The Auto Aftermarket Is No Afterthought
By Frederick Staab
General Motors (GM ) and Ford (F ) may be posting historically dismal sales numbers, struggling with labor contracts, and losing market share. But the $31 billion market in upgrading cars, SUVs, or minivans with cool stuff is still winning annual sales increases of 4% to 5%.
Small wonder that Las Vegas will see a lot of celebrating this week, with the opening of the industry's annual Specialty Equipment Market Assn. (SEMA) show. It will feature 1,500 new product introductions, up from 1,100 in 2004.
HAVE IT YOUR WAY.
What drives this market? Not spark plugs and fan belts. "The Typical SEMA member is a small to midsize business that is privately held and run by the owner," says Peter MacGillivray, SEMA vice-president for marketing and communications. "These businesses really started out as hobbies -- the person had a great idea and started manufacturing it in their garage, and their businesses grew from there."
The automotive aftermarket derives its success from the concept of personalization -- no two cars or trucks looking exactly alike, "That's just the type of consumers we are right now. Look at the success of Starbucks (SBUX ). You can have your coffee 100 different ways," says MacGillivray. "All of the dollars spent in our industry are discretionary. The parts are nothing you need but everything you want."
Those "everything you want" products are not just go-fast goodies for hot-rodders. In fact, a large portion of this year's SEMA show involves expanding the functionality of vehicles via add-on items such as quick-mount bicycle racks or mobile-entertainment systems.
"The products for trucks and SUV's make up more than half of the dollars spent in this industry each year," says MacGillivray.
The offerings will range from simple $1 items to such technologically sophisticated ones as Hella's DynaView Evo2 auxiliary lighting system, which uses electronics to steer fog lamps in the direction a vehicle is traveling.
In the past, the automotive aftermarket industry focused heavily on 30-year-old males who spent their discretionary income on custom wheels and engine parts. Today, SEMA likes to tout demographics that include a younger (19 to 26 years old) and more ethnically diverse lot. They favor Hondas (HMC ) and Mitsubishis over Fords and Chevys.
And the industry is trying to woo more female enthusiasts, which would perhaps explain SEMA's attempt to tone down the appearance of the booth models this year. In the past, they've been scantily clad. Not this year -- not even in Vegas.
The average enthusiast spends about $1,800 per vehicle for upgrades to wheels, grill guards, and mobile electronics. But some sport-compact owners can easily double or triple that amount, putting them at the top of the desired-customer list.
Honda, this year's "Manufacturer of the Show," has chosen SEMA as the venue for the world debut of its high-performance 2006 Civic SI, a vehicle clearly targeted at the younger demographic. Toyota (TM ) and Nissan will also have new subcompact models on hand to prime the aftermarket parts pipeline.
Ford has partnered with hip-hop DJ and urban car guru FunkMaster Flex, who'll promote customized versions of the carmaker's midsize Fusion. Toyota's generation Y Scion division was an early adopter of dealer-available add-on accessories, offering showroom choices of custom wheels, suspension, and engine-performance parts. Chevrolet will feature GM-branded accessories for its HHR subcompact crossover as well as its Cobalt and H3. The products' selling points: GM has tested and engineered the products -- and since you buy them from the dealer, it can work them into the vehicle payments.
The aftermarket might just serve as the bright spot of the automotive industry, thanks to ever-widening demographics, a continuous stream of new products, and a seemingly endless supply of customers with cash to burn.
Staab has been a print, radio, and TV journalist for more than 20 years. He is co-host of the nationally syndicated automotive radio show Cruise Control and is a lifelong fan of professional drag racing