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By APF
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link hidden, please login to view Activist investors targeting auto-parts retailers are taking hits to their investments, and Amazon isn’t helping.
When hedge fund Starboard Value LP disclosed a stake in Advance Auto Parts Inc. in 2015, it said the stock, then at $171, could more than double. The retailer’s shares have instead nearly halved since then, after warning weak sales will continue for an industry that’s also drawn interest from billionaire Carl Icahn. Advance Auto’s peers O’Reilly Automotive Inc. and AutoZone Inc. also have also plunged this year amid disappointing demand.
SOURCE: BARCHART
Perhaps the biggest bogeyman weighing on the shares is Amazon.com Inc., which sent shockwaves across the retail industry in June with its $13.7-billion acquisition of Whole Foods Market Inc. The online juggernaut has also been making inroads with autos, launching a car-research site and a parts marketplace last year. While car-part distributors -- with their technical expertise, trove of components and ability to quickly deliver to mechanics -- are more insulated from e-commerce than other retailers, though they’re not invincible.
“We fear an increased level of price transparency -- these companies either more aggressively price or promote their products to drive the same level of sales growth,” Seth Basham, an analyst at Wedbush Securities, said of the auto-parts retailers. “I don’t think it’s a primary driver of what’s been hurting same-store sales in the industry this year, but that doesn’t mean there can’t be a bigger impact going forward.”
Investor Interest
The more immediate challenges dragging on the industry include economic uncertainty for low-income customers, higher gas prices and warmer weather that has eased the wear and tear on consumers’ cars, Advance Auto Chief Executive Officer Tom Greco said Tuesday.
Starboard’s view is that Amazon is a mild headwind -- at most -- to the industry, a person familiar with its strategy said. The New York-based hedge fund is pleased with Advance Auto’s efforts to cut costs and bolster its online presence and sees earnings improving early next year, said the person, who asked not to be identified because the matter is private.
Further encroachment by online rivals could pose a threat to industry profit margins that are in excess of 20 per cent -- part of what initially drew investors like Starboard and Icahn to the aftermarket parts business.
With the average age of vehicles on American roads approaching 12 years, investors also are betting an older vehicle fleet will mean more repairs and parts replacement. To capture that expected growth, Icahn has strung together several companies that deal in automotive parts, including service and retail chain Pep Boys, Auto Plus and parts supplier Federal-Mogul.
For now, e-commerce represents a sliver of the $277-billion aftermarket parts business, according to estimates from Wedbush and the Auto Care Association, an industry trade group. Online sales were about $11-billion last year, with EBay Inc.’s roughly 40-per-cent share being the largest, Wedbush estimates. Amazon had about a 25-per-cent share, though it’s growing at a rapid clip, Mr. Basham said.
Amazon Encroaches
Amazon launched the Amazon Automotive store in 2006 and has been expanding its inventory since then. It’s added a parts-finder filter that lets shoppers enter the make and model of their cars to find the correct parts.
“We’re continually expanding our selection and improving the customer experience with things like our Part Finder, Amazon Garage and, most recently, Amazon Vehicles,” a company spokeswoman said in an email.
Icahn Automotive, which owns Pep Boys and Auto Plus, and Starboard declined to comment. Spokespersons for O’Reilly, AutoZone and Advance Auto also declined to comment.
In trying to assess the potential threat from Amazon and other online parts sellers like RockAuto and EBay, analysts are honing in on retailers’ exposure to the consumer-facing “do-it-yourself” market, as opposed to the “do it for me” approach in which retailers sell to professional mechanics. The do-it-yourself market could be more vulnerable because consumers who aren’t in a hurry to buy a new wiper blade or spark plug may go online to find the cheapest price.
DIY Slowdown
The do-it-yourself segment already is lagging, according to the Auto Care Association, which estimates sales will grow at a compound annual rate of 3.8 per cent in the five years ending in 2017, compared with a 4.4-per-cent increase for the do-it-for-me market.
The slower growth also is a reflection of cars getting increasing complex and loaded with technology, which contributes to more repairs necessitating technicians, said Behzad Rassuli, senior vice president of strategic development at the Auto Care Association. Some bumpers, for instance, now are built with embedded sensors that need to be properly calibrated.
“The opportunity for the consumer to repair their own vehicle has been dwindling,” Mr. Rassuli said.
Mr. Icahn said as much when speaking about his acquisition of Precision Auto Care Inc. in June, the latest addition to his chain of auto-repair shops. He’s also planning to take advantage of higher utilization of cars driven by the growth of ride-hailing businesses, he told the Wall Street Journal in an interview at the time.
