Market Analysis of the North American Exhaust Components Aftermarket

Long Term Growth in Unit Shipments as well as Revenues of Performance Parts Propel the Exhaust Components Aftermarket Forward

Growth in the North American components aftermarket will be driven by emission regulations that require the replacement of failed or worn out components. While long lasting OE installed parts impede the growth of the aftermarket, the adoption of inspection and maintenance programs in an increasing number of states will drive unit shipments. Further, the transition toward direct-fit components from universal components is expected to expedite revenue generation for the exhaust aftermarket. In the standard exhaust components aftermarket, brand awareness is low and consumers settle for what is available at a reasonable price. In contrast, the performance exhaust segment is characterized by high levels of customer involvement and branding plays a key role in determining purchase decisions. Thus, the performance segment holds enormous potential as the lack of technology standardization gives aftermarket manufacturers the liberty to introduce new features and induce greater product differentiation.

The North American exhaust components aftermarket is witnessing a shift towards direct-fit components that translate into increased average prices and hence revenues. "Seen more in certain product lines such as mufflers and catalytic converters, direct-fit components also adversely impact the unit shipments of exhaust pipes; this is because direct-fit components come with the requisite tubing," notes the analyst of this research service. "In addition, there is a move towards integrated systems such as integrated exhaust manifolds, as well as cat-back systems that present new growth opportunities to aftermarket manufacturers." Direct-fit components offer ease of installation and optimized productivity at the installer level. Considered from the standpoint of the shortage of skilled technicians, which is a major cause of concern in the aftermarket, direct-fit components provide an easier alternative compared to universal components. Direct-fit components eliminate the need for cutting and welding and can simply be bolted on to a vehicle. Thanks to this advantage, direct-fit components are preferred to universal components despite their higher price.

Although the quality of exhaust components at the OE level has improved a great deal, stringent emission regulations ensure that vehicle owners replace a catalytic converter or pipe when it is damaged. Besides, a larger number of consumers are more inclined toward keeping their vehicles longer, all of which bodes well for exhaust components aftermarket. Nonetheless, compliance with emissions and noise regulations poses a huge challenge as variations in regulations at the federal, state, and even local levels complicate matters for manufacturers. There are two sets of emission regulations followed by aftermarket manufacturers - one imposed by Environmental Protection Agency (EPA) and another imposed by California Air Resources Board (CARB). In order to compete effectively, aftermarket manufacturers are developing two different product lines, one for California, and one for the remaining 49 states. On one hand it raises their manufacturing costs, but on the other, it allows them to grow their customer base and rake in better revenues. Aftermarket manufacturers of catalytic converters are worst hit by regulatory issues. They have to walk the tightrope between developing lower-cost catalytic converter replacements that work on various vehicle applications and satisfying specific parameters related to exhaust emissions. "By focusing on performance improvements while meeting emission regulations, manufacturers can offset the impact of declining replacement rate in the standard exhaust segment," says the analyst. "Also, the ability to cater to their customers' needs in a short turnaround time, by providing direct-fit components, as well as offering a full line supply will emerge as critical success factors."

Market Sectors

Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:

• Exhaust pipes
• Catalytic converters
• Exhaust manifolds
• Performance mufflers
• Cat-back systems
• Exhaust tips