Maintaining adequate warehouse space has been an ongoing challenge for jobbers for more than a decade, given the continued onslaught of new parts from OEMs as they strive to make their vehicles lighter and more fuel-efficient. And tough as it’s been for jobbers to keep pace with the proliferation of parts, this challenge is about to ramp up considerably; most OEMs will be changing their entire platform in the next few years, and the current parts proliferation trend is about to explode. “What’s coming is something called CAFE, and it has nothing to do with beverages. It’s the Corporate Average Fuel Economy, and this is going to take over your life in the next 15 to 20 years because it’s taking over the auto industry’s life right now,” explains Dr. Peter Frise, scientific director and CEO of Auto21, a Federal Network of Centres of Excellence (NCE) on the automobile of the 21st century. Frise spoke at the Automotive Service Providers Forum earlier this year. “It’s all about fuel economy, and the balance between fuel economy and safety.” “As we have experienced over the last 10 years plus, parts proliferation just continues to get worse. It will continue to put extreme pressure on our space availability and our buildings. That to me this is one of the huge challenges right now,” explains Dale Devlin of Halton Automotive, a member of Bestbuy Distributors. For about 25 years, fuel economy was basically in a straight line, increasing at a rate of about 1% per year until 2010, when it started changing by about 5% per year. “When you change 1% to a rate of 5%, that is an absolutely foundational change,” explains Frise. “It’s huge. So by 2016, which is now, the OEMs have to achieve a CAFE of 35.5 miles per gallon (6.6 litres/100 km). That’s 35% higher than what was required in 2010.” By 2025, that number will be 54.5 miles per gallon (4.3 litres/100 km), he continues. We are now seeing a lot of turbo-charging and super-charging (two different things), EVs, battery vehicles, hybrids, plug-in hybrids, aluminum, and fancy carbon fibre. “It’s all about fuel economy. R&D is evolutionary, not revolutionary, and it costs billions of dollars to develop a new vehicle. The auto industry spends $100 billion a year on R&D; that translates to $1400 or $1500 per vehicle,” explains Frise. A chart on new modelling productions shows that not all OEMs are introducing models at the same pace. For example, between 2015 and 2018, Ford is going to replace 111% of its platform. Honda is going to replace 110%, and GM plans to replace 85%. Looking at the chart on page 18, you can see why warehouse space is going to be a critical factor for jobbers. “You are going to see a lot of change in OEM product lines in a short amount of time. Suppliers most exposed to OEMs, with the highest replacement rates and the lowest average age, are at an advantage for growth, productivity, profitability, and volume,” explains Frise. Ford provided a glimpse of the future recently with a lightweight version of the Fusion. The prototype, developed with the U.S. Department of Energy, is about 800 pounds lighter than a typical Fusion, thanks to dozens of changes in parts and materials. The instrument panel consists of a carbon fibre and nylon composite instead of steel. The rear window is made from the same tough but thin plastic that covers your cell phone. The car has aluminum brake rotors that are 39% lighter than cast iron ones, and carbon fibre wheels that weigh 42% less than aluminum ones. Because it’s so much lighter, the prototype can use the same small engine as Ford’s subcompact Fiesta, which gets an estimated 45 mpg (5.22L/100 km) on the highway. Interestingly, the average vehicle has gained more than 800 pounds over the last 12 years, and now tops out at just over 3,900 pounds (1,770 kilograms), according to government data. Not only have cars gotten bigger, but safety features like air bags and more crash-resistant frames have also added weight. Some new technologies also add weight: General Motors’ Chevrolet Volt electric car has to drag around a 400-pound (180-kilogram) battery. It is estimated that shaving 110 pounds (50 kilograms) off each of the one billion cars on the world’s roads could save $40 billion in fuel each year. Another measure of how complicated these car companies are becoming is the Bosch Automotive Handbook. There has been a 76% increase in the page count between 1986 and 2007. “They don’t have a new edition yet, but I bet it’s a lot bigger than [the current] 1200 pages, because there has been a huge increase in complications since then. So these things really are accelerating, and that’s going to affect your business,” warns Frise. “There is always going to be that segment of the marketplace that is going to be doing the day-to-day service work. The huge