Some leading Tier 1 suppliers on the hunt for increased aftermarket sales are betting that high-tech systems just making inroads in the original-equipment market could provide hefty profits a few years down the road.
Delphi Automotive Systems Corp. and Visteon Corp., both fairly new to the $158 billion light-vehicle aftermarket as independent companies, project that investment in electronically assisted product lines will pay off with automakers and in the repair market.
The two largest auto suppliers will be among the 1,900 companies touting aftermarket products this week at the Automotive Aftermarket Products Expo in Las Vegas, as part of the giant Automotive Aftermarket Industry Week trade show that also includes the Specialty Equipment Market Association show.
Traditional maintenance products such as brake pads and spark plugs remain in high demand, and replacement rates over the life of a vehicle are high for such components. But profits are lower, and competitors are many. So with the chance to formulate an aftermarket strategy from scratch, Delphi, for one, is putting its resources elsewhere.
“Since we have a clean sheet of paper in the U.S., we’re not going to get into those products,” said Frank Ordonez, general manager of Delphi’s aftermarket operations. “We’re going to grow in electronics.”
Delphi estimates the average electronic content of vehicles will expand from 22 percent today to 40 percent by the end of the decade. Ordonez cited Delphi’s electronic power-assisted steering as one system that will drive aftermarket growth.
Rick Meyer, general manager of Visteon’s North American aftermarket business, says that one advantage of being an original-equipment systems developer is that you know what systems are going into vehicles and are tooled up to manufacture them.
“Our strategy on the aftermarket side is really leveraging our manufacturing capabilities,” Meyer said. “So when that stuff comes up on the OE side, we already have it in our plants, so let’s put it in a carton (to sell) on the aftermarket side in four years.”
Delphi estimates its aftermarket sales will total just under $2 billion this year, while Visteon’s aftermarket sales will reach about $900 million.