Frost & Sullivan Product Report: Exhuast

The exhaust category is split into two major categories — standard replacement and performance. In 2007, 68 percent of exhaust product revenues came from standard replacement products. However, the trend toward performance products that emerged 10 years ago continues to gain momentum. By 2012, it is expected that performance exhaust products will drive more than 42 percent of revenues.

Consumers historically are reluctant to tamper with OEM exhaust systems for fear of violating the vehicle manufacturer's warranty. As vehicles age, warranty becomes less of an issue and style increases in importance. The industry has made significant changes to enhance consumer perception of performance exhaust systems. The "cat-back" system reduces installation time and creates a consistency in sound quality. Demand for cat-back systems continues to grow and currently represents 31 percent of performance exhaust system revenue, with a 35 percent growth projected by 2012. However, cat-back system growth has come at the expense of the exhaust tips category. Increasingly, the one-piece cat-back system includes a stylized tip that reduces the need for an add-on tip. The all-in-one cat-back improves installation time and reduces costs.

The shining star of the standard category is catalytic converters. In 2007, 39 percent of standard replacement revenues were driven by the sale of catalytic converters. Catalytic converters became standard OEM equipment for North American vehicles in 1979 and were used to reduce vehicle emissions of pollutants such as oxides of nitrogen, hydrocarbons and carbon monoxide. For most vehicles, the catalytic converter lasts five to seven years, however its demise is rarely noticed by the driver unless indicated by a sensor or a technician.

Modification products are influenced by fashion and social trends. Stylized products result in the need for customized inventories. The high costs of design, tooling and distribution emphasize the need to get vehicle application right. Manufacturers and distributors that have pinpointed high demand vehicle applications do exceedingly well in this category. Understanding vehicles in operation is important, but more important is a strong understanding of modifier trends, vehicle design trends, sound and performance trends.

In a 2006 Frost & Sullivan consumer study, 57 percent of the general vehicle owning population reported modifying their vehicle within the last 12 months, with 8 percent reporting the modification of the exhaust system. More intense enthusiasts, or those who perform more modifications, typically will perform exhaust modifications. Sixty-two percent of enthusiasts who report modifying the exhaust system did so as part of the first five modifications. Exhaust modifications can be done as a standalone, but often are performed in conjunction with other systems. The most common combination is exhaust, wheels and suspension. The combination favored by advanced enthusiasts is that of fuel delivery and exhaust, which enhances engine performance.

Frost & Sullivan's research indicates that exhaust modifications have a relatively similar appeal to vehicle owners of all income segments; however, vehicle type and owner age are strong indicators of exhaust modifiers. Owners of luxury vehicles, trucks and SUVs are more likely to upgrade to a performance exhaust system. Frost & Sullivan's market sizing research supports these trends.

Some performance products are negatively impacted by vehicle manufacturers incorporating performance products into OEM vehicle design. This is less common in the exhaust category, as many OEM replacements fall into the performance category. Many industry observers believe that the existence of an OEM performance system will actually encourage vehicle owners to improve on the already enhanced system.

The durability of OEM installed exhaust systems will continue to depress replacement opportunities for exhaust systems. In order for this industry to grow, it needs to generate demand. Performance systems are an important element of that strategy.

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