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Auto Parts Manufacturers Share Their Perspectives

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Counterman

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As one of the most powerful industries contributing to the U.S. economy, motor vehicle suppliers today have to balance both being influential as well as influenced by the challenges and opportunities in today’s ever-evolving industry.

According to a 2019 study conducted by IHS Markit and commissioned by MEMA, the motor vehicle supplier industry continues to maintain its stronghold as one of the largest manufacturing sectors in the United States. Total employment in this sector makes up roughly 2.5% of the U.S. GDP and provided approximately 4.8 million direct and indirect jobs and induced employment in 2019 (when the study was conducted). Impacting not only the country’s economy but also public safety and the environment, this is an industry with major impact and a powerful voice.

For the March AMN/Counterman cover story, we asked some of today’s top leaders in the supplier industry to tell us what’s top of mind for their businesses right now. What challenges and opportunities keep them up at night? What is their sense for the business environment in 2023 and other questions specific to their particular market segments? We’ve asked them to speak on topics such as EVs, the role of remanufacturing in achieving sustainability targets, the biggest contributors to innovation, the state of the supply chain, U.S. manufacturing competitiveness and more.

Chloe Hung

Chief Executive Officer, Autel U.S.

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As a leader in the EV charging space, what are your expectations for the EV market this year and moving forward?

There’s little doubt that the EV market will continue to see significant, sustained growth this year and beyond. Several factors contribute to that belief, including the introduction of EVs by almost every vehicle brand last year, with many setting goals of EV-only lines within the next decade or so. Another is the passage of the infrastructure bill that incentivizes EV purchasers and offers stimulus funds to businesses, communities and municipalities interested in implementing charging stations.

What can the aftermarket do – techs especially – to prepare for the increasing adoption of EVs?

I think this moment in time offers technicians a unique opportunity – as electric and hybrid vehicles are starting to come to their shops – to not only educate themselves about electric vehicle servicing and repair but also to start to transition their shop layout, equipment and tools from what traditional-fuel vehicle repair requires. This equipment will include new diagnostics products, Level 2 chargers for repair and service bays and, possibly, Level 3 chargers for customer and public use. This reassessment of space could allow shops to keep services in-house that they might have previously been subbing out, including ADAS calibrations. EVs and advance driver-assistance systems (ADAS) are rising in parallel. One would be hard-pressed to purchase a new vehicle without automatic emergency braking, blind-spot monitoring or lane-keep assist, and the march toward autonomous vehicles continues though less fervent than previously anticipated. The belief is that the continued growth of the electric vehicle will only accelerate the use of ADAS components in vehicles, as the EV design lends itself quite efficiently to using such sensors. Performing calibrations in-house is a revenue generator that enables shops to keep the funds lost in subletting calibrations and to earn additional revenue by offering such services to other shops.

What are your thoughts about the business environment for the aftermarket in 2023?

As supply chain and chip shortage issues continue to be resolved, 2023 may be when the aftermarket experiences real growth. In addition, more drivers are returning to their daily commute, resulting in more vehicles being repaired and serviced, which should also drive aftermarket growth.

What are the opportunities your company is most excited about at this time?

On the EV charger front, we consistently develop new AC and DC charging solutions for every commercial need, including repair and service centers, fleet managers, multi-unit dwellings, parking facilities, retailers and traditional fueling centers. And in diagnostics, we are incredibly excited about the opportunities our recently signed collaboration agreement with Repairify will mean for our companies and users. Via the arrangement, Repairify will deliver OEM-remote solutions, including diagnostics, calibrations and programming to our Remote Expert platform users.

Conversely, what are the biggest challenges for your business in 2023?

Autel has been fortunate to experience tremendous growth in the last few years. We purchased a 50,000-square-foot building, hired additional staff and expanded into a related but new industry for us, EV chargers. And we are about to finalize our selection of a factory site in the U.S. to produce chargers to comply with the infrastructure bill’s “Made in America” provisions. A lot is going on. But the challenges remain the same as when Autel started in the United States nearly 15 years ago, with just a handful of us working out of a small office. It is to develop products that enable our customers to realize genuine value. It holds true for the diagnostic tablet we make for the shop technician and the charger that a new EV driver just installed in his home garage.

