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Industrywide Consolidation Forcing Automotive Battery Aftermarket Manufacturers to Refocus Strategies

24 August 1998

Industrywide Consolidation Forcing Automotive Battery Aftermarket Manufacturers to Refocus Strategies

    MOUNTAIN VIEW, Calif., Aug. 24 -- Growth in the automotive
battery aftermarket is steady, due to a persistent need for replacement
batteries.  However, the perception of batteries as a commodity product is
posing a marketing challenge for manufacturers, who must now focus their
efforts on diversifying their product lines and maintaining favorable
relationships with suppliers.
    According to strategic new research conducted by Frost & Sullivan
(http://www.frost.com), "U.S. Automotive Battery Aftermarket," growth is stable but
slow.  Approximately 59.9 million batteries were sold in 1997, and revenues
amounted to nearly $1.9 billion.
    Growth in the vehicle population, coupled with the increasing average age
of the vehicle population and increasing average miles driven per vehicle are
the primary market drivers.  Increasing parasitic loads, higher underhood
operating temperatures and more vehicle inspection programs also contribute to
growth in the battery aftermarket.
    The growing popularity of light trucks is causing demand for light truck
batteries to shoot up.  Opportunities are also arising for higher priced
batteries with reserve capacity and longer warranties, because they offer
higher profit margins to manufacturers.
    Automotive batteries are sold through almost all aftermarket distribution
channels because they are so easy to install, and very few parts cover a large
proportion of the vehicle population.  Distribution channels include mass
merchandisers, auto parts retailers, battery specialists, traditional
distribution, original equipment service and national installer chains.
However, the trend toward consolidation of distributors is rapidly becoming
the main threat to market players.
    "The massive consolidation among distributors of batteries increases the
bargaining power of distributors in relation to manufacturers and reduces
battery demand.  Advance Auto Parts is about to merge with Sears' Western
Auto/Parts America division.  This newly expanded 1,500+ store retailer is
simply not going to order as many batteries as in years past when Advance and
Western Auto were separate competitors.  The new entity's distribution centers
and stores will be consolidated wherever there is redundancy, and battery
inventories will be reduced as a result.  This reduction in orders will be
tough on battery manufacturers during the next 10 years," asserts Frost &
Sullivan Analyst Dean Quock.  Currently, about 12 manufacturers sell batteries
to the aftermarket, and the market is dominated by only four large domestic
manufacturers.
    Battery designs have not changed dramatically, although they now carry
heavier loads and operate in tougher conditions, says Quock.  Computer Aided
Design and Manufacturing is the only technology trend expected to play an
important role in the aftermarket during the forecast period 1998 to 2004.
Electric vehicles, thin-metal technology batteries and increased voltage
batteries are not expected to have a significant effect on the market during
the forecast period.
    Frost & Sullivan's new study, "U.S. Automotive Battery Aftermarket,"
provides revenue forecasts, technology trends, market drivers and restraints,
competitive issues and strategies.  In addition, the report includes an
independent market share assessment of all the major competitors, and a
breakdown of the market into six distribution channels, with predictions
through the year 2000.
    This automotive industry research has integrated the Market Engineering
consulting philosophy into the entire research process.  Critical phases of
this research include:  Identification of industry challenges, market
engineering measurements, strategic recommendations, planning and market
monitoring.  All of the vital elements of this system help market participants
navigate successfully through the automotive battery aftermarket.
    The companies participating in this market include:  Acumuladores
Mexicanos, S.A. de C.V., Advance Auto Parts, AutoZone Inc., Battery Council
International, BJ's Wholesale Club Inc., Bridgestone Firestone Inc., CARQUEST,
Chief Auto Parts, Chrysler Motors, Crown Battery Manufacturing Inc., Costco
Companies Inc., CSK Auto Inc., Dayton Hudson Corporation, Discount Auto Parts,
Douglas Battery Manufacturing Company, East Penn Manufacturing Company Inc.,
Exide Corporation, Ford Motor Company World Headquarters, General Motors, GNB
Technologies, Hi-Lo Automotive Inc., Interstate Battery Systems of America
(IBSA), Johnson Controls, Kmart Corporation, Meineke Discount Muffler Shops
Inc., Midas International Corporation, Montgomery Wards Holding Corporation,
National Automotive Parts Association (NAPA), Optima Batteries, O'Reilly
Automotive, PACCAR Automotive Inc., Pep Boys, Sears, Roebuck and Company,
Superior Battery Manufacturing Company Inc., Trak Auto/Dart Group, Twin Power
USA, Wal-Mart Stores Inc., Western Auto, Wrangler NW Power Products Inc.
    Frost & Sullivan is an international marketing consulting company that
monitors the automotive industry for market trends, market measurements and
strategies.  This ongoing research is utilized to update a series of research
publications such as "U.S. Automotive Spark Plug Aftermarket," and #5156-18
"North American Import-Car Hard-Part Aftermarket," and to support industry
participants with customized consulting needs.  Free executive summaries of
all Frost & Sullivan reports are available to the press.
    Report: 5718-18  Publication Date:  August 1998  Price:  $2,950