A tidal wave of sales

With the Big Three struggling to maintain market share and overseas carmakers ramping up production just about everywhere, the aftermarket is quickly learning that coverage for import vehicles can no longer be a second thought.

According to a recent article from the Motor & Equipment Manufacturers Association (MEMA), "Toyota is poised to overtake ailing General Motors this year as the world's largest automaker in terms of units sold. It is a title, industry experts say, that the 69-year-old company could win through a combination of efficiency, flexibility, quality control and, most importantly, an uncanny sixth sense for what consumers want," demonstrated by their super-successful launch into the hybrid market with the Prius in 2000.

Mike Emley, co-owner of All Parts Auto Stores in San Jose, Calif., started his business in 1967 and made the move to imports shortly thereafter. "They've become so mainstream with American manufacturing of these cars. It's a minimum of 50 percent of my business," he explains, adding that it's an extremely important arena for his four stores, which are 55 percent retail.

"I've just watched the market shift dramatically," he continues. "In 1968, it was British, French and German vehicles. Now those are a rarity. Now it's Asian. We stock everything possible for imports. (But) it gets a little clouded and confused when you have to know your VIN number and whether that Toyota was made in America or Japan."

Seeing a growth spurt

In April alone, nearly every overseas carmaker reported their biggest sales ever. Toyota sales totaled 219,965 units, up 8.5 percent over the same period last year. American Honda reported a 6.5-percent increase over April 2005, and The BMW Group crossed the 100,000-vehicle sales' threshold and had an increase of 13 percent in April sales. Meanwhile, in the same month, DaimlerChrysler reported total group sales of 211,365 passenger vehicles in the U.S., a 6-percent decrease compared to April 2005.

Since 1980, the share of foreign nameplate vehicles on the road has jumped while domestic share has fallen. Twenty years ago, imports were 14 percent of the total vehicles in operation, with domestics garnering 86 percent. In 2005, that ratio was 67 percent domestic to 22 percent import, according to Lonnie Miller, director of Industry Analysis for R. L. Polk & Co.

This translates to almost 76 million import vehicles on the roadways and is a trend Miller expects to continue. As for the aftermarket, "these vehicles do have a lot of sophistication, so I think we're going to see the DIFM category continue to grow," he explains.

As for the future, imports will have captured 46 percent of new vehicle sales by 2012, anticipates Joerg Dittmer, industry analyst with Frost & Sullivan.

Responding to what they perceived as a growing need for foreign vehicle nameplate coverage in 2004, CARQUEST acquired WORLDPAC, which distributes replacement parts for over 25 import and domestic car and light truck makes to the import repair market. According to their website, they are now a sponsor of the International Automotive Technician's Network (iATN).

"WORLDPAC's business was exclusively built around sourcing import product from around the globe for import applications," explains Ray Birden, senior vice president of marketing with CARQUEST. "And after acquiring WORLDPAC, we have now made all of that product available through the CARQUEST store network" of 3,400 stores. WORLDPAC has more than 50 locations in the U.S. and Canada.

Birden, who says they are experiencing double-digit increases in the import segment, sees this growth of foreign nameplate vehicles on America's roads continuing.

"This year's Motor Trend Car (of the Year) and Truck of the Year were both Hondas: the Civic and the Ridgeline. And Toyota is building their new pickup in Texas," he maintains. "Where the domestic brands have traditionally held their own has been the truck and SUV market, and clearly the import manufacturers have their eyes on that market as well."

Dan Buss, president of D&R Autoworks, a service center in Illinois, says domestic service was down to 28 percent of his business in the first quarter of '06, a decrease of 8 percent for the same time period last year.

"I think every territory is going to see imports grow — maybe not at the percentage we've seen them, but they're going to see them grow," he offers. "I think people's tastes have changed. If they're going to spend $20,000 on a car, they'd rather buy a three-year-old Mercedes than a brand new Chevy. I think the more you hear an Asian import driver rave (the more imports will grow). I have a customer who went from domestic to Asian and asked why he didn't do it sooner."

