The remanufacturing industry benefits from lower costs to customers compared to those for new replacement parts. With evolving technology and production practices, remanufacturing is expanding across new product lines and regions where core collection programs have not existed before.
Frost & Sullivan tracks demand for a wide range of remanufactured parts, including engines and transmissions, starters/alternators, engine control units, fuel pumps, drive axles and brake calipers, among others.
Improving OEM system quality remains a challenge for remanufacturers, since parts now take longer to enter the aftermarket. However, electronic components for non-automotive applications, particularly for medium and heavy-duty trucks, offers higher growth than more mature, mechanical parts for light vehicles.
Frost & Sullivan’s latest study of North American Class 6-8 truck remanufactured powertrain and safety system components, analyzes engine and transmission control modules, anti-lock brake modules and electronic unit injectors and turbo actuators.
Manufacturer-level revenues totaled approximately $285.6 million in 2014 and are forecast to grow by 5.1 percent annually over the next five to seven years. Engine control modules are the largest segment by revenue, but electronic unit injectors are growing the fastest and will generate the largest share within the next year or two.
EPA mandates on fuel economy and emissions control will increase the penetration and replacement rates for remanufactured electronics components in the future. However, technological complexity and a lack of access to OEM data make it difficult for independent suppliers to participate.
Over time, the impacts of such barriers will decline with the entry of more Class 6 to 8 vehicles with advanced electronics into the aftermarket, generating a large pool of core supplies and providing new channels for technology transfer. For now, the industry is controlled by OEM manufacturers Cummins, Detroit Diesel Reman, Caterpillar, Delphi and Bosch, among others.
Other factors driving growth in this industry include the rising cost of new trucks and a lack of knowledge and training among service professionals. Fleets and owner-operators are spending more to keep their aging trucks in service, generating more replacement opportunities for remanufactured electronic components. Since many electronic components are new to the Class 6-8 aftermarket, or have low replacement rates, misdiagnosis is still common and parts may be swapped for troubleshooting purposes.
Remanufactured electronics are generally priced 30 percent to 40 percent lower than the cost of new parts at the wholesale level. By the time a truck owner buys them, the price difference could be substantially higher.
OES accounts for about 83 percent of total revenue, with independent distribution channels capturing just 17 percent. However, Frost & Sullivan forecasts independent wholesalers in the Class 6-8 aftermarket will grow and represent more than 20 percent of manufacturer-level revenue within a few years, as more truck owners seek out lower-priced parts and service.
Remanufacturers are struggling in many products where new imported parts are available for the same price. For those looking for new growth segments that align their businesses with the needs of OEMs, Class 6-8 electronics is an attractive opportunity.
Anuj Monga is a Senior Research Analyst for Frost & Sullivan’s Automotive & Transportation Global Aftermarket research practice. He focuses on monitoring and analyzing emerging trends, technologies, and market behavior in the global automotive aftermarket. For more information on Frost & Sullivan’s Automotive & Transportation research, contact Clarissa Castaneda, Corporate Communications, at [email protected].
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