Auto Service World
Feature   October 1, 2008   by Andrew Ross



The undercar parts market — brakes, suspension, exhaust — forms the backbone of the aftermarket, and with good reason.

Exposed to the elements, stop-and-go traffic, road conditions that seem to get just a little worse every year, as well as the curb bashing that brings more than a few cars into service bays before their time, the unglamorous underside of a car provides many opportunities for the aftermarket.

In recent years the market has seen the impact of more than a few “bumps in the road”: the replacement exhaust market has become virtually flat in terms of overall growth, and the influx of low-cost suspensions and brake parts, mostly from the Pacific Rim, have made it difficult for jobbers to retain dollar margin.

However, some jobbers are reporting a move away from the lowest-price options.

Florence Girrior, a counterperson with 26 years in the aftermarket with C. B. Hoare Limited, Antigonish, N. S., says that her firm’s customers are trending upward.

“A lot of our garages are going for the better stuff,” she says. Brand names are on the ascent in front-end parts, and even the value buyers are taking a step upward in quality and away from the lowest-priced products available.

In brakes, for example, while customers are still looking at the price line, they are opting for ceramics, which command a little higher price than NAO in the market.

“We did have some white box products in a few times, and the warranty is just not worth the hassle. Customers are really learning about that, too.

“I’d say that for the last three or four years, a couple of our garages simply refused to put on any of the cheap stuff. I think that the people and the clientele we have know that, so I don’t stock it anymore and we don’t really lose a lot of sales. Let’s face it, with front-end parts, if it falls off, you lose your life.

“I think that customers are getting a little bit smarter. And of course our roads — if you put on the cheap stuff, it is just not going to last.”

One area that she does find challenging is import applications. Demand is rising, but it is still difficult to source a full assortment from a single supplier, she says.

“The guys at the shops say that they have to shop at different stores. They should be able to get it all from us. It’s coming — but calipers and friction and cables, you have to shop around to find that stuff.”

And she says, sometimes you can’t get it at all.

“I hate to lose a sale. If you say no to customers once or twice, they will go to someone else.”

On a positive note, she adds, even though the overall exhaust market may not be seeing growth, it has seen a surprising jump in her business.

“There are about 6,000 people in Antigonish and we have a couple of exhaust shops in town, so believe it or not we sell quite a bit of it. We are selling more exhaust than we normally have in the last two or three years.”

That positive sentiment is echoed by Brian Pennell, outside sales at Brampton, Ont.-based National Exhaust.

“We have been growing by about 40%. We have been picking up a lot of market share,” he says. He adds that there isn’t a single product or component supporting the growth, though.

“It’s almost a bit of everything, so you have to be on top of it. There are more bolt-on exhausts and stainless kits. Muffler shops are buying kits instead of making custom systems.

“That has really changed the market.”

He adds that the departure of some players from the exhaust market has certainly helped his firm’s position, but he says too that the diversification of National Exhaust’s offering into more undercar lines has been a great benefit.

“Definitely exhaust is dropping overall and that is why we got into other things. You have to get into more and more stuff. You have to be on top of it,” he says, adding, “You have to read Jobber News to know what is going on.” (We appreciate the plug.) Further to that point, most recent research presents a picture of the undercar market as being price-sensitive, to say the least.

“Light trucks using recirculating-ball steering gears drive the sales of conventional steering parts,” notes Frost & Sullivan industry manager Avijit Ghosh. “Tie rods installed in new vehicle models are expected to ensure the growth of the aftermarket in the medium to long term.”

With regard to product segments, ball joints and tie rods represent the two largest segments of the steering system hard parts aftermarket. Despite nearly equal unit shipment sizes, ball joints hold a higher share of total revenues due to their higher cost. The unit shipment and revenue shares for both segments will likely gradually increase over the forecast period, as a result of declines in the idler/pitman arm and centre/drag link market segments.

However, premium lines will gradually lose market share to economy line products, says Ghosh. This loss stems from low labour costs in Asian countries that enable manufacturers to inexpensively produce the most popular and fastest-moving part numbers for resale in the North American aftermarket. Given the minimal difference in quality between North American premium parts and imported economy-line parts, the aftermarket is less willing to pay the higher price for steering components manufactured in North America.

“Furthermore, original equipment (OE) steering parts have consistently improved in durability and reliability over the past few years,” says Ghosh. “This has lowered replacement rates, thereby resulting in lower aftermarket unit shipment demand.”

So lower demand, or at least subdued growth, is being combined with lower price and dollar margin to create a sort of double whammy for the market at large.

However, for individual players, local market conditions and a strong competitive position can override larger market conditions.

It is not without some serendipity too, that while I waited to speak to a harried assistant manager at a NAPA store in Nanaimo, B. C. — too harried, as it turns out, to talk at any length — the on-hold recording featured a promo for accessory tips.

“We are trying to build something and it seems to be that the little Japanese cars are pretty popular around here and people want to spiff them up a bit,” said Michele Rush, before begging off to take care of customer calls.

One province to the east, in Edmonton, Alta., former exhaust specialist Warehouse Service Inc. has felt the changes in that market keenly over the years, and is currently reaping the benefits of having embraced the change.

“Originally we were almost exclusively exhaust,” says Zara Wishloff, CSP sales manager. “Part of what has changed is that the majority of big exhaust users have gone to one-step distribution,” cutting out the jobber.

That and other changes precipitated an evolution that has resulted in the six-branch WSI organization becoming a full-line jobber.

“That being said, we do have a big market in diesel truck aftermarket kits. We are still quite strong in that.”

The shift in the business has also given Wishloff some insight into the brake and chassis business.

“Luckily in this market we have never been as bad as some others for white box. Second line has always had a place, but years ago we aligned ourselves with a second-line rotor that was still good quality. Our warranty [business] was almost non-existent and we have stuck with that supplier.”

However, he says, the organization has not made a habit of having second-line product, and it has been staying with name-brand brake friction. Beyond this, market success has come from focusing on training areas where problems might arise in future.

“We are trying to stay ahead of the curve. We are doing clinics on the importance of shimming right now,” he says as an example. And he advises others to take the same view.

“It is more important than ever for us to educate our installers to get rid of future ‘defectives.’ The same thing happened with semi-
loaded calipers. Originally the market wasn’t ready for them. We went to back to bare calipers, and now we have semi-loaded again with very few problems.” It turns that initial high warranty claims were largely due to installation issues, not the products, he says.

“I foresee that we are going to be finding out that a lot of the ‘defectives’ in the next five years, or what was classed as ‘defective,’ will turn out to be problems with the installation.

“And everyone has been squeezed so tightly [by pricing pressures] that the manufacturers can’t absorb it anymore.

“So staying on top of the changes and getting your staff and customers trained is more important than ever,” he insists. “With defectives being watched more and more carefully, it becomes more important that we watch what we do in the middle.”

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