INDUSTRY NEWSAftermarket Threats: OEM Parts Proliferation, Warranties
and Lifecycle Service BROCKVILLE, CANADA (Dec. 5, 2006) - According to Terry O'Reilly, president and CEO of Pricedex Software Inc., manufacturers and resellers in the North American automotive aftermarket are
headed for serious trouble if they don't change course soon. The reality is, parts proliferation and OEM deal competition, along with a lag in updated technology, are not letting companies match what the new car dealer already
has.
OEM Make/Model ProliferationSegment199520002005Cars480463591Trucks430662999Combined91011251590(Source: Automotive News Market Databank)
The evolution from the Big Three to a multitude of automakers supplying many more models is driving parts proliferation and reducing profitability, says O'Reilly. He notes that there were just 910 models sold in 1995, compared to 1,590 models in 2005 - and the number of models is still growing.
"The associations serving our industry have been talking about this for many years. Numerous studies have been done that have identified the problems and solutions, and now it is time to move forward - quickly - before any more market share is captured by dealers."
- Terry O'ReillyBut it's not just cars and trucks. There are a number of other proliferations happening, including more engine types (gas, diesel, hybrid, in-line and V four-, five-, six-, eight-, 10- and 12-cylinder models), more transmission types (three-, four-, five- and six-speed, manuals and automatics), and more electronics and safety features than ever before. "In the face of this parts onslaught, the independent service installer or retailer doesn't stand a chance - unless his suppliers, including manufacturers and
warehouse distributors (WDs) alike, provide him with the systems and tools he needs to compete to sell their product lines," says O'Reilly, "just as the OEMs support their dealers." Vehicle manufacturers are extending their powertrain warranties, with General Motors (GM) now at five years/100,000 miles and Ford at five years/60,000 miles, adds O'Reilly. They're also planning more niche vehicles and special editions, and exploring special option packages to drive sales and bring in customers. Hyundai, for instance, is considering a safety package that would appeal to older drivers. O'Reilly notes that according to a recent NPD Group report, the car dealership market share for service has risen to 22 percent, making it the leading service outlet in the United States. This is a result of good practices through the dealer, which is predicated on good product information systems. Automakers are pursuing lucrative service and parts business to boost revenue, such as Hyundai's plans to introduce a prepaid maintenance program and an extended warranty to boost sales, as well as plans to extend the longer warranty to its used cars. GM recently appointed an executive director of accessories whose assignment it is to develop aftermarket accessory lines that dealers can install. GM also is committed to driving up revenue in service and parts, and is looking to extend customer-dealership loyalty through the lifecycle of the vehicle. Other automakers - including Ford, DaimlerChrysler, Volvo and others - also have programs in place to raise consumer awareness of parts and service through a vehicle's lifecycle. "It's not going to be easy, and it's not going to be cheap, but the independent aftermarket can and must compete - or some may find themselves out of business," says O'Reilly. "To survive, this industry has got to start investing in the tools, training and technology that will keep it viable and profitable going forward." A key to success will be for manufacturers and resellers to adopt fast, flexible, open product information management systems that will allow them to regain control of their inventory, pricing, catalog and publishing management and more. "The systems are available today for any manufacturer or distributor or retailer to cost-effectively implement a robust, powerful product information management solution that will truly improve their competitiveness through better parts data management, more effective pricing and better customer support and response time," says O'Reilly. "The associations serving our industry have been talking about this for many years," he adds. "Numerous studies have been done that have identified the problems and solutions; and now it is time to move forward - quickly - before any more market share is captured by dealers."
(Source: Pricedex
Software) 
