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Welcome to second edition of the Parts and Specialist newsletter. In this issue we will change gears (pun intended) and shift focus from the cannabis industry to a more “traditional” business: the after-market car parts industry. We begin by highlighting the importance of this sector, followed by a snapshot of key trends defining the industry dynamics and finally wrapping up with a market news update.

Why does the aftermarket parts sector matter?

A typical vehicle has about 30,000 parts and like any other piece of machinery they undergo normal wear and tear over a vehicle’s lifetime and thus require repair & replacement. For most people, an automobile especially a car typically ends up being the most expensive purchase of their lives after buying a house. On top of being a big-ticket purchase, cars also support the professional and personal lives of their owners directly or indirectly. For these reasons amongst others, an average car owner expects a certain level of quality & promptness in the post purchase interactions with the seller. In terms of sheer numbers, the auto parts aftermarket as a whole stands at a massive 900 Billion USD and is expected to reach 1.35 Trillion USD by the year 2030. Further, auto parts can be a true cash cow for car makers and dealers, with a large chunk of the profits coming from their sale. Sample this – when Saab went bankrupt in late 2011, just one wing of the former automobile giant was not included in the bankruptcy filing: “Saab Parts”. NADA (National
Automobile Dealers Association) estimates that a typical car dealership can have up to 50% gross profit coming from sale of parts. For the reasons stated above, the sector holds an important place not only for various stakeholders that are involved in this business but also for the economy at large.

Industry Trends:

The proliferation of digitization means that a typical consumerin this day and age is not only well researched before making a purchase but also has more flexibility when choosing to buy. This trend is directly linked to growth of e-commerce as an alternative sales channel for fulfillment of customer demand. The online channel effectively circumvents any intermediaries, allowing direct delivery of parts. World’s biggest ecommerce retailer: Amazon has partnerships with several major auto part manufacturers such as Bosch and Federal Moghul etc. to sell their parts through its dedicated vehicle portal. Even though, the online medium falls short of the avenues a brick & mortar store offers in terms of building long term relationship, service delivery & consultative selling, it is a trend that is here to stay. This will continue to put pressure on the traditional sales channels and push them to offer better service and faster turnaround times.

Update from GM Oshawa:

GM sent shockwaves last year by announcing to shut down its car plant in the jurisdiction of Oshawa, ON. The company has had its presence in the region for almost a century & has been the mainstay of the job market. The announcement came primarily as a consequence of the company’s decision to focus more on electric and autonomous vehicles. While initially GM planned to shut down the plant completely, after several rounds of negations with UNIFOR (trade union), it has decided to invest $170 M in the facility & leverage it for parts manufacturing & vehicle testing. The most noteworthy development is that in addition to making parts for their own consumption at various GM plants, the company is in talks with other part manufacturers such as Magna to produce parts for them.

Amitoj Singh
Metro Supply Chain Group