Eric Luftig

SVP, Product & Engineering, Dorman Products

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As a company that prides itself on creating problem-solving products, what would you say are the biggest contributors to innovation at Dorman and why?

It definitely starts with directly engaging our customers – the people on the front lines fixing cars and trucks every day. We’ve built several mechanisms for getting their feedback over several decades now, from our dedicated Ideation team that talks to repair professionals on a daily basis, to our newly expanded Dorman Training Center offerings that hold technician training classes around North America.

We’ve also structured our business to foster new insights and seize new opportunities. We have an enormous portfolio, with hundreds of different categories and more than 120,000 individual products. To both support that and keep innovating, we’ve expanded our teams of product experts and engineers, and organized groups focused on distinct vehicle systems. That allows us to be specialists at scale. Our culture is also a driver of innovation. We started as a small, family-run company, and even now that we’re a global enterprise, people are still highly encouraged to propose new ideas and play an active role in contributing to our company’s future. That makes our entire workforce a wellspring of problem-solving.

What are your thoughts about the business environment for the aftermarket in 2023?

We see many positive trends on the horizon for this year. We love to see vehicles staying on the road longer and traveling more miles, which portends stronger business for the aftermarket. We’re also continuing to see strong trends toward digitalization, with more consumers shopping for parts and service online than ever before. That’s required companies like ours to make new investments in technology, data and product content, and we were honored last year with multiple awards highlighting this work, including from the Auto Care Association and several of our retailer, distributor and cataloging partners. We think the business environment will be very positive for manufacturers and sellers who are dedicated to delivering better digital experiences this year and in years to come.

What are the opportunities your company is most excited about at this time? Conversely, what are the biggest challenges for your business in 2023?

We are most excited about continuing to invest in our technology, our people and growth into a wider range of vehicles. We are increasingly platform-agnostic, whether it be light-duty or heavy-duty, automobiles or specialty vehicles, or ICEs or EVs and HEVs. Dorman was one of the first companies to develop aftermarket solutions for hybrid vehicles a decade ago, and we’re hard at work developing more solutions for increasingly popular all-electric vehicles today. In the past couple years, we’ve also welcomed Dayton Parts and SuperATV to the Dorman family, and we look forward to growing with both of these highly respected brands.

As far as challenges, everyone knows there’s a lingering COVID hangover that still impacts global supply chains, but we are already seeing those issues start to resolve themselves. We believe the hard lessons from the past few years have made us much better as a company and prepared to deliver better service to our customers this year and beyond.

Michael Kitching

President and Chief Executive Officer, GB Remanufacturing

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With sustainability becoming an increasingly important topic to the aftermarket, what are your thoughts on the role that reman plays in the increasing efforts to meet sustainability measures? How does GB Remanufacturing help customers meet current and future sustainability goals?

Great question for a remanufacturer! Remanufacturing and the use of remanufactured parts should be at the forefront of any and all sustainability initiatives. Consider the amount of energy and resources being consumed from start to finish to produce new, OE parts. These parts are necessary in the production of a new vehicle, but once the vehicle enters the aftermarket, we should be considering a sustainable alternative, and that’s where remanufactured products come into play. Remanufacturing or sustainable manufacturing restores a part to OE specifications, and oftentimes the result is a part that is better than the OE part that failed. Replacing the parts that wear out and fail, replacing or fixing known failure modes, recalibrating the part and testing the part to OE specifications are all part of the remanufacturing process. The beautiful thing about remanufacturing is that, more often than not, we get to reuse the “shell” of the original part that never wears out and that saves precious resources.