Jim O'Neill, who has spent more than 25 years in import repair and is owner of Chino Autotech in California, says his shop's active customer database shows 6,582 import customers and 4,633 domestic customers (a ratio of about 59 to 41 percent). His top five manufacturers are General Motors, Ford, Toyota, Honda-Acura and Chrysler.

Parts source overflow?

Frost & Sullivan Consulting Analyst Mary-Beth Kellenberger states that, although import brand vehicle replacement parts have traditionally been sold through the dealer channel, there has been a rise in the availability of aftermarket replacement components for these vehicles, as the percentage of import brand vehicles has increased.

"In many cases, the OE component supplier has entered the N.A. aftermarket with an OE equivalent brand of their OE product. The aftermarket component manufacturers are importing the products and selling to WDs and jobbers," she explains. "In addition, remanufacturers have sprung up in North America and they are also a supply source.

"With import vehicle manufacturers doing more manufacturing and assembling here in North America, many have forged new alliances with N.A. component manufacturers, or their original offshore manufacturers have followed them to N.A. and created manufacturing here," she continues. "In either case, the OE parts are being made available through the dealers, or through the WD and jobber system by selling directly into those channels."

In addition, WDs and jobbers who are sourcing products offshore are doing so mainly for private label products that will provide them an advantage in cost or brand, Kellenberger notes.

Hank Allessio, managing director at Walden Consultants, says the import specialty jobber sources parts from five main company types: remanufacturers; OE parts suppliers; foreign parts suppliers that are not OE; U.S. suppliers that supply specialty import jobbers; and evolving sources of supply, which include China, India and Thailand.

Some in the aftermarket utilize specialty distributors like WORLDPAC, Northside Imports, Inc. and Interamerican Motor Corporation (IMC).

"We have always used WORLDPAC and were one of the first shops in our area to go to online ordering with WORLDPAC, IMC and Factory Motor Parts (an ACDelco warehouse)," O'Neill of Chino Autotech explains. "However, more and more import parts are readily available at our local jobber stores as well. Immediate delivery of a needed part by a local store saves labor costs, increases productivity and makes up for slightly higher jobber-level pricing. The local Auto Value/Bumper to Bumper affiliate warehouse and jobber stores do a very good job of stocking the right parts for import vehicles."

But some jobbers, like Bob Nelson, president of RKKC Incorporated, still have a hard time accessing parts. Nelson operates two NAPA stores in Rhode Island.

"We started as a traditional NAPA store and were a little lacking in import availability, so I hired two countermen who were specialists in the import arena," he explains, adding that his import business has doubled as a result of the countermen's expertise. "In the Northeast, I believe we're about 45 percent import vehicle registration, so it's paramount that we have availability of parts."

Although Nelson sources parts from IMC and Europacific Parts International, Inc. (EPI), he says his Asian vehicle coverage is still deficient. He has contacted WORLDPAC and a few manufacturers but to no avail.

"Since 1977, I've been selling NAPA auto parts, and I'd have to say that our import attention has really increased in the last five years or so," says Nelson. "I think most of the manufacturers decided that if they're forced to bring in imports, they're only going to bring in volume numbers (that make a profit). But when it comes down to a control arm for a Honda Accord, no one has it."

And Nelson feels he'd be opening up "Pandora's Box," dealing with warranty issues and returns, if he tries to source product directly from overseas.

Emley of All Parts Auto Stores, a member of Parts Plus, which is part of the Automotive Distribution Network, says his main supplier is Pacific Supply out of Beuna Park, Calif. "If I'm buying Wagner brakes, I have all my import and domestic coverage within that U.S. company. What I will say is American manufacturers have been a little slow on the uptake and could improve on supply," he notes. "I stock Bosch, Beck/Arnley, NGK Spark Plugs...our main competition are those supplying only import direct to the technicians, like WORLDPAC."

Emley also sees mass merchandisers offering more import parts, but thinks smaller guys like him can compete because of top-notch employees. "I don't think mass merchandisers understand it completely. We stock and adjust to the needs of our customer base. I have customers who work on specific vehicles, so if it's an import, we can meet that specific need quickly."

