participants cope with a decline in the prices of caps, rotors, distributors, and wire sets.

“ECUs are rapidly evolving technologies, which increase manufacturing costs and thereby, prices,” says Ghosh. “The performance replacement market, which is a niche segment, generates demand for more expensive caps, rotors, and distributors.”

The traditional market has responded to this demand by providing premium replacement products. The use of double platinum in spark plugs not only enhances their durability, but also substantially increases the cost of the plug. The increased durability can be attributed to the platinum-to-platinum firing, which occurs over a large surface area.

Spark plugs made of iridium, another precious metal, are priced higher and have longer product life than platinum plugs: while the product life of platinum spark plugs is between 60,000 and 75,000 miles, iridium’s is approximately 160,000 kilometers. The high costs compensate for the long replacement periods.

This is one of the major selling points that jobbers can exploit in order to help convince their customers to make the switch to premium parts. In that vein, product manager Chris Harrison, with NGK, is quite direct. “Engines today run much leaner than in the past, as a result of trying to lower emissions,” he says. “Since leaner usually translates to hotter, drivers today really do need a premium product that utilizes precious metals in order to handle that increased heat.”

According to the research, it is the virtually mandatory use of platinum or iridium that will keep the plug market moving in the coming years.

“The continued use of precious metals will help improve revenues for manufacturers, even though total units shipped are likely to decline,” notes Ghosh. “The premium segments of the ignition parts market can thus aid price stability in the long term.”

The research also specifically identifies the racer market as one to target in order to counterbalance declining volume sales, due to the high parts turnover characteristic of this market. While premium products do not experience frequent demand, some end-user segments, such as high performance and racing, present a constant revenue stream due to the frequent wear and tear of ignition parts. The high replacement rates create heavy demand for distributor caps, ignition rotors, ignition distributors, spark plugs, and wire sets.

Similar to other ignition components, platinum and iridium spark plugs and premium wire sets also tend to wear out sooner, or are replaced after a certain number of races to ensure optimum engine performance.

In the end there appears to be one bottom line when it comes to premium spark plugs, and that is the need to convince customers to replace premium OE plugs with premium aftermarket ones. “When you have a platinum or a fused-platinum product, it allows the system to burn a lot quicker and a lot hotter, without compromising longevity,” says Sgro. Further, according to Desveaux, installer clients may not be fully aware of the price they might pay for a foolhardy and cost-driven decision. “When they come in with a premium plug, it should be replaced with a precious metal product, or they could lose performance,” says Desveaux. He goes on to note that not only would that client lose horsepower and fuel efficiency, but a client that has grown accustomed to a 100,000 km plug change interval will likely not be happy when he burns through the replacement plugs in less than 25,000. As such, it is the responsibility of the jobber and the installer to work together to ensure this point is clear.