Market Feature: Reman versus New Man

Although manufacturers of rebuilt automotive parts face a number of challenges, including a difficult economic environment and competition from new parts in some categories, the overall market for remanufactured products appears to be on a growth track.

OEM technology issues, core availability, quality considerations, parts proliferation and complexity, age of the vehicle fleet, and other factors are all at play right now. However, remanufacturers say they’re well positioned to deal with these challenges.

Ezer Mevorach, president of Mevotech Inc., which has facilities in Montreal and Toronto, notes that although his company is well known as a supplier of quality remanufactured parts, it also carries a significant number of new parts.

“The question of ‘new versus reman’ really depends on the type of product involved,” says Mevorach. “In water pumps, for example, new is gaining in sales, but slowly because the quality of remanufactured water pumps is very good. In some cases, a replacement component may feature both new and remanufactured parts. In the case of Honda CV shafts for example, our unit has both remanufactured and new parts.

“As the fleet ages, it certainly helps the remanufactured market, particularly in some categories such as CV shafts and rack and pinion. The replacement market for these units is generally on older vehicles, and there are now more of these on the road.

“There can be a downside, however, and that is the tendency of some customers to be reluctant to spend a much money for major replacement parts on a 10- or 11-year-old vehicle. Overall, however, the older the age of the vehicle fleet, the more likely it is that customers will tend to purchase a remanufactured product. The favorable price factor with remanufactured products is always going to be a strong incentive for the customer.”

Tullio Lattanzio, vice-president of Armature DNS 2000 Inc., Montreal, believes that remanufactured products have a growing market, noting that even at the OEM dealer level customers are being offered rebuilt parts as well as new. “The future looks extremely strong for rebuilt parts. Brand new parts are a lot more expensive,” Lattanzio says, “and in addition, with rebuilt, there is generally greater parts availability–a lot more SKUs. When a customer is looking for a new OEM part, for example, the customer may have to wait as the part is sought throughout the dealer network.”

He also sees the growing age of the vehicle fleet on the road as helping the remanufactured market, as it does with the aftermarket replacement market in general. “In addition, during the last 10 years a lot of the sloppy rebuilders have gone out of business and the ones left, in electrical, for example, are much better.”

Speaking further about what he considers the advantage of rebuilt, Lattanzio says, “Rebuilt parts are often better than the original. We find out the weaknesses of the new parts and improve on them. On a particular model of alternator, for example, we have put in better bearings because they were causing problems on the original part. Simply put, we discover the problems and fix them.”

On the technology side, he says that the more complex the OEM design, the better it is for remanufacturers. “Generally, there is more to go wrong with the part as it becomes more complicated and this helps the rebuild market. The OEM parts are not as robust as they used to be and this also assists rebuilders.”

Customers see specific advantages in buying rebuilt parts, according to suppliers. Francois Desmarais, president and CEO of CV Tech Industries, Hull, Que., told Jobber News that the availability of remanufactured parts and their pricing makes them much more reasonable to the customer. He notes however that it is becoming more difficult for his company to source cores for their specialty, CV drive axles and rack and pinion. One of the reasons is that the OEM parts are getting more and more complicated. Desmarais says that for certain model years of the Nissan Maxima, for example, there are 36 different part numbers for drive axles.

“To solve the core problem we are making new parts for creating the cores. We use CNC manufacturing processes and re-engineer the core parts. This is one of the reasons that our strongest selling point is availability–we don’t have to rely on cores that are in scrap yards. The manufacturing capability has definitely been a factor in helping us grow. There are not enough cores available from 1995 and up. The frequency of core availability is not the same as it was in earlier years,” he says. He also comments that “OEM manufacturers are complicating the designs so they can retain share in the replacement market.” Desmarais believes that his company’s specialization is a strength. “It makes us more knowledgeable and we can focus on solutions.”