Frank Murkowski, marketing manager for North American aftermarket emissions control for Tenneco, says they are noticing more import specialist warehouses starting up and are trying to provide the product they need. In April, the Walker brand, maker of exhaust systems, launched 575 new part numbers, more than half of which were for import applications.

"In particular, there were 102 premium and direct-fit muffler assemblies related to import," he says. "We're really looking to that segment, making sure we're delivering the coverage when the market needs it."

Bill Tyson, president of Tyson's Auto Repair, which has three locations and is growing in Florida, sees more imports than ever before.

"It's very distinctly more and more Asian imports. Our local jobber has done a very good job for us," he explains. "But more and more often what we find is when we're looking for a part that is a very performance-related part, where the performance of that part is keenly observed by the consumer," we can't take a chance on brand and end up going to the dealer.

Cascading trends

Kellenberger reports that Hyundai is the fastest growing vehicle manufacturer and brand in North America today.

Nelson says he sees Suzuki and Kia growing in popularity, and as for parts, they see a lot of chassis, suspension components, steering and brake parts. "It's not so much tune-up; the majority is driveline because the kids are always tweaking their suspensions and the older drivers want it to ride nice."

His stores are 80 percent wholesale, and he notices more wholesale customers going import, even becoming import specialists. "On Saturdays and Sundays, though, we have kids coming in for parts."

"One trend we see on the import brand vehicles is the quality of the vehicle really is causing them to have a much longer life. And so the part categories we see most of the demand for will be in the typical categories of brakes, belts, hoses," suggests Birden. "The other interesting thing is that these brands are new brand names to the aftermarket — so it does require some education to the general repair shop as well."

Nelson agrees on the vehicle quality of foreign nameplates, but adds that even though it might be a five-year-old Toyota instead of a three-year-old coming in for a repair, what matters is it's still coming in.

Birden also says imports bring new product areas to the market, such as brake sensor wires that appear on BMWs.

Pouring out the product

As demand for aftermarket parts and accessories increases, manufacturers are ramping up their foreign nameplate coverage to supply WDs with as full coverage as possible.

Max Dull, president and CEO of Beck/Arnley, says the company is investing heavily in IT and late-model product coverage. "Where we're seeing the greatest amount of growth is in the higher technology products, such as electronic component sensors and fuel delivery."

Dull notes their business is growing with domestic traditional WDs "who have awakened and realized there is a growing import market out there." He says many of these customers have a dual inventory, adding an entire import program on top of their existing inventory, but larger WDs that are moving to more in-depth import coverage might "indent," or maintain one inventory by having a domestic brake supplier for domestic applications and an import brake supplier for import applications.

"I think they are awakening to the fact that brand is important to import owners, which is why we're hearing so much more about the distributor wanting to declare a very clear import strategy to go after that business," offers Dull. "And the suppliers of domestic brands are declaring they want to have a bigger part of the import business, too. It's going to be a large battle, but they're definitely moving that way."

"We're definitely seeing an increase in that area," concurs Mark Christiaanse, director, product management for Monroe. "We see the traditional guys are increasing their number of foreign nameplates."

He notes that these vehicles are moving away from shocks and toward struts, which are more complex to produce. "We're actually bringing product in from Europe and making it in the Arkansas plant to build that coverage for Hondas, Acuras, etc."

Visteon's Aftermarket Marketing Director Mark Boyle says more opportunity is being created for the independent aftermarket to work on foreign nameplates because there are fewer bays at the import dealers.

"Our business is now less than 50 percent with Ford Motor Company," he states. "This year, we're introducing 120 new compressor applications and, of those, 80 are import."

So as these vehicles continue to filter into the aftermarket, our industry hopes to waste no time communicating to the professional customers and end users that we have what they want. "My countermen's motto is 'never say no,'" says Nelson. "I'm trying to get my customers to realize that I'm their parts store for all their parts."