Growing installation of integral design control arms impacts steering, suspension parts
Steering and suspension parts are critical vehicle components. The steering system works with the suspension system to provide directional control with a comfortable amount of steering effort, whereas the suspension system supports the vehicle, allowing the wheels to move up and down over irregularities on the road.
The steering and suspension system parts include rack-and-pinion steering, ball joints, tie rod, power steering pumps, control arms, idler and pitman arms, among others. Due to the critical nature of their function to the vehicle, owners are likely to give high priority to repairs and replacement of these parts. Furthermore, increasing vehicles in operation, age of vehicles on the road, and parts proliferation caused by augmented segmentation of OE vehicle platforms that need specific unique parts are some factors that support market growth for the steering and suspension system aftermarket.
Frost & Sullivan’s research on steering and suspension parts in North America indicates that the North American market has been shrinking in terms of unit shipment due to consistent improvement in durability of OE and aftermarket parts. Also, declining popularity of some steering and suspension parts are pulling down unit shipment growth. The revenue growth for this segment is likely to increase supported by a rise in price of raw materials such as steel and aluminum.
Control arms are the only category that is forecast to grow both in units and revenues. Increasing popularity of higher priced aluminum control arms designed to reduce vehicle’s weight will push the overall market price up. According to a Frost & Sullivan report on steering and suspension, the market will reach $440.2 million in 2016 from the market earned revenues of $412.5 million in 2012.
Original equipment manufacturers are improving the product quality of steering and suspension parts to meet the current needs of the customer, which in turn is making participants in the marketplace to operate under extremely competitive pressure. The consistent rise in the price of raw materials, such as steel and aluminum, is the largest factor driving up prices, despite stiff competition from lower priced offshore parts flooding the market. Also, increased technological complexity of newer steering and suspension parts from the OEMs makes it difficult for many small manufacturers and remanufacturers to find qualified technicians and keep pace with changing product requirements. Additionally, a greater number of imported vehicles in North America is challenging the market for steering and suspension parts.
Drivers contributing to the unit shipment and revenue growth of steering and suspension parts
Frost & Sullivan research on steering and suspension aftermarket in North America also shows various drivers that are impacting the unit shipment and revenue growth of steering and suspension parts.
- Rising costs for raw materials due to volatile commodity prices, such as steel and aluminum, are the largest factor driving up prices. High steel prices also drive core prices up, resulting in greater core charges for customers and higher scrap metal value.
- The increase in vehicles in operation (VIO), average annual miles driven and aging vehicle population will support the demand for steering and suspension parts. As the VIO parc in North America keeps growing, the demand for replacement for steering and suspension parts will rise. Aging vehicles also will boost aftermarket demand by increasing the total number of replacements per vehicle.
Industry challenges and restraints
The major issue for the steering and suspension aftermarket is consistent improvement in quality caused by market participants building durable products with improved technologies, which are reducing the replacement opportunities, thus lowering growth rates.
Consolidation among the distribution channel has occurred due to the over-capacity at the retail level. The consolidation in distribution channels enhances buyer bargaining power, which makes manufacturers lower their prices at the expense of poorer margins.
The imports from Asian countries also are posing a strong threat to the domestic players because they are competitively priced, and at times lower than domestic manufacturing costs. Also, the start-up capital needed to open a rack and pinion or power steering pump rebuilding facility is relatively low. Thus, market participants have little protection against market entry by small regional remanufacturers.
Janardan Damani is a Research Analyst within Frost & Sullivan’s Automotive & Transportation Aftermarket research group. Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants. For more information on Frost & Sullivan’s Automotive & Transportation Aftermarket research or any questions on this article, you can contact Jeannette Garcia, Corporate Communications at [email protected] or 210.477.8427.
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