Consumers turned to industry products as alternatives to new auto parts, boosting revenue
Los Angeles, CA (PRWEB) September 18, 2012
The Auto Parts Remanufacturing industry (reman industry) operates counter-cyclical to the economy as a whole. When consumer spending is strong, demand tends to fall because motorists will be more likely to replace worn-out vehicles rather than extend their useful lives through reman parts. “Alternatively, when consumer spending is weak, demand for reman parts generally increases because such services constitute a cheaper alternative to new parts or outright vehicle replacement,” says IBISWorld industry analyst Josh McBee. “This latter condition is expected to benefit the industry.” Revenue is expected to rise at an annualized rate of 2.0% during the five years to 2012.
Auto Parts Remanufacturing industry firms are generally small, independent ventures that employ fewer than 100 people and operate on a local or regional basis as stand-alone enterprises or as part of a larger retailer, services garage or original equipment manufacturer. There are some large remanufacturers with a global presence and a number of locations. “Overall, concentration has fallen over the past five years as new firms entered the industry due to high demand,” adds McBee. “However, in the next five years, market share concentration is expected to increase slightly as companies exit due to lowered demand in the wake of falling unemployment and renewed spending activities.” The flexibility of existing mechanics to add or remove reman services to their offerings makes the industry relatively porous.
With regard to downstream demand, per capita disposable income regulates consumer demand and, in turn, demand from auto parts stores. The average age of the vehicle fleet and gas prices also factor into sales of reman parts. Most recently, rising disposable income from recessionary lows is expected to decrease the age of the vehicle fleet as consumers return to buying more efficient new cars to relieve pressure from rising gas prices. As such, reman parts revenue is expected to fall 6.4% in 2012, eventually settling at an estimated $5.0 billion.
Revenue declines are forecast to continue through the next five years for this mature industry. With returning disposable income forecast for US consumers, new car sales will rise and limit demand for cheaper reman parts. Additionally, continued increases in the price of crude oil will inflate gas prices and spur demand for newer cars with better gas mileage to replace older, inefficient models. Reman parts firms will continue to seek improved operational efficiencies to salvage their profit in the wake of falling demand from auto parts stores, wholesalers and consumers. As revenue falls, persistently high steel prices will benefit profit, as increased purchasing costs can be passed onto the customer as higher prices. For more information, visit IBISWorld’s Auto Parts Remanufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes firms that remanufacture automotive parts. Remanufacturers acquire disassembled, used components and combine several pieces to reassemble or remanufacture an automotive part. Firms remanufacture various automotive parts, including alternators, starters, steering parts and electrical units. Firms operate as stand-alone enterprises or as part of a larger retailer, services garage or original equipment manufacturer. This industry excludes engine remanufacturing.
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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