Consumers will hit the road again as unemployment falls and commuting increases
Los Angeles, CA (PRWEB) April 07, 2012
The Used Car Parts Wholesaling industry hit the brakes during five years to 2012. After the recession, consumers shifted from buying used parts to purchasing new parts as disposable income rose during the economic recovery. In addition, auto parts dealers, a key downstream market, have been compounding the effect by stocking new parts to entice customers, pushing used car parts to the back of the shelves. This trend is expected to sustain, reducing overall sales of used parts and further cutting into industry performance. As a result, industry revenue is anticipated to decline at an annualized rate of 0.8% over the five years to 2012, culminating in a one-year drop of 1.7% in 2012 to $3.1 billion. The industry's woes began before the recession swept through the economy. According to IBISWorld industry analyst Antonio Danova, several top-tier players declared bankruptcy due to excessive production costs and high customer concentration. Many downstream customers of these troubled firms also ran into trouble, which made customer concentration an issue as financial difficulties plagued these firms' revenue sources. The recession compounded these trends to all other parts of the industry. To deal with the drop in revenue, companies reduced head count, moved certain functions offshore, closed facilities, consolidated operations, granted price concessions to retain business and promoted the environmental benefit of incorporating used parts instead of new parts into car repairs, says Danova. Companies that failed to navigate the difficult economic environment went out of business.
The Used Car Parts Wholesaling industry is highly fragmented and will remain so through the next five years. The top two firms are Remy International Inc. and Motorcar Parts of America Inc. Most auto recycling yards and parts remanufacturers employ fewer than 10 people and serve local or regional markets. Some recycling yards, though, maintain websites that allow users anywhere to search for available parts in their efforts to expand market share. Mergers in this industry are rare. Most business activity is intensely local. Companies cater to local parts demand, source cars from local donors and local wrecks, sell to local customers and invest heavily in maintaining those relationships. Furthermore, certain used car parts are heavy and difficult to transport. This creates an incentive to do business locally and avoid incurring potentially high freight costs.
The long-term future looks brighter for the industry. As the economy gains steam, consumers will have more money in their pockets to purchase new vehicles, increasing the number of warranty agreements on automobiles. As such, an increasing number of vehicles will be taken in for warranty service, and mechanics and auto dealers will source used auto parts to fix the vehicle and enhance the profitability of their work. Additionally, many consumers will hit the road again as unemployment decreases and commuting becomes a part of everyday life. As vehicles age and incur more wear and tear, repair costs will increasingly be a part of the consumer's budget as more people get behind the wheel. As a result of these trends, industry revenue is expected to grow in the five years to 2017. For more information, visit IBISWorld’s Used Car Parts Wholesaling report in the US industry page.
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IBISWorld industry Report Key Topics
Companies in this industry sell used auto parts to retail stores, original equipment manufacturers (OEMs) and professional parts installers. This industry includes companies that dismantle cars and then wholesale the salvaged parts as well as companies that receive inoperative parts and then remanufacture those parts. This industry excludes companies primarily engaged in selling scrap metal and companies primarily engaged in selling used tires and tubes.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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