In an ideal franchised world, dealers would regard parts as mainly for use in their own service bays and bodyshops.
But if they can’t reverse the loss of out-of-warranty cars to independent garages for maintenance and repair, at least they have a backstop – selling parts to those garages.
Ridgeway Group has three BMW outlets in its brand portfolio that turn over a combined £10 million a year in parts, most of it generated by trade sales. At its Hook outlet, where 70% of its £5m revenue comes from external customers, parts manager Toby Cartell said: “A local independent will typically spend £10,000 to £15,000 a month with us. It’s almost the opposite of the traditional practice when most parts were for internal need and the dealer had a small retail presence.
“As much as VMs want to see cars kept within their networks, they realise it’s not happening and this creates an opportunity for dealers to engage in wholesale, encouraged by manufacturer bonuses.”
Cartell says good communication is key, as is delivery.
Karl Davis, managing director of Coachworks Consulting, pointed to infrastructure as an issue and stiff competition from “well resourced” independents such as Euro Car Parts and Andrew Page, which between them operate through more than 200 branches.
“From a logistical point of view, they score in heavily congested areas. Selling parts for every brand, they can do multi-drop-offs. Single brand is more of a problem; a couple of miles can take 45 minutes for one drop-off,” he said.
Davis said franchised outlets had an advantage in that they could supply a wider range of stock for their specific brand, including ‘captive’ parts, electronic control units, for instance: “These tend to be less price-sensitive than, say, a headlamp lens where you may get the same production line product, with one being up to three times more expensive than the other.”
For most customers, though, delivery scored over price. “There are circumstances where you can’t anticipate parts requirements, vehicle health checks and MoTs, for instance, where ease of sourcing and speed of delivery is of the essence,” said Davis.
Another consultant, Toby Proctor from Trend Tracker, said: “It makes sense to have a trade parts division because you have the stock anyway, and having (internal) aftersales to support the business is less of a given now.” However, he said the margins weren’t terrific and need to be weighed against the overheads and whether there are enough independents in a locality to make it worthwhile.
Proctor said Pendragon’s Quickco and Lookers’ FPS showed how franchised groups could rival the major independent parts distributors and how the VMs – notably Volkswagen Group’s TPS network, operating through selected VW franchised outlets – were also a force to be reckoned with.
Whole service proposition
Graeme Potts, chief executive of the Eden Group, said: “I won’t hide the fact that it’s our preference to service as many of our own vehicles as we can. But to retain customers further into the vehicle age range, we have to be seen as a repository of great value, not just on price but on the whole service proposition, because the difference between franchised networks and good quality independents is now so narrow as to be scarcely perceptible.
“There are substantial opportunities for parts wholesaling, third-party fleet business, for example, so clearly we want to supply this need and our largest client base is independent service repair and bodyshop.”
With 10 dealerships, most Vauxhall/Chevrolet, serving the Thames Valley, South Coast and South Devon, Eden has 20 vans and four scooters to deliver parts.
Eden’s overall parts operation generates £12m a year. Potts said although margins vary from branch to branch, “it’s fair to say we are on the right side of the 20% industry return”.
However, said Toby Cartell, the wholesaling aspect of the business is not always so clear-cut.
“If you have dealers representing the same brand in a limited geographical area, all competing for business to maintain their VM bonuses, it creates a bit of a viper’s nest. Discounting is tempting, so margin erosion is always a danger.
“Another challenge is 30- to 45-day credit exposure. In my 10 years in the business, I’ve known half a dozen independent garages to go under without warning.”
A further recurring theme is the complexity of the parts range. “A car can have 15 different types of ECU for one model year,” said Ben Conn, Swansway’s parts depot director.
Provenance is also an issue. Brian Spratt, chief executive of the Independent Automotive Aftermarket Association, said: “The logo on the box is a presumption of quality, but one VM sells some parts in plain boxes with just the part number and another sells an oil that’s not approved for use on its own vehicles. It’s an unregulated market with everyone flogging bits to one another at silly prices.”
He said the situation was not helped by the Block Exemption change in the definition of ‘matching quality’ from the standard of parts fitted on the production line to those fitted by the VMs’ franchised networks.
“We want to see a more rigorous quality inspection regime,” he said. Toby Proctor pointed out a further complication – vehicle recalls where a build part has to be replaced.
OE producers are trying to address the issue by setting up the Original Equipment Suppliers Aftermarket Association. Its chairman, Nigel Morgan, who is managing director of Schaeffler, explained: “VMs and original equipment suppliers have to look at their programmes and what they are selling.
“It’s not necessarily OE, they could have second-line product. That doesn’t make it poorer quality, but our message to the aftermarket is that where parts are marketed as ‘OE quality’ there needs to be evidence to back that up.
“If no one makes a stand, the market falls to the lowest common denominator. In our attempts to demystify this whole subject, we hope that people can make an informed choice and, at the same time, realise that the price difference between OE and non OE is often not that great.”
According to a report from Impetus Automotive, vehicle manufacturers’ attempts to boost parts sales with cheaper, second-tier products for older cars may have damaged brand value.
Operations director Andy Mills said: “Our research showed that what began as a strategy to reverse declining parts sales might actually accelerate the process – and damage brand identity at the same time.”
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