3 Challenges & 3 Opportunities Facing Auto Parts Manufacturers
The market for auto parts manufacturers is evolving, leading to new challenges—as well as new opportunities.
- The car-buying boom is predicted to flatten, meaning fewer new auto parts will be needed to fill consumer demand for vehicles. A reduction in volume means auto-parts manufacturers will need to focus their efforts on R&D and customization in order to stay competitive. High-volume, low-margin offerings are no longer enough to win the day and stay ahead of macro-economic trends.
- Imports from Asia are undercutting commodity auto-parts manufacturers. Even if worldwide production of automobiles remains steady (which is unlikely), commodity auto parts are no longer as viable as a primary-production focus for auto manufacturers. As commodity producers in Asia drive down production costs and margins, the profits available to manufacturers in this segment are dwindling. Higher margins are now found in customized and high-tech parts required for the increasingly complex design of modern vehicles. Auto-parts manufacturers must compete in this higher-margin field to stay competitive.
- B2B buying cycles are longer than ever before. Due, in large part, to the necessary shift to highly customized, complex, high-tech solutions auto-parts manufacturers now offer their customers, the buying cycle has changed dramatically. The time—and number of stakeholders—required for parts buyers to make a decision on complex automotive solutions has ballooned well beyond industry precedent. This new buying cycle requires increased stamina and new tactics to close deals.
- Value-add auto parts are taking the driver’s seat for domestic auto parts manufacturers, meaning higher revenue and higher margins. The focus on non-commodity parts will mean growing margins and profits for the parts manufacturers who adapt to the new B2B sales cycle required by the changing realities of the industry.
- Vehicle design is becoming more complex, and these designs require a higher volume of more sophisticated parts to function. Though total auto production may be predicted to decline, the number of complex, high-margin parts required to keep a modern vehicle operational are on the rise. Clearly, there’s still ample opportunity for auto-parts manufacturers to grow if they maintain a focus on non-commodity parts and adapt to the new sales cycle their buyers demand.
- A focus on specialty & custom parts means marketing differentiation works. Marketing differentiation is nearly impossible to achieve in a crowded field of commodity auto parts. Auto-parts manufacturers who leap into the emerging market for high-tech, customized automotive solutions will find marketing differentiation is not only effective but necessary. As the new B2B buyer begins their research online months before they’re ready to engage with a salesperson, marketers of high-tech auto parts can—and must—reach those buyers early with strong, differentiating messages, beginning conversations before the buyers engages directly.