Alejandro Calderón
View from the Top

Room Still There for Premium and Low-Cost Parts

Sat, 09/01/2018 - 11:18

Q: How did the suspension of mandatory vehicle emissions inspections in Mexico City in 1H18 impact the Mexican aftermarket?
A: Sale of quality spare parts plunged during this time because people did not need to pass any tests or have their vehicles checked, leading to a crisis for repair shops because they were working at less than half of their installed capacity in Mexico City for six months. Prior to the suspension of this public program, demand for branded spare parts, including Bosch, DENSO, Delphi and HELLA, was on the rise. These components reduce both ownership costs of vehicles and fuel consumption, so we expect that when the vehicle inspections program becomes mandatory in more states, demand will rise. ARIDRA raises awareness about branded products and how they meet the quality standards of original equipment that enable vehicles to pass these environmental verifications. To meet this coming demand, all aftermarket companies in Mexico City have increased their production and distribution capabilities.
Q: How has the spare parts market evolved toward minimum quality standards in the Mexican aftermarket?
A: OEMs dictate the quality standards that their component suppliers must meet. There are several quality levels in the Mexican aftermarket. While some companies have developed spare parts that meet original-equipment quality standards without participating in this segment, others import low-cost, low-quality components. There is a demand for both products. Since there is no regulation, companies that import low-quality parts can market them among price-driven users. As an example, an oxygen sensor requires pure platinum parts to work as expected. But, some low-quality, imported oxygen sensors do not use pure platinum and do not perform as expected. When an emissions scanner is applied to this component, it will not offer clear readings and the performance of the vehicle will suffer.
While small shops may buy the components that clients ask for, larger chain shops will pay attention to their image and focus on delivering premium services and use quality spare parts as more Mexican drivers care about having components that keep vehicles on the road for longer. The premium side of the aftermarket has also grown in importance as more women buy their own vehicles. This population segment is generally willing to pay more to have quality parts in their vehicles.
Q: How is the downturn in vehicle sales since 1H17 impacting the country’s aftermarket?
A: Aside from the vehicles used for public transportation that enter the aftermarket almost immediately after being sold, the sales drop does not have an immediate impact on the aftermarket. Vehicles sold in 2018 will need spare parts in three to five years. On the other hand, 2016 was a record year with over 1.6 million new vehicles sold. This vehicle park will start needing spare parts and repairs around 2019, so there should be solid demand ahead for the Mexican aftermarket. At the same time, consumers who decided not to buy a new vehicle in 2018 will continue making repairs to their current units.
Q: How ready are Mexican spare parts distributors to cope with the projected demand generated by vehicles sold in 2017 and 2018?
A: The more than 1.5 million vehicles sold in 2017 and those sold in 2018 will start reaching the aftermarket between 2020 and 2021 and will create an interesting demand. Companies in the Mexican aftermarket cannot fully prepare for this demand because they are unaware of what vehicles are more prone to breaking down and what parts will need to be replaced more often. Having said that, Mexican spare parts distributors already have fast-moving components for new vehicles in stock. Filters, sparkplugs, brake pads and suspension parts for new vehicles reach the market before new vehicles need them. Engines, pistons and other more complex components take longer to be available. This happens because engines are increasingly technologically advanced and parts tend to last longer.