What is automotive aftermarket?
The automotive industry deals with the manufacturing, distribution, retailing and installation of all vehicle parts, chemicals, equipments and accessories. The automotive aftermarket industry also does the same, but after the sale of the automobile by the original equipment manufacturer (OEM) to the consumer. In other words we can say that the automotive aftermarket is the secondary market of the automotive industry. This is quite possible that the OEM may or may not manufacture the parts, accessories, etc. for sale.
More about aftermarket parts
According to a report by the International Trade Administration in the Department of Commerce,” Aftermarket parts are divided into two categories: replacement parts and accessories. Replacement parts are the automotive parts built or remanufactured to replace the OE parts as they become worn or damaged. Accessories are parts made for comfort, convenience, performance, safety, customization, etc. and are designed for add-on after the original sale of the motor vehicle.”
The range of the aftermarket covers all vehicle makes and models. It supplies a wide variety of parts like aftermarket chrome truck bumpers, etc. with varying qualities and prices.
Things to consider while doing the aftermarket business:
- The aftermarket parts are easily confused with the new parts in appearance. You should assign separate part numbers to them and keep them in the separate section of your parts warehouse.
- In case your dealer management system (DMS) does not accept the separate part numbers, you will have to track the inventory through some other system. A Microsoft Excel spreadsheet or a Microsoft Access database can serve you in this regard.
- A number of states and countries have laws requiring dealers to account for the sales and gross profits with the aftermarket parts. There may rise problems if your existing accounting system does not integrate with the information. So, you should look into the matter and solve it.
- Things may become tough for your business if your parts staff does not have a thorough understanding of ‘reusability guideline’. Experienced and trained personnel alone can determine whether or not the part meets the reusability guide.
- Only a few good distributers are specialized in selling used-parts because they have got specific training in this regard. You should ask the manufacturer’s service department to facilitate you with the guidelines they have established.
- You should deal the customers, purchasing used parts, keeping in mind that they are always willing to pay 65% to 80% of the new parts. So, be vigilant to earn your share.
- A gross profit of 35% to 50% is always expected in this part of the business. You should try to mature your deals ensuring this very range of profit.
- You should create a competitive advantage for your Service department.
- You should look for a reliable source for securing good used parts if your dealership is not prepared to establish the systems, processes and trained personnel.
Hence, you must consider the above said points while running the aftermarket automotive business.