A boom in aftermarket truck parts demand is poised to keep gaining strength into next year as fleets large and small continue to extend their truck ownership cycles to cut down on vehicle acquisition costs.
At a media event in Miami, FL, to tout the NASCAR racing team sponsored by Daimler Truck North America’s (DTNA) Alliance Truck Parts (ATP) line of aftermarket products, executives explained that higher sticker prices for new trucks – driven largely by emissions reduction regulations – along with tighter capital investment budgets is resulting in longer ownership periods, thus spurring a long-term demand curve for parts.
“The whole longer ownership cycle expectancy among truck buyers is driving part demand,” John O’Leary, DTNA’s senior vp-aftermarket, told Fleet Owner. “The ownership period has gone up significantly over the last 18 to 24 months and we definitely continue to see growth in vehicle age despite the fact that new truck build rates are up. The major fleets are buying replacement trucks; not so much the smaller guys.”
O’Leary also noted that a corresponding rise in used-truck values is adding to the aftermarket part demand trend as well.
“Used trucks are now dramatically more valuable,” he said. “In the past, used trucks used to be shipped in large numbers to markets outside North America. Now, because they are more valuable, they are staying home. Consequently, trucks that we didn’t get to see in the past from an aftermarket parts sales perspective are now here. And that high used-truck value is leading to the use of higher value parts as well.”
As evidence of this demand spike, O’Leary pointed out that ATP’s revenues grew 19% in 2011 vs. 2010. Overall, total parts revenue for DTNA has climbed to $2.2 billion annually; a figure that includes ATP’s sales.
Dan Haggerty, DTNA’s director of parts and service marketing, noted that the company is now trying to position ATP to attract second and third truck owners, since not only are they too extending their ownership cycles, but they are seeking better parts quality as well.
“We used to lose those guys after the first owner,” he explained to Fleet Owner, in part because they focused solely on attaining a “low-price point” for parts.
“Now, with the value of that equipment higher and expectations for it to last longer, we’re seeing the opportunity to sell quality, value, and dealership service at a competitive price,” Haggerty said. “We’re trying to show the second and third owner that our parts and service pricing is not all that bad, and is worth the investment to sustain longer ownership periods.”
O’Leary noted that DTNA has focused on expanding the distribution footprint for its ATP brand of parts, which contains 20 product lines aimed at the Class 6-8 truck market. Currently, he said the ATP line is offered at 500 Freightliner, Western Star, and Sterling truck dealerships; 60 Thomas Built bus dealerships; and 200 Travel Centers of America and Petro Stopping Center truck stop locations.
All told, that network holds, on any given day, $500 million worth in inventory of both parts and accessories, according to O’Leary, with DTNA’s six distribution centers in the U.S. and Canada stocking about $275 million in inventory and shipping some $7 million worth of parts per day.
“We’re trying to [make ATP] known as the all-makes ‘value brand’ in the parts market,” he added. “Since the industry went through its worst downturn ever starting in 2008, budgets now do not always support buying parts at premium price points. We want to fill the ‘middle tier’ of the truck parts segment; we want to be the better part at a good price.”
ATP is also continuing to “rationalize” its parts offerings, adding six new ones over the course of 2011 and discontinuing others. “We’re trying to fill in the gaps, so we have the most complete offer,” O’Leary said. New offerings include: Charge air coolers (added in June); radiators (July), new clutch assemblies (August), four new battery models (September), and new brake chamber models (October).
In the first quarter next year, ATP plans to add in customizable fuel tanks to its product line – tanks that can be customized via an online application and shipped within days, noted Haggerty.
“The replacement market for fuel tanks is worth a $150 million a year according to our research,” he explained. “It’s much larger than we realized.”
Other new product offerings in 2012 include: U-joints, starters and alternators, 5th wheel top plates, and air springs, among others.
The biggest demand going forward, however, is for what Haggerty calls “maintenance items,” such as brake chambers and drums, batteries, and heating venting and air conditioning (HVAC) parts.
“In fact, HVAC components are our largest seller,” he said. “That’s one of the reasons why we think a ‘value pricing’ approach combined with a national distribution network will help grow our share in the parts business going forward.”