I have friends and family in the car sales and parts industry and I guess if you had asked me to invest in this sector a few years ago I would probably have thought twice ( or more ! ) about doing so but I would have been  wrong 😉

In 2009 and 2010 both the U.S. and the U.K. had ” Car Scrappage ” schemes ( ” Cash for Clunkers” in the U.S. !! ) in an effort to boost new car sales in the face of the recession.

These appear to have boosted the existing trends and R.L. Polk & Co. of the U.S. says:

“As vehicles age and consumers continue to

hold onto them longer, there are significant opportunities for repair services and parts demand for the aftermarket as vehicles are falling out of warranty as they age,” said Mark Seng, vice president, sales and client services, aftermarket and commercial vehicle, at Polk. “The increased complexity of vehicle repairs also presents a business opportunity for service professionals as traditional do-it-yourself consumers are less likely to attempt complicated technical work on their vehicles.”

Dealers will have an opportunity to develop programs geared toward service loyalty marketing as they seek to hold onto a growing base of customers, according to Polk. “The trends we’re seeing suggest great motivation for dealers seeking to maintain a longer-term relationship with their customers,” said Lonnie Miller, vice president, marketing and industry analysis, at Polk. “Service-oriented loyalty programs can significantly contribute to improving business and overall loyalty among customers,” he continued.

Polk expects conditions facing the U.S. automotive industry today to remain through 2010 and expects trends for scrappage and vehicle ownership to continue for at least another year. This assessment is largely based on current industry dynamics, coupled with Polk’s annual forecast of a moderate increase in light vehicle sales to 11.5 million units this year. It also assumes a general upward trend for vehicle scrappage rates as high volumes of older vehicles continue to retire from the U.S. fleet. “

( I am assuming that the U.K. is following similar trends to the U.S. ).

People are holding on to their cars and vans ( light vehicles ) longer ( 2004 – 8.6 years, 2010 – 10.2 years ) but also the scrappage percentage is rising ( from approx 5 to 6 % between 2005 and 2010 ) .

” These trends are supported by a number of factors, including the economy, limited financing and leasing options available in the market, extended warranties offered by OEMs, and improved vehicle durability and quality of vehicles. They also provide opportunity for various business segments of the industry” says Polk.

Whilst the variations are considerable car parts come from one of two places and get fitted in one of two ways:

They are either ( originally ) from a manufacturer ( either the ” original ” or ” Genuine ” one or an ” Aftermarket” or what is called in the ICT industry a ” compatible ” one ) or they have been ” recycled ” i.e. they are from a crashed or scrapped vehicle.

The parts are fitted either by a garage/service provider or by an unqualified individual, likely to be the vehicle owner.

Certainly the comment made by Polk about vehicle complexity is valid. Some faults cannot be identified and resolved without hi-tech ( expensive ) equipment and skilled operators.

The ” route ” that the parts take between manufacture and fitting is varied. Broadly speaking, these days, there is an ” Internet route ” and a ” Physical route ” but there will often be a mixture of the two.

For example the vehicle owner might go to a garage, who buys from a “distributer ” , who buys ( mainly ) from the manufacturer.

or

The vehicle owner might do the work himself and obtain the part from an online website like eBay, a car parts provider/car breaker or a forum member.

These might be viewed to be the ” extremes ” but there are very many permutations for the garage/service provider route and for the self repairer route.

An individual could go to:

– The Internet ( eBay, online parts company, breaker or forum )

– A car breaker ( physically )

– A general car parts provider ( a physical outlet )

– A manufacturer’s dealer ( physical outlet )

A garage/service provider could go to:

– A car parts provider ( distributor )

– A manufacturer dealer

– The Internet ( as for an individual )

As a generalisation ” older ” people might tend towards the ” physical routes ” whilst younger people might be more inclined toward the ” Internet ” routes.

As younger, more Internet literate, people join dealers/service providers ( SP’s ) they will be more aware of the potential Internet based routes although they may be constrained by existing procedures from using these routes.

