Summary
Service parts are a big profit opportunity for OEM’s. Navistar knows why their own and competitor shops don’t do well in the aftermarket - and are doing something “smart” about it.
Analysis
Why don’t we take our cars back to the dealer for service work after warranty? Or where do we buy our aftermarket parts for our personal vehicles? The answers to these same questions for the majority of the trucking market are similar. We don’t go to dealers because of cost and we buy non-genuine parts (some made by same OEM suppliers) because they are cheaper.
With the declining new vehicle sales comes less warranty work in shops - and they don’t do a good job with customer’s once they are out-of-warranty. In other words, dealer service shops are hurting.
A great way to address this is by offering good parts with warranty, as Navistar is doing with their PartSmart parts line. The are first offering higher volume common parts that can be used on all truck makes / models (air valves, bearings, belts, clutch, hoses, hydraulic pads and calipers, lighting, rotating electrics, U-joints, seals and wipers). Most opportunity through the OEM dealer channel comes with first-owners, so going after this base with these products makes sense.
Aftermarket truck parts are offered by NAPA, Ryder Fleet Products, TA / Petro Truck Stops, FleetPride and others all the way through hundreds of independent repair locations. The margins on parts are anywhere from good (30%) to unbelievable (100%+), so this is a smart move. As the truck owners’ lengthen truck trade and life cycles, therein lays great opportunity. Couple this with fixed-price labor offerings - and profitable work will start to come back to OEM shops, too.
It sounds like the Autozone or Checker Auto parts successful approach. You know, most people don’t realize that Paccar really understands this model from when they bought Al's Auto Supply in 1987 and then Grand Auto in 1988 - both being aftermarket retailers and wholesale distributors of auto parts and accessories in Washington, California, Idaho, Oregon, Nevada, and Alaska. They sold these in 1999 to CSK Auto, Inc and were rebranded Checker.
Selling discounted parts lines has always been a tough deal for dealers because it’s a question of selling premium and not so premium parts, along with different profit margins. Nevertheless, look for the other OEM’s to follow the less-expensive Navistar parts approach.
