Car Aftermarket in High Gear
The U.S. economy may be stuck in second, but the industry catering to the dreams of gear heads is roaring ahead in supercharged splendor.
Retail sales for the so-called automotive aftermarket rose 7.7% to a record $28.9 billion last year -- moving more than twice as fast as the general economy -- according to a report released today by the Specialty Equipment Market Assn.
Most of the growth came in parts and accessories for sport compact cars, but companies that make $10 vinyl-flame decals to $3,000 turbochargers, and hundreds of go-fast, look-good parts in between, cashed in.
“This is the biggest explosion in the industry’s history,” said Brian Horowitz, founder of American Products Co. in Corona.
The specialty equipment association, known as SEMA, represents 5,300 aftermarket companies, about a quarter of which are clustered in car-crazed Southern California. SEMA’s annual sport compact parts show takes place this weekend at the Los Angeles Convention Center.
Horowitz will be displaying his wares there. He started American Products in his garage five years ago. Now he imports, manufactures and distributes car and truck accessories and has 240 employees. His sales last year were $100 million, up from $65 million in 2002.
Performance like that is gratifying to SEMA officials, who not long ago fretted that their mostly middle-aged male customer base was driving into its sunset years with no core of young enthusiasts to fill the void.
Helping to drive the market are younger buyers like Dalat Truong, 25, of Anaheim. The Fast ‘n Furious crowd has created a hot new segment for aftermarket specialists for products ranging from custom seat covers to nitrous oxide injection systems designed to dramatically boost the horsepower of small car engines.
Truong, a physical therapy aide, started by overhauling a used 1993 Honda Civic when he was 19.
He spent about $8,000 to replace the interior, repainted the car in a custom crystal blue metallic color, added custom wheels and tires, and put in a custom-built, 172-horsepower engine, more than double the power of the original.
He outgrew the Civic last year and purchased a new 2003 Toyota Tacoma pickup for $23,500. Since then he has invested about $2,000 on accessories: He had the windows tinted and added a performance exhaust system, custom wheels and chrome running boards.
He ticked off $4,000 worth of equipment, including a supercharger, that he plans to purchase.
Why spend the money?
“Because I want mine to look better and go faster than the other Tacomas that I see,” Truong said.
A few years ago, “we worried about where customers would come from, but suddenly the young people were there,” said Jim Spoonhower, vice president of market research for SEMA, whose acronym has become part of the enthusiast’s language. A car that has been rebuilt with high-performance engine and suspension parts complemented by fancy paint work, custom wheels, aerodynamic body panels and expensive entertainment systems has been “SEMA’d.”
When Spoonhower began tracking the sport compact segment in 1997, he pegged it as a $295-million piece of the aftermarket industry.
For 2003, it was a $3.2-billion segment, accounting for just over 11% of total industry sales, he said.
Overall, SEMA members’ sales growth rate last year was their best since 1999. Older enthusiasts, often with larger disposable incomes, are helping drive other segments, notably in customized wheels.
The popularity of SUVs reinvigorated the custom wheel market because the big vehicles can accept larger -- and more pricey -- wheels than other vehicles.
“The SUV customizing craze has been fueled by the vehicles’ popularity with athletes, movie stars and the hip-hop crowd and their drive to be different,” said Steve Kelley, vice president of sales and marketing at American Racing Equipment Inc. in Rancho Dominguez.
American Racing’s sales have been growing 5% to 7% in recent years, mainly from sales in the truck and sport compact markets.
“Kids are spending a lot, but it’s not just a kid market,” he said. “Older enthusiasts are better able to afford things like a $9,000 custom wheel and tire package and will put as much stuff on their cars as they can,” he said.
That’s been the case with Preston Schuster. The 53-year-old Fountain Valley tire shop manager recently purchased a 2003 Mitsubishi Lancer Evolution, a $29,000 high-performance sport compact car, and then spent an additional $50,000 modifying it.
In addition to a new interior and custom wheels and tires, he’s boosted the Mitsubishi’s 271-horsepower engine to about 400 horsepower and installed an exotic sound and entertainment system with three DVD screens.
“These cars are today’s hot rods,” he said.
Schuster said he preferred to spend his money on cars because “I like to have a car that people like to look at, and this one definitely is a looker.”
That attitude is what keeps the aftermarket industry growing even in a weak economy, said Ryan Sweeney, sales manager at American Products.
“Our industry doesn’t sell anything anyone really needs,” he said, “but we sell things people really want. And enthusiasts always will find money to spend on their passion.”
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Revving up sales
The $28.9-billion automotive aftermarket is broken into three broad categories: appearance, handling and engine performance. Sales in 2002 and 2003 for those segments and some key divisions, in billions:
*--* Category 2002 2003 Appearance: $15.4 $16.7 Body accessories $7.3 $8.3 Audio and entertainment components $3.4 $3.8 Wash and wax products NA $0.2 Handling: $6.5 $7.2 Performance tires $3.3 $3.5 Custom wheels $3.1 $3.3 Suspension and steering NA $0.5 Performance: $4.9 $5.0 Engine $1.5 $1.5 Electrical $1.4 $1.5 Total $26.8 $28.9
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NA: Not available
Source: Specialty Equipment Market Assn.
