Battery Manufacturers Report

21 December 2000

U.S. Automotive Battery Manufacturers Under Price Pressure From Distribution Channels, Reports Frost & Sullivan

    SAN JOSE, Calif.--Dec. 20, 2000--What does a manufacturer in the U.S. automotive battery aftermarket do under the following circumstances? -- little differentiation in product features from company to company, a consolidated distribution channel with members bargaining aggressively on prices, distributors demanding excellent and prompt service with very high 'fill rates,' the risk of supporting high inventories that blow up costs.
    The questions are many. The answers -- compete by making constant price cuts and denting profitability, or, work toward new technologies that result in product differentiation.
    According to new strategic research by Frost & Sullivan's Transportation Group (http://transportation.frost.com), "U.S. Automotive Battery Aftermarket," a major reason for minimal product differentiation is that manufacturers have been unable to promote their own brands. On the other hand, private labels, such as those of mass merchandisers in the distribution channel, have grown significantly.
    However, there are ample opportunities for battery manufacturers, as vehicle sales in the U.S. continue on an upswing resulting from strong economic performance and aided by attractive consumer finance schemes. The average number of miles driven per year has also increased steadily, resulting in increased battery usage and thus, higher battery replacement.
    Driven by these factors, Frost & Sullivan expects the market to reach $2.66 billion in 2006, the end of the forecast period. Frost & Sullivan also forecasts the heavy vehicle battery aftermarket to outperform the light vehicle battery aftermarket.
    "Demand for heavy vehicle batteries should grow at 3.3 percent due to higher shipments, whereas demand for light vehicle batteries will grow at 2.8 percent," says Frost & Sullivan analyst Kavan Mukhtyar. "The impact of Business-to-Business (B2B) and Business-to-Consumer (B2C) E-commerce will also boost overall battery sales in the long run."
    The issue that holds the key to battery manufacturers' fortunes in the market is customer account management. Consolidation has resulted in a concentrated group of distributors handling a large proportion of a manufacturer's volume. If a manufacturer loses one major account to a competitor, then he loses substantial market share.
    "Maintaining customer relations will be crucial over the forecast period, until new technologies such as the 42-volt and dual systems, are fully implemented and help manufacturers counter the bargaining power of the distribution channels," says Mukhtyar.
    Frost & Sullivan, headquartered in San Jose, Calif., is a global leader in international strategic market consulting and training. Frost & Sullivan's industry experts monitor the ground transportation industry for market trends, market measurements and strategies. This ongoing research is used to complement the Automotive Aftermarket Custom Subscription, which includes studies on the U.S. Brake System Parts Aftermarket and the U.S. Automotive Glass Aftermarket. Executive summaries and interviews are available to the press.
    Along with publishing in-depth strategic market consulting research, Frost & Sullivan provides custom consulting solutions to a variety of national and international companies.

    "U.S. Automotive Battery Aftermarkets"

    Report: 7769-18 Publication Date: January 2001