Digging Beneath the Statistics By Gary Smith Recently, the following informa- tion was published in The APRA e-Connection e-mail newsletter, and reprinted in last month’s issue of the Electrical Rebuilder’s Exchange. This brief introductory essay raises some very interesting points, to which I am choosing to respond. I am inserting my remarks to facilitate easy reading within the context of the initial presentation. “New Unit Programs Hold Revenue Generation Potential for Remanu- facturers… Discount Rate Available for Automotive Parts Remanufacturers Association Members for Frost & Sullivan’s North American Starters and Alternators Aftermarket Research. “Frost & Sullivan, a global growth consulting company, along with the Automotive Parts Remanufacturers Association (APRA) is partnering to offer APRA a discounted rate on Frost & Sullivan’s recently released research on the North American Starters and Alternators Aftermarket. “Although remanufactured units accounted for approximately 92.3 per- cent of the revenues in the North American starters and alternators aftermarket in 2005, current trends indicate that this share will marginally decline throughout the forecast period as new units gradually gain a foothold in the market.” As any of you who read my article published in the October 2005 Electrical Rebuilder’s Exchange will know, I see the automotive replacement market through the eyes of the replace- ment parts industry (the auto parts dis- tributor) and believe that electrical rebuilders (and electrical rebuilder sup- pliers) are simply another form of an auto parts store. I do not have, nor have I seen published, figures on market share penetration of new electrical units in comparison to rebuilt electrical units, nor do I know what group of sales activity Frost & Sullivan are account- ing for in their determination of the North American Aftermarket. I have no reason to doubt the figures quoted by Frost & Sullivan. I am sure they have carefully accounted for their figures based upon their chosen analytic metrics. One way or the other, a 7.7 percent market share is a very good foothold from which to more aggres- sively market any product. “‘New starters and_ alternators accounted for about 7.7 percent of the total aftermarket in 2005, which is likely to increase to 9.2 percent in 2012,’ says Frost & Sullivan Industry Analyst Sanjay Vasudevan. ‘The future growth rate of these units is likely to be relatively low, with revenues projected to increase from $77.2 million in 2005 to $82.9 million in 2012, and will take place at the expense of remanufactured units.’”’ Now we are getting to some mean- ingful numbers and thoughts, which can be more carefully observed and responded to from the point of view of industry history. Remember, we (as the aftermarket industry) have been through this new replacing remanufactured cycle before. One specific product line (there have been several) that went through this same transition years ago was clutches, specifically rebuilt clutches. If you momentarily look at the world of domestically manufactured cars with the eyes of around 1980, you will see that automatic transmissions had pretty well taken over the world; not com- pletely but mostly. However, at the same time the import car invasion of the 1970’s had moved well past the gaining traction phase and was proceeding to make inroads into the market share of the Detroit brands. Additionally, the import car was now old enough that demand was beginning to strongly appear in the replacement aftermarket, and (here is the important part) auto- matic transmissions in the early import car were almost non-existent. At the parts distribution level, there was meaningfully renewed demand for clutches. On the West Coast, several remanufactured clutch lines had full import coverage and were seeing a very nice increase in business. In the 1980s, I was right in the middle of the import auto parts invasion, operating as manag- ing partner in a small multi-line import only parts WD. Here is a brief description of what I saw: In 1981 we stocked a full line of rebuilt clutches (remember, we were import only). In 1984 half of the rebuilt clutch line was gone and was replaced with new product. In 1987, three- fourths of the rebuilt line was gone, and by this point the only reason for stock- ing rebuilt clutches was price. If the remanufactured unit was not at least 30 percent less money, then it was a very hard sell. What replaced the remanufactured product was new product. One Japanese manufacturer (Daiken), during this time, assembled a full line program of new import clutches (much of it of their manufacture, and the remainder from European OE sources) and in comparatively short order dominated the West Coast USA automotive import clutch market (whether in their brand or re-branded). The product was exact OE, it exactly matched what the installer took off the car, and the customer resistance to the product was nil. Yes, it was more mon