changes are going to be on the electronics side,” says Wayne Hoskins, owner of Pacific Parts in Vancouver, a Uni-Select shareholder. In response to changing market conditions, Vancouver Community College made changes that have literally tripled the size of its training facility for automotive technicians in just a year and half. They recently discontinued their diesel program and put it all into automotive training. “I think the biggest area where we are going to see change is going to be with new technicians, who will be trained with the new technology. There will also be component training for technicians, just to do specific components like brakes for instance. Things like brakes will be as big or bigger than they were in the past. It’s all going to get a lot more complicated,” continues Hoskins. “We are also seeing more component installations. For instance, we used to sell shocks and struts; now we sell quick struts. We used to sell ball joints, and now we sell the control arm with the ball joint. A lot of things are being replaced as a whole component.” As an example, Volkswagen has a platform called the VQB. This car is basically the Volkswagen Beetle, but it’s also the basis of a Spanish minivan, made by a company called Seat (pronounced Sea aught). It’s also a Czechoslovakian family sedan made by Skoda, and the Audi TT. The guts are the same car, but the vehicles will not cost the same and likely don’t drive the same. It can be built as a diesel or gasoline engine, with a range of four or five different engine sizes. It can be an electric vehicle, a plug-in hybrid, or it can even be a fuel cell vehicle. This platform is designed for that type of flexibility. “They make four million vehicles on that one platform. That’s about 5% of the world’s production on that platform. So if you don’t know how to supply and service that platform, you are cancelling yourself out of 5% of the new vehicle market,” advises Frise. “The materials used in cars from 1985 to 2010 didn’t change much, but in the next 10 years they are going to change completely. And it’s going to shake up the whole auto industry, the supply chain included.” For example, bodyshops will require specialized tools and have to learn new techniques for welding and joining procedures on these new structures, and chassis that are going to change a lot. Many vehicles that are coming onto the road now actually have car parts constructed out of carbon fibre, parts of corn plants, and other new, lighter materials. Also, OEs are now using high-strength steels in the chassis of some vehicles. To make it lighter, they are making the steel wider and thinner. The problem with making steel parts thinner, though, is that the steel is stronger, so it’s harder to bend, and when you bend really strong steel it often cracks. So the idea is to have strong steel that is also formable. Most vehicles that have steel are using those very strong formable steels. The problem is, once they are formed they are difficult to weld, drill, cut, or bend. “If you’re a guy who puts trailer hitches on cars, and you have to drill a hole somewhere, you’re going to have trouble doing it, and if you don’t do it right you will damage the car. You will damage the durability and you will damage its safety. So you will have to buck up to some of these changes,” advises Frise. “If you take the new Jaguar Land Rover as an example, it is built more like an airplane. It has lots of aluminum and lots of extruded profiles and die castings. That’s what OEs are using now to get better fuel economy. It’s expensive, it’s complicated, and they have to redesign everything about the car,” adds Frise. “This design technology is not only for European sports cars. Just look what Ford did with the all-aluminum F-150. If you look under the hood and look at how all the bits and pieces are put together you will see it’s not spot-welded; it’s glued and riveted like an airplane.” Chevrolet has announced it is going to do its 2018 pickup in aluminum, and Toyota is moving the Camry to aluminum, so jobbers are going to see more of this in the near future. “This is where we are headed, so the world is getting really, really complicated,” says Frise. Vehicles are becoming smaller and lighter, yet everyone wants them to sound like they are big and quiet, so OEs are using all kinds of special materials to get them to do that. People in the parts supply and repair industry have to acquire those materials, know how to use them, and do it right. “There is a lot to learn about how to put these things together. It’s a similar situation with brake pads. People keep asking, ‘Why do my brakes squeal?’” notes Frise. “It’s vibration; because the brake parts are getting smaller and lighter, they vibrate at a higher frequency. And that turns out to be a