Suppliers comment that certain types of replacement parts are more suitable for rebuilding than others. Brent Karr, regional sales manager of Autoline Products Ltd., Winnipeg, Manitoba, comments, “We have seen increased competition in the industry from new product lines. Products that have few components and do not require a high degree of technology to manufacture and assemble are good candidates for new product manufacturers. These products are typically of foreign manufacture, with lower production costs, therefore allowing the marketing company to be reasonably price-competitive against a remanufactured product. New water pumps are a good example of this type of product,” he says.

In looking at the composition of the fleet, Karr notes that commercial and fleet use vehicles typically will be using remanufactured parts sooner than your typical family sedan. “A commercial/fleet vehicle is more likely to be off warranty within a year or two of in-service-date, and therefore the aftermarket has an opportunity to sell repair parts for this vehicle. On a family vehicle, as the kilometres and years increase, a vehicle is more likely to be serviced with remanufactured parts, since the owner is typically more price-conscious and new parts may no longer be available from OEM sources.”

Talking about what he considers the advantages of remanufactured, Karr says, “In many cases a remanufactured product is actually better than a new part.” He cites the example of an OEM rack and pinion unit with Teflon seals riding on an aluminum housing assembly. Remanufacturers typically machine the housing and install a low-carbon steel sleeve, which is harder than the Teflon seals. The remanufactured product has proven to be far more durable than the original design.

“This type of improvement is also evident in many other remanufactured products. Any time a remanufacturer can identify a design flaw or weak point and is able to correct or improve on the product during the remanufacturing process, the finished product is superior to the original. High prices of OEM new parts will continue to create demand for lower priced alternatives, particularly as the vehicle age increases. In many cases it is just a matter of time until many new technology parts–such as ECMs–are available to the aftermarket from remanufacturers.”

Karr notes that remanufactured fuel injectors are an example of a relatively new product category that has until recently been a new-only item. “Traditionally the aftermarket has relied on new injectors for vehicle repairs, and due to cost, most installers are only replacing totally failed injectors. With competitively priced remanufactured injectors now available, installers can purchase a complete set of six injectors for what some new injectors cost each, and perform a complete fuel system service. This is something that would not be practical on an older vehicle if only new injectors were available.”

Joe Barrau, national sales and marketing manager of Tarani Rebuilders, Edmonton, Alta., which is involved in drivetrain components, and particularly front wheel drive CV axles, says that the question of rebuilt versus new is on a case-by-case or part-by-part basis. “It is a combination of cost and the difficulty of rebuilding. In so
me cases, there is greater demand for new. For example, the Honda CV axles are hard to rebuild.”

In cases when rebuilding may be difficult for whatever factors, such as the availability of cores, Barrau says Tarani is currently exploring offering new components in some cases. “Moreover, although we do not consider new technology at the OEM level as a problem, we are constantly reviewing the OE technology situation and looking to the future to see what we have to do to keep ahead of the curve.”

As with many aftermarket sectors, rebuilding can be cyclical. Eric Surkari, president of Mister Starter Auto Electric Ltd., Toronto, Ont., says he finds that the rebuilding business goes up and own. “I find that it is seasonal and I also feel the economy has a lot to do with it. Remanufactured parts are now starting to pick up again in volume. Up until a few years ago, the demand for new was higher. I also sell new parts, although the biggest percentage is remanufactured. I am also noticing that OE companies are getting into rebuilding to get a bigger market share.”

Analyzing the question of when rebuilt makes sense, Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc., Richmond Hill, Ont., says, “It depends on the product. In many cases, such as electrical, it makes more sense to remanufacture. It is better costing and good quality. Also, some SKUs need to be remanufactured, such as parts with low volume.”

He notes, however, that there is some movement away from reman, such as with radiators and transmission coolers. “Some of the newer materials in these make them harder to rebuild. Also, with the new manufacturing technologies, you can sometimes sell new cheaper than rebuilt. Alternators, starters and small motors, however, are rock solid reman products and will remain so.”