PRESS RELEASES - AUTOMOTIVE AFTERMARKET
GLOBAL RECYCLED CAR PARTS TRENDS
Diagonal Reports tracks developments in the automotive service aftermarket by conducting interviews with experts in 18 countries. The GAP (Global Aftermarket Panel) is published annually.
Creating a Stable Market for Remanufactured Parts
Legislation pending in the European Union will eventually make the recycling of cars and car parts mandatory. Legislation will tend to standardise practices across the EU and further afield. The environmental conditions that push the move to recycled parts are similar in almost every market.
But creating a stable market for remanufactured parts will be hard work. Diagonal Reports research (Global Aftermarket Panel, 1999) has identified that consumer attitudes to recycled parts are generally negative.
Service channel experts consistently cited fitting problems and quality concerns as reasons not to use remanufactured parts. Fitting problems increase labour costs and reduce profits. Predictable, consistent parts' fitting times are absolutely crucial if the competitive service channel is to standardise its prices and offer consumers transparent pricing. Predictable fitting time is a parts' purchasing criterion in franchise and quick service chains.
Car owners, like professionals, worry that recycled parts, despite lower prices, will turn out to be 'no bargain' because they are likely to be of a lower quality/shorter life than new parts, and therefore could pose a safety risk or cause damage to a vehicle. In Brazil, where remanufactured parts were very important ten years ago, sales have declined to about 5% of the aftermarket. Remanufactured parts did not keep pace with changes in the service channel where profit margins are based on labour rather than parts' costs. A shadow hangs over remanufactured parts in many markets. The term 'remanufactured part' is assumed to be little more than a flag of convenience for a grey market. In Italy and South Africa experts report that many of the so-called 'remanufactured parts' in circulation are actually parts dismantled from stolen cars. In Italy experts worry that the stolen parts trade, because of its scale, poses a bigger threat to the industry than the trade in counterfeit parts. In China the aftermarket faces similar problems in that remanufactured parts are often passed off as new parts. The fraud is only discovered when mechanics fit the part.
Overcoming the Problems
Better quality remanufactured parts, in terms of parts' performance and reliable fitting, along with warranties and replacement policies are essential if sales are to grow. Remanufactured parts will only be accepted if they come with warranties comparable to those offered with new parts. New parts generally come with extended if not life long warranties. Indeed warranties, which would also function as a certificate of a part's legitimate origin, would help to remove the shadow of "criminality" now hanging over remanufactured parts. Service outlets, particularly in high wage markets, will only use remade parts if they come with a replacement policy to cover fitting problems.
Looking Ahead
Sales of remanufactured parts rise when manufacturers meet consumers' needs. Japan serves as an example of what can be done. The once low usage of remanufactured parts increased after quality improvement and the introduction of warranties. These measures helped to overcome the concerns of the notoriously quality-conscious Japanese consumers.
In a very different market, China, remanufactured parts account for up to half of aftermarket sales in some parts' categories due to significant quality improvements.
This review was originally printed in Automotive Rebuilder
Copyright © 1999 Diagonal Reports Ltd.
