Rising average vehicle age – currently at 10.4 years in the United States – as well as higher prices for new SKUs entering the aftermarket will help to drive brake pad revenues up by 4.5 percent annually through 2018, totaling more than $2.3 billion in revenue.
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Demand for premium pads remains high and they continue to take share from lower-priced parts.
Pads in the “good” segment (defined as those without a shim, lowest grade of friction materials and limited warranty) represented about 12 percent of manufacturer revenues in 2012. Premature replacement at 12,000 miles is causing demand for these products to drop sharply at the installer level.
Pads in the “better” segment (defined as those including a shim plus hardware and higher grade of friction materials) represented about 40 percent of manufacturer revenues.
Pads in the “best” segment (includes a molded shim, platform-specific friction materials and limited lifetime warranty) made up 48 percent of manufacturer revenues.
The aftermarket has also done a good job of responding to changes at the OE level with products that properly replicate the fit, form and function of original parts.
Ceramic SKUs represented about 53 percent of total industry revenues in 2012, with semi-metallic parts making up 40 percent. Non-asbestos organic (NAO) pads made up 6 percent.
Traditional two-step and three-step distribution channels continue to dominate, but the OEMs are starting to make some progress in the aftermarket.
Fifty-five percent of manufacturer-level sales were to warehouse distributors and programmed distribution groups. Auto parts retailers – the fastest growing channel because of its two-step structure and low prices – represented about 28 percent of manufacturer-level revenues.
The original equipment service (OES) channel made up approximately 14 percent of revenues. However, dealerships are starting to see growth in their brakes business as more aftermarket parts and tiered pricing is made available to consumers.
Rising costs for raw materials and new product development, as well as macroeconomic factors such as weakness in the value of the U.S. dollar, will drive brake pad prices higher and generate revenue growth for manufacturers. The average price across product lines from manufacturer to distributor – adjusting for rebates and discounts – was approximately $18 per pad set in 2012.
Despite the positive outlook, manufacturers will continue to face tough competitive challenges. These include higher competition from private labels and the need to develop new copper-free brake pads to comply with “Better Brakes” legislation taking effect by 2021 in the United States.
Manufacturer brands accounted for 60 percent of brake pad sales while distributor brands, or private labels, represented 40 percent.
The latest findings are now being verified through follow-up analysis. The final research deliverable will be available in March or April.
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