Automotive parts replacement business has become increasingly important to franchise dealers, but stagnant vehicles sales and extended service intervals are causing the market to shrink rather than grow, says McCarthy chairman Brand Pretorius.
The automotive parts replacement business has become increasingly important to franchise dealers, but stagnant vehicles sales and extended service intervals are causing the market to shrink rather than grow, says McCarthy chairman Brand Pretorius.
As a result of stagnant vehicle sales, car dealers have had to contend with a reduction in the gross margins of new vehicles to improve competitiveness and affordability in the market. The R12-billion replacement parts market currently contributes 22 per cent of the profits made by vehicle dealers and although the margin could become 25 to 30 per cent in future, there were several factors that were causing the market to struggle, Pretorius was quoted as saying by this week.
Pretorius, who is also president of the Retail Motor Industry organisation (RMI), said modern cars consumed fewer parts because the material used for parts led to less wear and tear. More "long life" components, such as some brake pads, which could last 25 000km and oil filters 35 000km, were also being used.
"For that reason, manufacturers have extended service intervals. I can't see that trend reversing," he added.
The viability of the parts replacement market was also being affected by disposable income of South African consumers remaining under pressure.
Pretorius said the market could expect "at best limited growth". In future, original equipment manufacturers could expect growth of between one and three per cent and alternative suppliers about one per cent, he predicted.
There was a lot of consolidation in the alternative parts supply segment of the market due to declining volumes, margin pressure and the entry of new players in the market, Pretorius said.
Only the sophisticated, high-quality and price-competitive suppliers would survive, he added.
Original article from Car