Auto Parts Retailers

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 16,400 auto parts retailers in the US sell automotive parts, supplies, and accessories. Companies may also sell batteries, lubricants, audio equipment, tires, and used products. While the majority of revenue typically comes from do-it-yourself (DIY) customers, large companies may have sizable commercial (do-it-for-me, DIFM) sales. Some companies offer repair, installation, or maintenance services.

Increasing Vehicle Complexity

The growing use of electronic components has increased the complexity of vehicles, resulting in a shift away from DIY jobs and towards DIFM.

Competition

Auto parts retailers compete with a variety of alternative sources, including traditional retailers (mass merchandisers, discount stores, hardware stores, supermarkets, drugstores, convenience stores) and auto dealers.

Industry size & Structure

The average auto parts retailer operates out of a single location, employs 22 workers, and generates about $3-4 million annually.

    • The auto parts retailing industry consists of about 16,400 companies that employ 366,800 workers and generate about $57 billion annually.
    • The industry is concentrated at the top and fragmented at the bottom; the top 20 firms account for about 59% of industry sales.
    • Large companies include AutoZone, Advance Auto Parts, and O'Reilly Automotive Stores.
    • Some large auto parts distributors have retail operations.
                              Industry Forecast
                              Auto Parts Retailers Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Nov 10, 2022 - New Voice Capabilities for Cars
                              • Automakers are developing new voice control capabilities for vehicles and adding voice commands that go deeper into the car’s controls, including verbal cues for turning on windshield wipers, adjusting mirrors, or raising the tailgate, The Wall Street Journal reported in November. In an effort to keep drivers’ eyes on the road – and not on dashboard screens – carmakers are expanding voice capabilities and using artificial intelligence to transform cars “into a travel companion of sorts,” WSJ wrote. More drivers are embracing voice controls as the technology has improved. Some 40% of owners said they used their in-vehicle voice systems at least once a week, up from 30% in 2019, according to a US survey conducted last year by research firm Strategy Analytics, according to WSJ.
                              • The European Union in October 2022 approved a ban on the sale of new gasoline and diesel cars and vans by 2035, the AP reported. Under the agreement by EU lawmakers and member countries, carmakers will be required to reduce the emissions of new cars sold by 55% in 2030, compared to 2021, before reaching a 100% cut five years later. The ban is part of the EU’s effort to achieve the goal of reducing greenhouse gas emissions by 55% over this decade. In the US, California recently approved a similar ban on the sale of new gasoline-powered cars and trucks by 2035. The European Parliament and member states must formally approve the agreement before it comes into force, according to the AP.
                              • Auto parts retailers are poised to benefit from record high new car prices and soaring interest rates on car loans that are making repairs an economical alternative to replacing aging vehicles. New car prices hit a record in August 2022 with the average transaction price for a new vehicle climbing to $48,301, up 0.5% over July, according to data from Kelley Blue Book (KBB). That figure represents more than 80% of median income in 15 US states, reports YAA Car Search. Moreover, industry insights from KBB and TrueCar indicate that new car prices have yet to peak. Adding to buyers’ pain, interest rates on auto loans have soared, with the average annual percentage rate on financed new vehicles in the third quarter at 5.7%, up from 4.3% at the same time last year, and up from last quarter's 5%, according to Edmunds.
                              • Auto parts retailers have largely avoided the challenges faced by the broader retail sector, such as too much inventory and weakening demand, The Wall Street Journal reported in an August roundup of recent company performance. WSJ noted that while Advance Auto Parts and O’Reilly have downgraded their full-year guidance, the sector’s prospects still look good. That’s partly due to the fact that failure-related auto parts like brakes and batteries are non discretionary purchases that consumers can’t delay, ensuring steady demand. Also, prices of used cars have been rising at a faster pace than that of auto parts: As of July, used cars cost about 38% more than in January 2021, while replacing parts had gotten 18% more expensive, according to data from the US Bureau of Labor Statistics. That means inflation-squeezed consumers are still more likely to opt for car repair than replacement.
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