In almost every instance, our remanufacturing processes save raw material, energy and labor when compared to a similar new product. This allows us to offer our customers a product that is equal to or better than a similar new product at a significant cost savings. High-quality remanufactured parts and competitive pricing give our customers the opportunity to enhance or increase their sustainability initiatives within their companies.

Remanufacturing is a win-win proposition for both our customers and the planet.

What are your thoughts about the business environment for the aftermarket in 2023?

I’m not going to pretend to be an economist, but I can tell you with certainty that our business remains strong through the first two months of 2023, with solid growth expected for the remainder of the year. This is following an extremely strong 2022.

Historically, consumers keep their existing vehicles longer, drive more and repair their vehicles themselves or at independent repair facilities in times of high inflation and/or recessionary times. This is all good news for the automotive aftermarket, and has been very good for our company in past similar economic cycles. As a remanufacturer in the aftermarket, we provide products to consumers and shops that allow them to save either themselves or their customers money, while offering them parts that meet or exceed OE specifications – two key advantages in economic uncertainty.

Supply chain, inflation and labor issues remain real for us. The supply chain is improving each and every month. We invested heavily in safety stock several years ago and that has helped us tremendously throughout the last few years. Raw material and freight costs continue to increase on a monthly basis, which is concerning. The labor market is unlike anything I’ve ever seen in the almost 37 years we’ve been in business. It’s very frustrating and concerning. I don’t see the labor situation getting any better with current legislation and the business climate in California, unfortunately.

What are the opportunities your company is most excited about at  this time? Conversely, what are the biggest challenges for your business in 2023?

Opportunities for our business in 2023: We are excited about furthering our plan towards becoming an even more sustainable company. In addition to remanufacturing an extensive line of remanufactured gasoline and diesel fuel system related products, we are working hard at critiquing every aspect of our business and asking ourselves “What can we do better?” in regards to making sure that we reduce, reuse, recycle and remanufacture in every department. While looking at our own operation, we want to be an advocate for remanufacturers in our industry and around the world through education and by using our products as a testament to the quality of remanufactured goods. Additionally, we are doubling down on our efforts to keep as many jobs related to GB Remanufacturing and our product lines right here in the USA. Finally, we are looking to expand into a few different product lines, and will be working hard on this project in the coming year.

Challenges for our business in 2023: I touched on this subject in the previous question, but our largest challenges, in no particular order, are supply chain related issues, inflation and attracting and retaining team members. If we could solve these three issues, life would be really good!

Eric Sills

Chief Executive Officer, Standard Motor Products

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You have personally testified before Congress on issues such as supply chain challenges and U.S. manufacturing competitiveness. What are your thoughts on these issues as they stand today? Are we seeing improvements? What still needs to change in your opinion?

Thankfully we are seeing a lessening of supply chain disruption, both from a delay perspective as well as relief from the outsized cost inflation of transportation. That said, we are far from back-to-normal. It surely has taken longer than anyone would have expected and I believe it highlights the fragility of the global supply chain the world has come to rely on. Which leads me to the second part of your question: U.S. manufacturing competitiveness. I am a firm believer in regional competitiveness, and moving from global supply chains to regional ones. Certain things make sense to manufacture here, while others are a better fit for Mexico. But it took decades to build out the China model, and moving things back will not be an easy or quick task.

What are your thoughts about the business environment for the aftermarket in 2023?

I continue to feel good about market conditions. The majority of the trends are positive – aging car parc, increasing VIO, rebounding miles driven – we all know the stats. And while there are legitimate concerns about heading into difficult economic times, the aftermarket tends to outperform, especially for non-discretionary product categories. For most Americans, their vehicle is their means of going about their lives – it needs to operate properly and safely.

What are the opportunities your company is most excited about at
this time? Conversely, what are the biggest challenges for your business in 2023?

