Frost: Aging vehicles drive brake demand

MOUNTAINVIEW, Calif. (March 14, 2014) — The aging vehicle parc in North America will drive the aftermarket for brake rotors, drums, and calipers, according to a new Frost & Sullivan Inc. report.

The industry analysis firm said suppliers should continue to concentrate on maintaining and expanding market share as a wave of mergers and acquisitions is expected to heighten competition in the market.

The report, “North American Brake Rotors, Drums, and Calipers Aftermarket,” determined the market generated $1.39 billion in revenue last year and estimates this will grow about 2.3 percent annually to reach $1.64 billion by 2020. Rotors account for approximately two-thirds of the total market revenue.

 “The decreasing service life of vehicle parts will support demand for brake components in North America,” said Stephen Spivey, automotive and transportation aftermarket program manager. “In particular, rotors wear quickly as they have become lighter and thinner and need to be replaced often.”

 The continuous entry of new stock-keeping units into the aftermarket also is increasing the potential of this market, as distributors add them to their inventories. In addition, manufacturers are raising the price of vehicle parts to cover the rising cost of raw materials and transport, boosting market revenues.

Large retail chains, such as AutoZone Inc., Advance Auto Parts Inc. and O'Reilly Automotive Inc., by virtue of their size and consolidated two-step distribution channel, are driving the migration to private-label brands, according to Frost. They also are putting pressure on manufacturers to reduce the prices of brake rotors, drums and calipers, and accept lower margins in return for market share.

 The accelerating trend of consolidation among large distributors, such as the recent acquisition of Carquest by Advance Auto Parts, is reducing the number of distributors in the market, according to Frost.

“This is intensifying the competitive pressure on manufacturers to make additional concessions in order to gain shelf space in the retail stores and stay in business. Manufacturers that are not aligned with one or more of the large retail or wholesale distribution groups will not be able to establish a strong presence,” the report said.

“Manufacturers may, however, find increasing success using e-commerce sites like eBay and Amazon.com. Consumers and installers are expected to purchase 10 percent of the total spare parts through such channels by 2020,” said Mr. Spivey. “Although these e-retailing sites lack the just-in-time logistical link that many service shops require, they enable shoppers to enjoy lower prices and a wider selection of products, which are key incentives driving traffic to Internet sellers of brake rotors, drums, and calipers in the North American aftermarket.”

Other findings in the Frost report include:

• Manufacturer-level revenue will increase by 2.3 percent annually over the 2013-2020 period with the average manufacturer-level price expected to increase by only 0.2 percent annually, reaching $14.48 per unit by 2020.
• Warehouse distributors represent half of the revenue, but large retail chains continue to gain share, according to Frost, noting that the top suppliers last year were Brake Parts Inc., Cardone Industries and Winhere Brake Parts.
• Rotor prices are declining, drum prices are rising and caliper prices remain flat. Prices are expected to remain flat or slightly down for high-volume rotor SKUs in the future.
• The market is experiencing a higher rate of all-disc brakes installations as the use of drum brakes continues to decline.

For more information on the study, go to Frost & Sullivan's website.