Spurred by the need to improve the in-cabin environment for drivers and passengers, automakers began installing cabin air filters for North American vehicles in significant numbers way back in 1995, yet the awareness of their inclusion, and their need for regular replacement, remains low.
Accordingly, the main efforts of a variety of players in the market have been to increase the share of mind for this service among both the consumer at large and the automotive aftermarket.
There are some signs that this market, as a consequence of the rising on-road vehicle fleet equipped with them, is on the verge of hitting the steep side of the demand curve.
The Automotive Aftermarket Industry Association recently reported in its Aftermarket Factbook that the annual replacement rate for cabin air filters varies between 0.70% for vehicles up to three years old, and 0.25% for vehicles between four and seven years old. Older vehicles than this, those eight to 12, both logged in at about 0.33%. The average for all vehicle ages was 0.48%.
According to research firm Frost & Sullivan, manufacturers’ efforts to improve visibility of cabin air filters (CAFs) in retail centres, and to increase consumer awareness of their existence during regular maintenance, has given the CAF market a tremendous boost over the last two years.
In its report “North American Cabin Air Filter Aftermarket,” the company reports that the market generated $16.9 million U.S. in 2002 and is expected to rise to $81 million U.S. by 2009.
“Despite being a relatively easy routine maintenance product, the inconspicuous nature of the cabin air filter hinders its growth as a ‘do-it-yourself’ product,” says Frost & Sullivan industry analyst Mary-Beth Kellenberger. “Market participants are now actively courting aftermarket service organizations as the primary market entry avenue.”
Besides aggressively promoting replacement cycles through installer channels, manufacturers, retailers, and distributors are pushing CAF awareness and replacement cycle information at retail point of purchase and via consumer-oriented vehicle maintenance publications. Still, the market continues to suffer from a lack of awareness, even though some growth has been evident.
The primary success in this respect has been in the fast lube channel, as a result of their corporate focus, internal programs, and the fact that it is a good fit for this type of service provider.
According to Kellenberger, in the late 1990s maintenance became the buzz within the automotive aftermarket. Small dollar, quick turn around, high volume maintenance products provided excellent margin opportunities for building client trust and rapport. This strategy continues to dominate and drive both the original equipment service (OES) and independent aftermarket channels, she says. Retailers offering specific services such as oil changes, car washes, and mufflers, which are already high frequency services, have experienced strong revenue growth from complementary maintenance products and services.
CAFs are recommended for replacement every 18,000 to 25,000 km, a range that coincides with oil change frequency. In that span, the volume of air passing through the filter typically generates dust, debris, and fumes in sufficient quantity to clog the filter. A clogged CAF can reduce the volume of fresh airflow. Furthermore, backpressure caused by the full filter can cause deterioration of the heating, ventilation, and air conditioning system (HVAC).
In 2003, Frost & Sullivan estimated that the number of lube oil and filter (LOF) jobs topped 480 million, with modest increases forecast for the immediate future. Automotive filter sales topped $3.2 billion U.S. in 2002, with all types and retail gross margins falling between 35% and 45%. Together, these statistics indicate the automotive maintenance market, and especially the LOF channel, is an excellent launching pad for complementary products. The cabin air filter (CAF) is just that complementary product.
There are reports, however, that their inroads have been restricted to the simple-to-access applications, leaving some under-dash cabin air filters to remain in place well past their replacement intervals, creating an opportunity for the independent aftermarket, though the technician may want to save this service for more involved climate control work as replacing some under-dash models can be an involved process.
Still, sales are responding to the communication efforts. Consumers are becoming more aware of declining air quality and the importance of using air filtration devices for vehicle passenger compartments. Building on this new understanding, CAF market participants are focused on selling the benefits of combination-style filters.
Combination filters use activated charcoal to augment the particulate filtering and provide some degree of odour elimination. The primary odours that these types of filters are focused on eliminating are diesel exhaust smell and sewage/manure odours (so much for “fresh country air”).
While 60 percent of vehicles produced still do not have CAFs, expectations are that this situation will change drastically over the next five years, as all vehicle manufacturers project rising installation rates. Concerns surrounding rising vehicle pricing have initiated a trend toward de-contenting vehicles, which has slowed the CAF installation rate, but many vehicles retained the CAF space and filters are now being exploited as an alternative aftermarket opportunity.
“Since competitive issues such as pricing and quality are not prevalent yet, participants are setting initial CAF prices with the expectation that price/feature competition will help the prices grow positively,” notes Kellenberger.
Participants are focused on developing this market, which is still in its infancy. Avoiding the temptation to market these filters as a commodity, most participants are using differentiation strategies that incorporate variations in product packaging, marketing, and distribution to build market share and brand recognition.
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