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Frost & Sullivan Executive Summary:
U.S. Brake System Parts Aftermarket

 

 

30 June 1998

 

Introduction to the United States Brake System Parts Aftermarket


Chart 1.1 represents the segments of the brake system parts aftermarket.

The brake system parts aftermarket makes up the largest share of revenues of all undercar aftermarket segments, which also consists of the ride control, exhaust, and steering and suspension systems.

U.S. brake systems aftermarket manufacturer revenues totaled $2.17 billion in 1997. Manufacturer revenues are obtained by multiplying the number of units sold by the price charged to the manufacturer's primary customers. Growth in this mature market is mainly driven by increased vehicle design changes, which increase wear on brake parts, and growth in the vehicle population.

For the purposes of this study, the U.S. brake system parts aftermarket is divided up into three segments:

  • Friction Parts (Disc pads and drum shoes)
  • Hydraulic Parts (Calipers, Master Cylinders, and wheel cylinders)
  • Drums and Rotors

 

 

Summary of Major Findings


Market Growth, Opportunities, and Total Forecast

This study provides market engineering measurements in units shipments and revenues for the forecasted period (1995 - 2005).

Figure 1-1 and Chart 1.2 display the percent of revenues by product type for the brake system parts aftermarket.

Analysis by Major Segment

Friction Parts Market

The friction parts aftermarket made up 44.9 percent of the total brake system parts aftermarket in 1997. Estimated revenues totaled $973.4 million with unit shipments of 82.1 million units.

The major trends impacting the friction parts market are distribution and technology.

The friction parts aftermarket has been experiencing change in distribution. The trend is the increasing distribution activity through retailers over WDs. Retailers have changed their focus from DIY customers to professional installers, the primary customers of jobbers and WDs. Despite the potential market gain, retailers are finding it difficult to penetrate the jobber and WD market because of the high additional costs of satisfying these customers.

The second major trend is the development of new friction materials. Manufacturers are constantly improving friction products in the areas of performance, durability, and noise reduction.

In the first half of the 1990s, an advancement in one area usually comes at the expense of another. Today's successful manufacturers overcome this disability by introducing new products or modifying exiting products. Two examples would be the QMX disc pad by EIS Brake Parts that eliminates noise without sacrificing performance and durability and AlliedSignal's TitaniuMettalic brake pads that include shims at no additional charge.

The following are the factors driving the friction parts aftermarket:

  • Aging vehicle population boosting aftermarket sales
  • Increasing annual average mileage
  • Growing emphasis on safety among consumers
  • Professional installers providing maintenance packages
  • Developing industry standards
  • New innovations in friction materials
  • Shift towards higher-priced quality parts

Restraints impeding the growth of the friction parts aftermarket include:

  • Lack of industry performance standards
  • Lack of product knowledge
  • Slow market growth
  • High costs of professional installation
  • Plateau in United States vehicle production

Hydraulic Parts Market

In 1997, hydraulic parts accounted for 34.3 percent of the total brake system parts aftermarket. Sales rose to $743.1 million while units shipped increased to 54.3 million units. Increasing vehicles in the United States and extended vehicle life span have stimulated growth. However, longer lasting original parts have been the main factor impeding growth.

Major trends affecting this segment include increasing sales of remanufactured parts, the development of alternative material compositions, and the increase of in-car electronic systems.

The hydraulic parts aftermarket has been experiencing increased use of remanufactured parts. Over 95 percent of calipers sold were remanufactured in 1997. The demand for remanufactured master cylinders, on the other hand, have decreased as professional installers change to new parts to reduce the number of customer comebacks. In 1997, 65 percent of all master cylinders sold were remanufactured, down from 75 percent in 1995.

Market demand is shifting towards lighter hydraulic parts that can reduce upsprung weight. Manufacturers are developing parts using alternative materials to gain a competitive advantage.

Another trend affecting the hydraulic parts market is the development of electronic braking systems such as brake-by-wire. Brake-by-wire will use electronic sensors that replaces hydraulic linkages in braking systems. While not scheduled to be released for at least 7 to 10 years, brake-by-wire will likely impact future hydraulic part sales.