Greg Henslee, O’Reilly’s CEO, has said the impact of companies like Amazon will be limited because they will struggle to sell component to consumers who don’t know what’s wrong with their car. Online retailers “will continue to take a little bit of market share here and there,” Mr. Henslee said on an earnings call in February. “I don’t see them nearly as one of our most prominent competitors.”
Digital Experience
Even if their expertise diagnosing car troubles offers some protection, traditional parts retailers still are under pressure to improve their digital experience, especially since a buyer will often go online to ensure a part is in stock before picking it up at a store.
Advance Auto is investing heavily in technology to ensure a “consistent experience every time, both in-store and online,” Mr. Greco said on the company’s earnings call Tuesday. He told analysts consumers will have a “faster and more frictionless experience” online.
If you’re a parts retailer, “you’re definitely concerned,” Wedbush’s Basham said. “You’re thinking about ways to defend your turf and to capitalize on the way consumers are changing their behaviour.”
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By Counterman
You may notice a different type of show car at the
link hidden, please login to view this year. It only has 140 horsepower, with a four-speed automatic transmission, and it clocks in at 20 feet long. This car is not arriving at the show on a trailer. Instead, it’s coming from Akron, Ohio, on its own power.
The car and its adventures over the next nine days promise to be a rolling testimonial for the $1.6 trillion global industry that keeps more than 1.3 billion vehicles on the road: the automotive aftermarket.
Over the past five months,
link hidden, please login to view and 16 sponsors have rehabilitated a 1989 Cadillac Brougham so it can make the epic 2,500-mile journey to be a part of AAPEX 2022. The journey from the used-car lot to the AAPEX show floor is being documented in a six-episode video series, starting on Sept. 19, called “The Road to AAPEX.” The finale will air on Oct. 31 just prior to the AAPEX opening reception. All episodes will be available on the
link hidden, please login to view as well as the link hidden, please login to view. “This project car is not about quarter-mile times or chrome,” said Randy Loeser, executive director of content and video services, Babcox Media. “The project is a proof of concept to show how the auto care industry keeps the world moving, no matter what they drive.”
link hidden, please login to viewThe Caddy When Babcox Media’s automotive video producer Joe Keene spotted the listing on Craigslist for a 1989 Cadillac Brougham, he knew it would be the perfect car for the journey to Las Vegas. The Brougham had more than 180,000 miles on the odometer. Unfortunately, it also had a leaking transmission, no A/C and the air suspension was no longer working.
“After a quick inspection of the car, it was not as bad as I thought,” said Keene. “But we had to make it reliable, safe and able to handle conditions like desert driving.”
The rehabilitation process addressed all mechanical systems on the vehicle. In addition, the body was restored with new parts and paint. The complete process will be shown on the first episode of “The Road to AAPEX.”
“Many people think it would be difficult to get parts for a 33-year-old car,” said Keene. “However, all of our sponsors still manufacture and stock parts for this aging vehicle.”
Check out the trailer for the Road to AAPEX link hidden, please login to view!
Vital Statistics
Make/model: Cadillac Brougham Year: 1989 Hometown: Arlington, Texas Mileage: 180,000+ miles Engine: 307 LV2 Olds V-8 Power: 140 hp and 245 lb./ft. Weight: 4,500 lbs. Length: 20 ft. Fuel capacity: 21 gallons Fuel economy: 15 city/22 highway Tires: 225/65R17 Transmission: Remanufactured Turbo-Hydramatic 200-4R Brakes: Front vented disc/rear drum brakes Air conditioning: R134a conversion Airbags: None The Route
“The Road to AAPEX” begins in Akron, Ohio, at Babcox Media’s headquarters. Keene will then travel to Joliet, Illinois, to pick up the historic Route 66. Keene will take the “mother road” to visit historic roadside attractions, parts stores and shops in eight states. The trip will cover more than 2,500 miles in nine days.
“The Road to AAPEX is an incredible demonstration of the freedom and choice that our industry provides Americans, every single day,” said Bill Hanvey, president and CEO of the Auto Care Association. “Every part of our supply chain enables this freedom to go anywhere, anytime: from parts manufacturers, to distributors, to retailers and shops. There’s nothing more quintessential than a road trip across America, fueled by these essential businesses. Without the aftermarket, the affordability and convenience the motoring public relies on wouldn’t be possible – and we are proud to be that anchor for the consumer for generations to come.”
