The North American brake system parts aftermarket is growing incrementally on the strength of new vehicle sales and the continuing increase in the average age of passenger cars and trucks, but escalating raw materials costs are impacting profits.
That's the finding of a recent study by market research firm Frost & Sullivan, based in New York City. The company reported that brake parts manufacturers rang up sales of $2.21 billion last year, but are coping with rising raw materials costs as well as growing competition from overseas factories.
It said demand for brake pads, rotors and calipers is increasing, while demand for brake shoes, drums, master cylinders and wheel cylinders is in decline. The reason cited by the firm is auto manufacturers' preference for disk brakes in place of drum brakes as standard equipment on new vehicle models.
In his report, Frost & Sullivan researcher Stephen Spivey asked: ``Is it sensible that the aftermarket sells so many high-end brake pads with low-end rotors?'' His answer: ``It is, in that it significantly increases the cost of a brake job for the average motorist and improves profit margins for distributors and installers.''
He also noted that premium, or ceramic, brake pads and shoes are popular with large aftermarket buyers because of their noise-dampening characteristics. Noise, Mr. Spivey wrote, is the most common complaint of car and truck owners following a brake job. ``When they bring the vehicle back to the shop for additional servicing, the installer loses money. For the added security of reducing service comebacks, the installer pays about twice as much for a set of ceramic pads than for a set of semi-metallic or non-asbestos-organic (NAO) pads.
``Because most vehicle owners have little brand loyalty to brake parts and because the installer often recommends pads or shoes to the vehicle owner, this extra cost is easily passed on to the vehicle owner.''
Mr. Spivey predicted that escalating raw materials costs-including steel, resin and fuel needed to produce and transport brake friction components-will hinder revenue growth in the aftermarket. Because steel is a key ingredient in brake pads, shoes, backing plates and other associated hardware, ``for some manufacturers, costs are likely to rise well above 40 percent in the near future,'' he said.
Brake rotors cannot be machined to extend their service lives as easily as older rotors, he continued, because there is less material in the product. ``Anecdotal evidence suggests that ceramic brake pads are also more abrasive on rotors and drums than semi-metallic or NAO pads.
``As a result, rotors and drums are replaced more often than they were in years past. On some vehicle applications, the rotors may need to be replaced with each set of brake pads instead of at every other brake job, or every third brake job.''
Coupled with the price of premium brake pads, Mr. Spivey said it's ``easy to see that consumers are paying more to have their brakes serviced. Product quality and service frequency impact the cost of servicing the brakes of a typical passenger vehicle over time.''
Frost & Sullivan said it ``believes these impacts will subside in the medium to long term. The quality of off-shore products will improve, blurring the distinction between economy and premium rotors. As ceramic brake pads reach saturation in the aftermarket, their prices will decrease.''