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Engine Aftermarket Expected to Decline

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Aug. 6, 2013—A new analysis from Frost & Sullivan found that the engine aftermarket earned revenues of $3.62 billion in 2012, and is expected to reduce to $3.49 billion in 2019.

According to the report, the market is still suffering from the economic slowdown. Participants in this aftermarket are struggling to stay afloat due to the increased durability, lower miles driven, longer warranties of original engines and the intensifying competition from the salvage industry.

The study, Analysis of the North American Replacement Remanufactured Engine Aftermarket, covers the remanufactured gasoline engine and remanufactured diesel engine segments.

Many factors are contributing to the fall of the aftermarket engine economy including the increase in hybrid and alternative fuel vehicles. While the demand for gasoline engines will dip in the long term, remanufactured diesel engines will gain, as light pickup trucks and package-delivery trucks are shifting from gasoline to diesel engines.

The rise in fuel prices are lowering the average miles driven and decreasing the value of pickup trucks and SUVs with lower fuel economy, which is diminishing sales of remanufactured engines for these types of vehicles.

"The on-going trend of manufacturing high-quality engines is slashing the replacement rates in this market, thus threatening the existence of smaller players that are vulnerable to constricted profit margins," said Janardan Damani, automotive and transportation research analyst at Frost & Sullivan. "Smaller participants will either be forced to exit the market or be acquired by bigger companies, which will then consolidate their position."

For more information, email Jeannette Garcia at jeannette.garcia@frost.com.

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