Certainly younger people, doing their own repair work, are very likely to use the Internet route.

Dealers/SP’s using the physical routes are likely to be marketed and sold to in a ” physical manner ” e.g. snailmail shots, telephone sales.

However, it is clear that the Internet channel is getting more and more popular, utilised and sophisticated.

A brief analysis via Google reveals the following:

A Google search on ” Car Parts U.K. ” gives 1st page results as follows:

Paid search ( Pay per Click / Google Adwords )

1. Euro Car Parts ( ECP, Genuine and Aftermarket parts online or physical sies )

2. 1st Choice spares ( New – Genuine and Aftermarket – and Recycled, online only ? )

3. CPR ( New and recycled, online ? )

4. Comline ( New, online )

5. Find a part ( New, online )

6. Express Car Parts ( New, online )

Organic ( Free ) Search

1. ECP

2. 247 ( New, online )

3. carparts-uk ( New, online )

4. carpartsdirect ( New,online )

5. 1st Choice

6. Breakeryard ( New,Recycled, online )

A Google search on ” LandRover Clutch parts ” gives 1st page results:

Paid Search

1. ECP

2. EH Douglas ( Servicing/Repairs )

3. jgs4x4 ( New – Genuine and Aftermarket )

4. Rimmer Bros.

Organic/Free Search

1. Brookwell.co.uk ( New – Gen. and Amarket )

2. Rimmer

3. FamousFour ( New and Used )

4. landroverspares.co.uk ( Buckley bros. ) ( New Gen. & Aftermarket )

5. eBay

N.B. ECP has presence across both searches, ( the only one ), paid and organic – very strong Internet presence. 1st Choice also appears in paid and organic search for car parts uk search.

Quite clearly some ” physical ” based companies have some work to do in terms of Internet presence.

The trends for people keeping their cars longer will undoubtedly lead to continuing demand for spare parts – new and recycled. It appears that supply for both new ( original and aftermarket  ) and recycled will also continue. New and recycled prices may trend down with competition and manufacturing efficiencies ( more research required ).

I am always looking for industry sectors that performed well over the last couple of years and the replacement car parts market is certainly one of those.

Despite ” scrappage schemes ” and ” 0% Finance ” people have been repairing their cars in great numbers and this has led to massive expansion in the sector. Here are a few extracts on some of the key players in the market:

Euro Car Parts Ltd began as a single site operation in London in 1978 but, unlike some other companies that have hit the headlines in this sector recently; they have grown organically, rather than by acquisition, into a 38 branch national parts distributor covering England, Scotland, Wales and Northern Ireland. Employing nearly 1,000 staff, and operating 400 vehicles (including a fleet of motorcycles where traffic congestion slows the progress of a van in highly populated city centres), this specialist organisation has been successfully satisfying the needs of German, French and Swedish vehicle repairers and owners for over 27 years.

The 2004 turnover figure of £59 million has dramatically increased to nearly £70 million in 2005 with profits rising from £1.3 million in 2003, £2.5 in 2004 and nearly £5 million in 2005, even though they are only currently supplying parts for 35% of the vehicles registered in the UK. As always, these profits have been re-invested into the business to ensure its continuing growth and ability to keep up with modern vehicle trends.

For 2006, the company is expanding its offer to their customers by entering the ‘all makes’ sector, thus increasing their target customer base to 100% of the cars registered in the UK – a staggering 27 million vehicles. The turnover for 2006 is estimated at between £90 and £100 million. With a strong management team and excellent planning in place, this looks to be an achievable target. Its 2007 plans include
acquisitions and consideration of expansion into Europe.

Facts and Figures…..