Market drivers in this segment are:

  • Aging vehicle population boosting aftermarket sales
  • Increasing average annual mileage
  • Professional installers providing maintenance packages
  • Growing emphasis on safety among consumers
  • Shift towards premium-quality parts

Market restraints include:

  • Improved quality in OEM parts
  • Plateau in United States vehicle production
  • Slow industry growth
  • Electronic braking systems

Drums and Rotors Market

The drums and rotors market accounted for the remaining 20.8 percent and is the fastest growing segment in the brake system parts aftermarket. Unit shipments are estimated at 33.1 million units, with revenues totaling $449.5 million.

The major trends impacting the drums and rotors market are the development of new materials and the rising prices of offshore products which previously were in decline.

Vehicle manufacturers are developing lighter weight materials, such as aluminum and ceramic, to increase vehicle gas mileage. These new rotors will likely be less durable and can not be machined. Shorter product life span is expected to increase the rate of replacement.

The prices of offshore products are expected to slowly increase as new technologies and manufacturing techniques improve offshore product quality. In addition, China, a major supplier of drums and rotors, has lowered its export bonus from 17 to 9 percent. As a result, the prices of Chinese imports will eventually increase.

Factors driving the drums and rotors aftermarket are:

  • Aging vehicle population boosting aftermarket sales
  • Increasing average annual mileage
  • Increase of light truck sales
  • Increase in the number of vehicles on the road
  • Increase of professional installers offering maintenance packages

The restraints in the drums and rotors market are:

  • Low-priced foreign parts lowering revenues
  • Four-wheel disc braking systems reducing drum sales
  • Lack of product knowledge
  • High costs of professional installation
  • Plateau in United States vehicle production

Competitive Analysis

Approximately 200 companies supply parts to the United States brake parts aftermarket. Market leaders in this industry are comprised of large manufacturers who have access to the four main channels of distribution. The four channels are:

  • Program Distributors
  • Retailers
  • New-Car Dealers
  • Others (including National Installer Chains)

The leading companies in the brake system parts aftermarket are Brake Parts Inc., Wagner Brake, AlliedSignal, and EIS Brake Parts.

Leading manufacturers in this industry have succeeded through:

  • Consolidation
  • Product innovation
  • Streamlining for efficiency
  • Customer Service

Consolidation can significantly affect a company's standing in the saturated brake system parts aftermarket. Through acquisition, a company can gain access to new markets, increase its distribution and production capabilities, and expand its product line. Joint ventures are another way companies compete in the brake system parts aftermarket. These companies combine the competitive advantages of the participating companies without heavy capital expenditures.

The trend of industry consolidation is also changing the structure of the market. The brake system parts aftermarket is showing characteristics of an oligopoly, where a few major companies control most of the market and have limited power to influence pricing. Smaller manufacturers in the market tend to follow trends set by market leaders. Furthermore, declining prices of brake system parts will eventually flatten out as the market leaders strengthen their influence on the brake system parts aftermarket and further reduce industry overcapacity. In 1997, the four market leaders hold over 60 percent of total aftermarket revenues.

Product innovation covers two primary areas. The first area is the development of new products. While expensive, this strategy can help companies gain market share and product diversity. Secondly, the modification and improvement of existing products can add value to old products at lower costs.

Leading companies continuously streamline operations. Computerized management systems can fully integrate all operating, administrative, and distribution functions to reduce overall production costs.

Customer service is crucial in the saturated brake parts aftermarket. Professional installers are extremely concerned about comebacks due to faulty products, the shipment of incorrect brake system parts, or poor instructions. Companies are combining attractive modular packaging with expert technical advice and training to generate repeat business and improve customer relations. Furthermore, larger companies have strategic alliances with distributors of brake parts so they can adapt their products to work effectively with them

Conclusions

The brake system parts aftermarket has reached maturity in the United states marketplace. This has led many manufacturers to focus on growth through international markets, consolidation, and new product development.

The key to success in the United States brake system parts aftermarket lies with distribution. Companies must treat distributors as intermediary customers as well as reach end-users with competitive prices and timely delivery.