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North American Automotive Aftermarket Workshop
Opportunities and Trends in the
North American Aftermarket
Presented by Mary-Beth Kellenberger, Global Aftermarket Program ManagerNorth America Automotive & Transportation
2
The North American Aftermarket represents a profitable opportunity for sustainable revenues. Frost & Sullivan has a long history of covering the automotive aftermarket. Mary-Beth Kellenberger, Global Aftermarket Program Manager, North America will discuss the current state of the market and the developing trends.
The recent developments in the North American automotive industry have created many challenges, but most importantly, have also generated opportunities for growth. Frost & Sullivan will outline the top opportunities for your company in this market.
Who Should AttendWe recommend that all key personnel involved with aftermarket, market research, product and strategic planning attend. Key people from the following departments are recommended:
1. CEO Aftermarket2. After Sales and Service3. Advanced Product Planning4. Marketing and Branding including Consumer Research Teams5. Corporate Strategy Division and International Sales
Workshop Introduction and Objectives
3
Proposed AgendaThe North American Automotive Aftermarket
CEO’s perspective of the Automotive Aftermarket
North American Market Metrics: Vehicles in Operation, Vehicle Sales, Domestic vs. Import Nameplates, Cash for Clunkers
Understanding the Products that Drive the industry. A Look a the Top 10 Products by Revenues
External Forces at Play: A Review of Political and Regulatory Influences
The Aftermarket is NOT Immune to the Effects of an Economic Downturn
Understanding How Changes in the Economy Alter the Aftermarket
Understanding Distribution and the Competitive Elements at Play
What Motivates the Sale from the Owners Perspective
Distribution and Retailing Best Practices
Key Take-Aways for Building your Growth Strategy
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Examples of Research That Will Be Presented
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The Aftermarket Today (North America), 2008
What Are Aftermarket Products? • Those installed after the initial sale of the
vehicle from the dealer• and non warranty replacement parts.
Major Factors Influencing AftermarketDemand:
• Vehicles in Operation (VIO)• Vehicle use (miles traveled)• Part life -expectancy
2007
82.7%17.1%
0.2%
MY 1992 to 2008 MY 1966 to 1991 MY 1965 and Before
Source: Frost & Sullivan
Audi0.4%
BMW1.1%
Chrysler13.5%
FMC21.7%
GM30.2%
Honda-Acura6.8%
Hyundai1.6%
Kia0.8%
Lexus1.1%
Mazda1.8%
Mercedes-Benz1.0%
Nissan-Inf initi4.9%
Toyota-Scion8.6% VW
1.5%
Others5.1%
0
50
100
150
200
250
300
350
2005 2007 2009 2011 2013 2015
Lig
ht V
ehic
les
in U
se (
Mill
ion
) Light trucksCars
CAGR, 2008-2015: 0.8%
6
Tires & Wheels
22%
Collision & Glass
8%
Electrical Products
12%
Accessories8%
ServiceParts10%
Others40%
Aftermarket Revenue Distribution by Product Category, 2009
Wheels expected to drop marginally, but category expected to remain strong.
With the integration of advance sensors, electronics, and rising material costs, revenues are expected to increase.
Category share expected to increase with increased reliance on electronic vehicle applications and infotainment systems.
With consumers showing trends of defaulting vehicle servicing or extending the periods, revenues have dropped in 2009. On the other hand, increased average vehicle age has triggered demand for more ‘major’ maintenance activities.Regular service revenues are expected to recoup with economic stability.
Has shown a decreasing trend in 2009 due to reduced disposable income. Category expected to pick up with economic recovery.
What is expected in 2015?
’08’08 ’15’15
$76B
$90B
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Overview of Major Participants (North America), 2008
IdentityProgram
GroupProgram
GroupRetailer Retailer Retailer Retailer Retailer
Retail Sales 20% 20% 85% 50% 100% 73% 60%
Wholesale 80% 80% 15% 50% 0 27% 40%
Private Label Sales
90% 90% 50%25%
(Estimated)27% 20% 25%
Private Label Brands
NAPA CARQUESTDuralast,
Valucraft & Others
Best Test, MicroGard &
Others
Prostart, Futura & Others
Autocraft, Endurance &
OthersMotomaster
Geographical Coverage
North America
North America
U.S. U.S. U.S. U.S. Canada
Source: Frost & Sullivan
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Private Label Strategies – Retail Participants (North America), 2009
Advance Auto Parts currently has over 30 private label brands covering their private label product categories. Most product categories have their own PvL brand.
Advance Auto PartsAutoZone - IDEAL
• Retail participants in the aftermarket generally follow the multi-brand strategy with the exception of AutoZone which follows the Multi-Tier private labeling brand strategy and Canadian Tire which follows the single-brand strategy under the private label product brand of Motomaster. Theoretically, AutoZone has proven to have the most efficient private label branding strategy amongst the aftermarket retailers.
• The multi-brand strategy has been proven to be ideal for retailers when offering low-cost goods to the consumer while appearing to have a wider selection.
• As private label products have become more sophisticated with the introduction of premium products as private label products, the multi-brand strategy was incapable of creating a relation between the retailer and the product. In turn raising marketing costs and losing customer loyalty.
• Research shows that many retailers have experienced disadvantages due to their wide variety of private label brands. Many are now in the process of consolidating various related private labeled products under one private label brand.
Canadian Tire
Pep Boys O’Reilly Auto Parts
Private Label Sales
20%
PL Sales50% PL Sales
25%
PL Sales25%
(Estimated)
PL Sales27%
Source: Frost & Sullivan
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Overall SWOT Assessment of the North American Automotive Aftermarket – Market is highly mature, but fairly stable with constant new variables.
STRENGTHS•Most developed in the world.•Coverage of all makes, all models.•Stable distribution structure.•Caters to the largest consumer pool in the world.•Constant demand for maintenance products.•North American automotive culture demands for aftermarket products.•Fast cash turnaround for participants.•Efficient reverse-engineering.•R&D for performance and safety products starts mostly in the aftermarket.
THREATS• Constant new entrants.• Lower cost imports.• Quality improvements from low cost imports.• Less vehicles in operation.• Increased logistics costs.• Parts proliferation.• Increased adoption of electronics in vehicle manufacturing.
• Increased popularity of vehicle leasing.• Fall of vehicle sales.
OPPORTUNITIES• Economic rebound expected to boost sales for accessories and minor maintenance products.
• Electronic integrated products increase unit price.• Constant high demand for maintenance products.• Economic hardship has triggered an increase in DIY.
• Increased average vehicle age demands ‘major’ maintenance products and services.
• Increased profits with Private Labeling and Wholesale.
WEAKNESSES (CHALLENGES)•Heavy fragmentation.•Constant new entrants.•Consumer perception of product quality.•Many products & services are heavily reliant on social & economical state.•Constant introduction of new vehicle technologies.•Difficulties in repairing new vehicle electronics and applications.•Technician training lacks detail of all models.•Increasing logistics costs.
Mature, Stable, but
with constant
new variables.
RESPONDCAPITALIZE
SEIZE PREPARE
Current State
Market Forces
Source: Frost & Sullivan
Stable
Saturated
Highly Unstable
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Contacts
Johanna HaynesCorporate Communications Direct: 210.247.3870Email: [email protected]
Johanna HaynesCorporate Communications Direct: 210.247.3870Email: [email protected]
Mary-Beth KellenbergerGlobal Aftermarket Program Manager Automotive & TransportationDirect: 416.490.1997Email: [email protected]
Mary-Beth KellenbergerGlobal Aftermarket Program Manager Automotive & TransportationDirect: 416.490.1997Email: [email protected]