squeal.” Right now pretty much everything on the road today has an internal combustion engine, either gas or diesel, but we are moving to a world of electricity, just not as fast as expected. “They made great predictions, saying 20% of the cars on the road by 2020 would be electric, but that’s not likely to happen,” says Frise. “The average age of a car on the road is 11.2 years, so if you go forward to 2026, half of the cars that will be on the road in 2026 are on the road today. But still this is the trend.” “With 300 different engines on the market, it’s becoming more and more difficult to keep track. Two- to four-cylinder engines are going up, and five- to 12-cylinder engines are going down. Three-cylinder engines are the new four-cylinder engine. I can show you how they are not nice because they vibrate a lot; but [manufacturers] are finding new ways to make them smooth, with balance shafts and very sophisticated engine mounts. It’s not easy to do, but it can be done. “We are no longer in the engine business,” adds Hoskins. “We closed down our engine shop because they aren’t rebuilding engines anymore.” “Then we have lots and lots of complicated transmissions, nine speeds and ten speeds. It’s not easy to make something that complicated and compact in those kinds of numbers and have it stay together,” says Frise. Frise also advises jobbers and repair shops to stock up on people who understand electrical. “Every time you push a window button up and down, it’s not just a 12-volt running through a ground-to-load type signal anymore. It’s all going through a microprocessor. The car knows what you are doing, so it’s important that technicians be really careful with electrical stuff. You can’t just twist the wires together and tape it up.” “There is almost 100 pounds of copper in the average car today. That can’t go on,” he continues. “It’s too heavy and too hard to build the car that way anymore. The wiring bundle is too big. Turns out if you are intelligent about how you do the wiring, you can make the wiring harness with just a few wires going around the car in a BUSS configuration.” There are a number of trends that jobbers will have to deal with over the coming decade. These include reduced vehicle weight resulting in lots of complicated components; and more parts diversity, which means huge increase in parts to stock. The ownership pattern of cars is changing as well, as the millennial generation prefers car sharing, hence the emergence of companies like Zipcars, so your customer base will change somewhat. With so many switches and functions in vehicles, it’s becoming increasingly difficult for people to interface with their car. To deal with this, you can expect to see OEs introducing heads-up displays on most of the newer vehicles. With active cruise control, following distance, lane keeping, side obstacle detection and rear view cameras, it’s difficult for drivers to absorb all the information the car can give them and keep their eyes on the road. “It’s a big battle right now and the big car companies are spending a fortune on this stuff,” adds Frise. The price of parts and repairs are also likely to go up. For example, between 2014 and 2015, the cost of a Ford F-150 front door went up about 25%, because the new one is aluminum. Parts will inevitably become more expensive as they become more advanced. As affordability of repairs becomes a problem for consumers, there are going to be a lot of used cars on the market in the next number of years, so when it comes to a choice of facing a $5000 repair or buying another car, vehicle owners are going to make a different choice. Repair shops may well have to look at offering financing options for repairs in order to get people to look after their cars properly. “When we sit around this is what we talk about, the changes coming down the pipe. But the more things change the more they stay the same,” says Hoskins. “I am a guy who goes back to when everything had a carburetor and fuel injection was coming in and they were saying, ‘oh what a change.’ I remember when there was a distributor with points and a condenser and we thought, oh wow, the tune-up was going to disappear! Things are changing, but there are more and more cars on the road. And the age of the vehicles on the road is going up. People are taking better care of their cars now, because it’s a bigger ticket item so it is going to last longer.” “These changes just continue to put pressure on space management. For example, Bestbuy recently added 40,000 square feet just to keep up with the proliferation of numbers,” adds Devlin. Clearly, parts proliferation is going to continue to escalate at an astonishingly fast pace as OEs work towards the 2025 CAFE target, and in doing so, will change the face of the aftermarket as we know it today.