Parts, service and accessories boost Ford, FCA, GM revenue
General Motors, Ford and Fiat Chrysler are banking on growth from highly profitable accessories like performance wheels, chrome trim and bedliners to drive up the bottom line.
While none of the automakers would release figures on how much money they make from accessories and parts, they say it’s significant and continues to grow.
For its popular F-150, Ford Motor Co. offers 24 pages of accessories online for the 2017 model alone — everything from Realtree camo seat covers and wireless smartphone chargers to tonneau covers and chrome door handles. Fiat Chrysler Automobiles’ Jeep brand has 40 pages of parts and accessories in its catalog.
Dealers are installing displays to entice consumers with extras before they sign the final paperwork. George Matick Chevrolet in Redford Township, for example, has several parts and accessories wall displays in its showroom. Richard Grant, parts and accessories consultant at the dealership, said the hottest sellers are remote-start kits, step bars and tonneau covers for trucks.
Some automakers make it easier to say “yes” to those extras by giving customers the ability to finance those step bars into monthly new-car payments. Dealerships increase their profits not only by selling accessories, but by installing those parts for an additional price.
Ford is even introducing parts for competing makes at its dealerships.
GM President Dan Ammann has said its aftersales business is a “huge profit-driver,” bringing in billions of dollars of revenue. In fall 2015, Ammann told investors that the company’s aftersales business has profit margins of 30 percent to 40 percent: “We’ve been growing it through initiatives around accessories, we’ve been growing it through initiatives around increased service retention of dealerships.”
In January, GM told investors it expects profitability for its adjacent businesses — including aftersales parts, OnStar and finance arm GM Financial — will grow by about $2 billion from 2015 to 2019. The company would not break out how much of the growth is from parts vs. other businesses.
The U.S. market for replacement auto parts and service is growing and in 2017 will be a $277 billion industry, estimates the Auto Care Association, a trade group that represents manufacturers, distributors, parts stores and repair shops. The association predicts a compounded annual growth rate of 3.7 percent from 2015 to 2019.
More than 264 million light vehicles were registered in the U.S. last year — a record level — and the average age of a car on the road today is 11.6 years, according to researcher IHS Markit. “The size of the vehicles in operation is growing,” said Mark Seng, director of the global automotive aftermarket practice at forecaster.
And that means more business for parts and service companies, including automakers, Seng said.
Ford wants to grow its parts business 30 percent to 40 percent over the next five years. The automaker said its parts and service business has been growing slightly ahead of the industry.
Frederiek Toney, president of Global Ford Customer Service Division, said Ford only gets 20 percent to 30 percent of the parts and service business of all of the Ford vehicles on the road in markets such as the U.S. and Europe.
Ford announced in January a new Omnicraft parts brand that allows Ford and Lincoln dealers to sell parts and service vehicles made by other automakers — items like air filters for a Chevrolet.
“We are fighting to retain customers longer as well as attract customers back to us,” Toney said. “In a world where the independent repair shops want one-stop shopping, we need to expand our offerings to all makes so that we can have a competitive offering that actually allows them and makes it compelling to do business with us. This is all part of a much bigger strategy to make us a much bigger player in the marketplace.”
Fiat Chrysler’s Mopar aftermarket parts and service business has grown for seven straight years in the U.S., and its U.S. parts market share has grown more than 10 percentage points from 2010 to 2016, the company said.
Mopar’s U.S. accessory business has grown even faster, up 180 percent-plus in the past seven years and by double-digit percentages last year.
Mopar — the name is a contraction of the words “motor” and “parts” — was trademarked in 1937 as a line of antifreeze products, and today is estimated as a multi-billion-dollar endeavor with about 70 million vehicles on the road globally. Mopar is best known in North America for Jeep off-road products and Dodge performance parts, though it serves about 150 markets globally.
Pietro Gorlier, head of Mopar, attributed its success to selling more cars and expanding its reach — from more aftermarket parts to increasing service centers and products.
“There is still a strong interest of customers for driving a car that is unique,” he said. “Our role is to put new accessories in the markets that are fitting all those different needs.”
Mopar Custom Shops, or workshops at some plants where it adds vehicle personalization products before customer delivery, also are growing. Fiat Chrysler now has 12 in North America and last year it upfitted more than 270,000 vehicles.
Fiat Chrysler is building two new Mopar Parts Distribution Centers in the U.S., including one in Romulus. Mopar, too, has added more than 1,000 Express Lane service centers in the U.S. since 2008.
GM’s revenue for its overall parts business, including its storied ACDelco brand for GM and non-GM vehicles, grew 3.7 percent last year in the U.S. and has been running the same trajectory since 2012, said Tim Turvey, global vice president of GM Customer Care and Aftersales division. An estimated 65 million to 66 million GM-branded vehicles are on the road in the U.S., aiding growth; Turvey said GM’s dealer service retention level has grown almost 19 percentage points since 2010.
GM also is seeing huge growth in U.S. accessories sales, with revenue up 25 percent last year vs. 2015, with global results not far behind, Turvey said.
“This isn’t just a one-year phenomenon,” Turvey said, adding that GM about five years ago shifted more focus to vehicle personalization and accessories available when the vehicle launches.
Jim Campbell, Chevrolet’s U.S. vice president of performance vehicles and motorsports, said Chevrolet sees strong accessory sales for its trucks, followed by crossovers and cars. On the 2017 Chevrolet Silverado pickup, for example, buyers could buy a bed extender for $249, LED bed lighting for $135 or a bedliner for $305. Turvey said there is “huge growth” for GM in all-weather rubber mats.
IHS’ Seng says automakers can boost their profits by maintaining relationships with car owners as their vehicle ages — something Chevrolet says it does.
“We communicate with (customers) many, many times during their ownership cycle and when we’re doing that, we know whether they bought our accessories or not,” Campbell said. “If they didn’t, we have a chance through our communications to recommend accessories that are most popular for the vehicle.”
Michael Wayland contributed.