After reaching the Grand Canyon, Keene will head north to Las Vegas and AAPEX. Following its debut at AAPEX, the Cadillac is being gifted to a U.S. Military veteran through the
link hidden, please login to view, with the whole project truly capturing the spirit of the aftermarket from start to finish. “The Road to AAPEX looks different for each member of our great industry, from snowy mountain roads to sandy, beachside highways or the classic Route 66. However, these journeys all have one thing in common – the strength and power of the aftermarket behind each vehicle,” said Paul McCarthy, president and CEO of the Automotive Aftermarket Suppliers Association. “AAPEX is the home for each part, tool, chemical, technology or component needed to safely maintain America’s 280 million vehicles. We are proud of our industry, and to serve the millions of people who rely on the aftermarket on their own ‘roads to … ’ every day. I am glad AAPEX provides us with the opportunity to come together to build the relationships we need to grow our businesses.”
The Driver
Joe Keene is an automotive video producer for Babcox Media. He has worked in the auto care industry as a technician, service advisor and instructor. He is the host for “Auto Pros on the Road,” which is now in its third season. Keene is an ASE-certified automotive technician and is the chief mechanic for the Cadillac.
The Sponsors
Transtar Industries Transtar Autobody Technologies AP Emissions BCA Bearings Blackburn OEM Wheel Solutions Continental Tire MotoRad Motorcar Parts of America, Inc. (MPA) O’Reilly Auto Parts Wix Filters TRW Litens PennGrade Auto Care Association AASA Right to Repair AAPEX
AAPEX represents the more than $1.6 trillion global automotive aftermarket industry. Historically, the event draws approximately 2,500 exhibiting companies that display innovative products, services and technologies that keep the world’s 1.3 billion vehicles on the road.
AAPEX also provides advanced technical and business management training for professionals to maintain excellence and take their businesses to the next level. Industry buyers include automotive service and repair professionals, auto parts retailers, independent warehouse distributors, program groups, service chains, automotive dealers, fleet buyers and engine builders.
AAPEX is co-owned by the
link hidden, please login to view and the link hidden, please login to view, the light-vehicle aftermarket division of the Motor & Equipment Manufacturers Association (MEMA). For more information, visit link hidden, please login to view or e-mail: [email protected] On social media, follow AAPEX at #AAPEX22. The post
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By Counterman
Continental has named Peter Dobrowolski as the new product manager for diagnostics and services – North America.
In his new role, Dobrowolski will be responsible for managing the portfolio of diagnostics products that include the Autodiagnos Pro automotive diagnostic system, Autodiagnos TPMS tools and the Autodiagnos Drive connected-vehicle-data solution.
Dobrowolski is a long-time employee of Continental, serving in several capacities during the past 10 years. He was a senior product manager for the Tachographs, Telematics and Services group, where he managed a startup compliance product for the heavy-duty trucking industry and oversaw the entire product lifecycle from concept through to market deployment in both the United States and Canada. Dobrowolski also was the health, safety and facilities manager for Continental’s Allentown, Pennsylvania, facility.
“We are thrilled to add Peter to our Diagnostics and Services team,” said Christopher Bahlman, head of diagnostics and services for Continental. “He has great expertise in product development and understands the unique challenges of launching products in emerging markets. His experience and know-how will help us to identify potential market opportunities and expand Continental’s diagnostics business.”
Prior to joining Continental, Dobrowolski was employed by Saab Automotive AB as assistant manager – parts technical services and worked on the operations support staff for Logistics Services at Caterpillar Inc.
He holds an MBA in Marketing from Strayer University, a BSBA in Management from Kutztown University, and an AAS in Logistics Technologies from Lehigh Carbon Community College.
Continental Diagnostics & Services (D&S) was founded nearly 10 years ago to address the needs of service providers for advanced diagnostics, service information, connected services and specialty solutions, such as PTI (periodic technical inspection). D&S has developed diagnostics and service solutions for North America under the Autodiagnos brand. Key product offerings include professional aftermarket scan tools, TPMS diagnostic and service tools, and a connected-vehicle-data platform.
The post
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By Jacky Xine
In last November, the much-anticipated Wrangler pickup Jeep Gladiator officially debuted at the Los Angeles International Auto Show. According to Jeep's plan, the new Gladiator will be officially delivered in the second quarter of this year. Recently, some foreign media reported that in addition to the three models already launched, Jeep will also launch a high-performance version of the gladiator.
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