While automotive technology has always evolved, it is now doing so at an accelerated rate. And while this is certainly a challenge, it also presents tremendous opportunity for those willing to invest in it. This has always been the case for SMP. We’ve been told many times over our 100+ year history that we were going to get killed by new technology – electronic ignition, fuel injection, etc. – and yet each time we turned the challenge into a major component of our business. So, while it is clearly growing more daunting, and while we are facing external battles like data access that are increasing the challenge, we continue to invest in manufacturing capabilities, to train technicians on these new systems, and to hire great talent to get it all done for us.

Matt Roney

President, DRiV

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DRiV is known to have some of the most venerable brands in the aftermarket. What goes into maintaining a strong brand reputation for a product that’s been around a long time, while also ensuring customers that it is on the cutting-edge of technology and innovation?

Ultimately, brands are built on trust, and trust is developed over a long period of time delivering sustained performance. The various brands within DRiV, including Monroe, MOOG, Fel-Pro, Walker, Champion, Wagner and many others, each stand for a variety of factors that instill trust in the thousands of installers who choose our products, the distributors who carry our products and the consumers who ultimately rely on our products. Some of the common threads across the DRiV brands include high quality and durability, superior product performance and a commitment to partner with our customers to ensure our products are available when our customers need them. By continually delivering on these promises, we build and reinforce the trust in DRiV and each of our individual brands. This requires a commitment to innovation, operational excellence, brand marketing support and customer relationships. For example, our engineers are busy developing new solutions, including over 1,400 new part numbers to be introduced in 2023 and many first-to-market innovations like our patented carbon fiber bearing designs to create stronger and more durable chassis control arms and ball joints. In addition, we are innovating in data analytics to evaluate forward-deployed inventory to work with our channel partners to ensure the right, targeted products are available quickly to each repair shop by zip code. On the operational excellence front, we continue to invest in our world-class manufacturing facilities to manufacture in the regions we sell with the best quality and durability. From a brand marketing perspective, we continue to support all our brands in market, clearly defining each brand’s value proposition and why our products are superior to the competition.

Finally, as we partner with our customers throughout the value chain, our Garage Gurus team continues to provide much-needed training and technical knowledge to the technician community. Through the Gurus program, we provide technicians with the opportunity to keep up with the latest vehicle technologies for increasingly complicated repair jobs on newer vehicles. It’s the sum of these investments that maintain our brand reputation while innovating for the future.

What are your thoughts about the business environment for the aftermarket in 2023?

The last few years have been anything but an ordinary business environment. We’ve seen a rise in pandemic-fueled DIY in 2020, followed by a rebound in DIFM with the stimulus payments in 2021, and some corrections in 2022 as inflation and supply constraints muted market volumes. Looking ahead, we expect some reversion back to somewhat more normal activity in 2023, and with an aging and growing car parc we expect volume growth for the next few years.

What are the opportunities your company is most excited about at this time? Conversely, what are the biggest challenges for your business in 2023?

We are extremely excited about firmly establishing our commitment to service the global car parc across the full range of technologies for years to come. Where other companies are moving away from categories like engine and exhaust, we see an opportunity to reaffirm our commitment to VIO coverage and availability in these segments. In addition, we continue to lead the way in training for emerging technology areas like ADAS and electrification and have a range of products well-suited to these vehicles along with our full lineup of powertrain-agnostic products like shocks and struts, chassis and braking.

The biggest challenges for our business are not unique to DRiV, as companies around the world are wrestling with the macroeconomic impacts of the war in Ukraine, increased inflation and the shortage of skilled labor. Global supply chains remain strained, and therefore we remain committed to our strategy to manufacture in region. I mentioned our commitment to training, as that is also a response to the continued technician shortage across the industry. Through our Garage Gurus program, we annually offer academic scholarships to students who are enrolled in collegiate or high school technician and repair programs. Another challenge for us is the status of Right to Repair legislation across the U.S. So far in 2023, 20 states have filed legislation to address the issue, so we will be watching that carefully as the bills progress through state legislatures. Finally, as inflation continues to impact the industry, our commitment to operational excellence and innovation will help ensure we are providing the right value to our customers for years to come.

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