• Our branch delivery service covers over 90% of the UK population
• Over 80 branches across the UK
• ECP is the UK’s largest car and van parts distributor
• In 2009 we made in excess of 5 million deliveries
• We have enough parts in stock to fill every seat in Wembley Stadium (with plenty to spare!)
• Our new National Distribution Centre has more than 400,000 sq.ft of warehousing space and 12,000 sq.ft of office space
• We have over 110,000 different parts always in stock
• Our branch network is growing by more than 25% per year
• We now have in excess of 3,500,000 sq ft of warehouse storage in the UK
• We now employ more than 3,200 people in towns and cities right across the UK
• Over 400 ECP staff are studying for an NVQ Qualification

About Us

GSF Car Parts really began back in the 1970s. Today’s business brought
together in April 2000 by the German & Swedish Management Team stems
from a number of long standing car parts specialists such as Vee Wee,
Autocavan, Andyspares, and URO.

Since the formation of GSF Car Parts in 2000, the company has developed a parts and distribution portfolio to create one of
the UK’s strongest independent parts suppliers. Today, GSF Car Parts employs approximately 800 people covering all of UK
as well as Eire. There are 60+ distribution points and over 300 GSF delivery vans on the road.

Key developments

• 2000 – GSF Car Parts is formed.
• 2000 – GSF Car Parts adds replacement parts for French cars to range.
• 2003 – Hans Motors joins GSF Car Parts and sells all makes parts to other factors.
• 2005 – GSF Car Parts adds all makes range of parts to specialist inventory.
• 2006 – TDCS is bought by GSF Car Parts enabling industry-leading diagnostic equipment sales.
• 2009 – GSF Derby moved to brand new refurbished site.
• 2009 – GSF Car Parts complete several branch refurbishments and upgrade the whole company’s stock criteria.
• 2010 – GSF Car Parts sign up with several leading garage equipment providers and offer a market leading garage equipment solution to support the existing diagnostics business.
• 2010 – GSF Banbury, Leeds East (RDC), Worcester, Letchworth and Kettering are opened.
• 2011 – GSF Bristol (RDC) is opened.

Today GSF Car Parts has a turnover of £75m. The company has a dynamic strategy supported by an extremely able staff
body to continue expanding its parts and distribution service to its customers.

CES (UK) Ltd was set up in 1984 by Howard Warren and Charles Colton. Both managing directors love anything to do with cars and motor racing. Equally, they both have a passion for excellence. CES (UK) evolved as a result of these interests, aiming to offer the service level of a national company to the local garages in and around Chester. Back in the 1980’s the explosion in exhaust part numbers meant that the stock holding requirement for any garage became overwhelming and a national distributor was needed. CES was there to fulfill the role. For many years now we have supplied Britain’s widest stock range of exhausts & catalysts for national distribution. CES (UK) quickly expanded due to our mission to never say ‘No’. This means we have to have the best technical expertise in the business, in order to source our vast stock of exhausts and catalysts. Over the years we have introduced a full range of car parts, garage equipment & training, providing automotive solutions for today and anticipating those of tomorrow. We currently have 17 branches throughout the North West, North Wales, Midlands and the Isle of Man delivering a complete range of car parts on our vans to our local customer base. Over the last 25 years we have twice been awarded Distributor of the year by theprestigious Automotive Distributor Federation. More recently, at the 2009 ADF Annual Awards, we won two of the top categories. CES were awarded the much coveted Distributor of Excellence award. On top of that accolade, CES put in an amazing performance and scooped all of the awards in the new category of UK Parts Advisor of the Year. In 2001, CES (UK) became a member of the UK Parts Alliance (UKPA), which consists of nine like-minded independent distributors. To find out more about the UKPA, visitwww.ukpa.net

CES Branches With a network of 17 branches across the North West, Midlands, North Wales and the Isle of Man, and a fleet of over 180 vans, fast, frequent and reliable delivery is one of our main commitments to you. For customers further a field, our overnight nationwide carrier service ensures you are never too far away. CES Anglesey CES Burton on Trent CES Caernarfon CES Cannock CES Chester CES Crewe CES Derby CES Isle of Man CES Liverpool CES Llandudno CES Northwich CES Porthmadog CES Rhyl CES Shrewsbury CES Stoke CES Telford CES Wrexham National Exhaust and Cat Service