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Replacement Brake Quality Being Defined - But Will it Improve Distributor Margins? Brian Taylor The launching of EC90 should certainly produce a more level playing field as far as aftermarket quality is concerned, and motorists should be more reassured about the product they buy. But in consumer perception terms it is arguable that brake quality is really only a trade issue - created by the downward pressure on prices caused by a flooded market, which includes a large proportion of lower quality units. In truth, most motorists probably don’t realise there is a problem. And in an oversubscribed market it is unlikely that standardising the product quality will lessen the pressures on distributor margins unless they can find a way of retaining some of the good profitability at installer level. In truth, the brake market is a fairly complex part of the automotive aftermarket in that it really consists of several parallel markets that increasingly overlap. Downstream there are different routes for distribution and installation of CV and car brake components – and within the two channels themselves. And the upstream sourcing of system components is fragmented into suppliers of friction material, mechanical parts and electronics. Brake pads and shoes are consumable items that need to be replaced fairly regularly, despite their extended life over recent years, and they represent a considerable market. Other brake part also need replacing – albeit less frequently. But they tend to be the more expensive mechanical and electronic parts, and in total the European replacement brake market is currently estimated by FT Management at around 4.5bn Euros made up as follows Pads 1510m Euros Shoes 550m Euros Hydraulics 1370m Euros Discs & drums 750m Euros Cables 275m Euros Total 4455m Euros FT Management – The Car Aftermarket in Europe; 2nd Edition by Neil Mullineux European players The major European friction players are BBA, Federal Mogul and Allied Signal. Together they control around 60% of the friction market when you include their own brands and the units they make for other branders. The mechanical parts sector is dominated by Bosch, Continental Teves and TRW Automotive (LucasVarity). Automotive Products (Lockheed) is a smaller player. Bosch dominates the electronics sector supplying 65% of all ABS systems. In fact this understates its true influence because the company also makes components for Continental Teves. TRW Automotive is a smaller player. The leading global brake system manufacturers as listed by Who Owns Who in Global Automotive Components published by FT Management are shown below. There are many other smaller players and of course lots of brands owned or supplied by these manufacturers.
The Moves to Becoming Brake Systems Suppliers The split between friction manufacturers and those manufacturing mechanical parts is not a global trait. In Japan for example the companies making the linings are often the same as those making the mechanical parts for braking systems. But in Europe, different companies have traditionally manufactured the two elements of the system. And more recently that third category has emerged specialising in electronic controls. But despite an o.e. braking system being a fairly imprecise concept (being composed of many pieces fitted at different stages of a vehicle’s assembly), there has been some movement by ownership and alliance for companies across the categories to become brake system suppliers to vehicle assemblers. For example Robert Bosch purchased the mechanical braking interests of Allied Signal. Tyre manufacturer Continental’s purchase of Teves pushes the system supplier concept to even broader horizons. In aftermarket terms the trend towards brake brands offering all the components necessary for replacement braking components has become more logical as the vehicles have become more complex and a DIY/installer ‘’bits and pieces’ approach less viable, whilst the need for critical mass sales has become more acute. For example, BBA’s Mintex (previously only a friction supplier) is now adding hoses, callipers, wheel-cylinders, fluids, tubing, test equipment and master tools. Most of the extra items are of course being out-sourced and packaged as a Mintex brand. This outsourcing approach has also enabled other aftermarket brands not previously involved in the brake market to enter the fray. Hella is a good example. However, many amongst the big players in the brake replacement market offer at least two brands. For example Federal Mogul offer Ferodo and Target in the UK and they have other brands within their global portfolio. And some suppliers are moving to introducing a third price beater to compete with the large number of cheap imports as well as gain market share. The comparisons with the replacement tyre market are becoming plentiful. The recent announcement by Automotive Products about the AP logo becoming more prominent on a global basis presents some interesting opportunities. When you think about it the company has some great aftermarket brands in their stable – Lockheed, Borg & Beck and AP. As the company more closely integrates its brake and clutch offers the way these brands can be used could be quite different to the way we see them now. The new Regulation EC90 should ease the pressure of very cheap and low quality brands. Enough has been said about this over recent months so suffice to say that by March 2001 products will need to comply with critical criteria regarding fit and suitability for purpose and perform to known vehicle assembler standards within set parameters. This means brake manufacturers will have to submit products to rigorous testing including simulated braking in different conditions as a method of testing wear, performance and durability. Other tests will be required for checking dimensional, metallurgical and comparative criteria and packaging will flag the standard as well as the product. Whether they recognise it or not, in truth, the advantage to the motorists as far as ensuring quality is concerned will be significant and tamper evident packaging should help negate any criminal activities. In fact the packaging requirements may present more problems to manufacturers and traders than the physical standards of the units. And DIY sales could be difficult. The old practice of breaking into a pack to check dimensions doesn’t quite fit in with tamper proof packs. Certainly Trading Standards Officers will be enforcing the legislation vigilantly. And the question of liability if the wrong brakes are provided for DIY fitment is still a worry. But the race for market share could still make a third price beating brand an attractive marketing tool. The general view is that the replacement brake market is likely to remain an oversubscribed market with both the trade and motorists buying on price. Safety is assumed by consumers as not being compromised by price. The units would not be available for sale if they were dangerous – would they? Trust and convenience can negate the price factor. Particularly trust. But this can only be truly built after you’ve attracted, serviced and satisfied the customer in the first place. These aspects, combined with the global nature of trading in this sector and changing currency rates will ensure that price remains a consumer and trade issue. A Predictable ‘Distress Purchase’ Like many hidden components, brake replacement tends to be MOT test-driven or at least necessity driven. In many ways it is a distress purchase market. Indeed, recent surveys have shown that about 65% of all replacement pads are the result of necessity rather than planned maintenance. But the following survey of 774 drivers shows that brake components are the fourth most common component replaced during the preceding 12 months. So it’s an important market with ramifications for traffic building as well as revenue. Depending upon your business strategies and needs, it may be more profitable in total business terms to trade off brake profit for increased traffic flow. More pressure on the market price of course. Car parts replaced on own car in the preceding 12 months
Source; BMRB/Mintel But some good news is that there are clear signs of impending brake system component failure - in both vehicle handling and component condition. So some of the distress nature at purchase points can be negated if a regular free inspection regime is put in place. Tyre and wheel condition can indicate much. Simply taking the wheels off and using your eyes can give other clues. Measuring brake disc thickness is a sensible service point and one not complicated to carry out. AP also reports problems with brake fluid condition. Their research revealed a staggering 29% of cars tested as having brake fluid with a boiling point of only 125 degrees C. This compares with safe operating levels of around 240 degrees C. The cause is water ingress and once again the test is very easy to carry out. The following list of common problems and likely fault areas paints the picture at installer level.
Some of the more sophisticated braking systems on modern cars compensate for some of these conditions and provide visible and/or audible service prompts or warnings. AP lists a number of points to help ensure brakes are kept in optimum order.
Pad life clearly varies with driving conditions and styles. Brake balance pressure and temperature are just a few elements that come to bear. It means that replacement mileage can vary from vehicle to vehicle and axle to axle. But typically a set of front pads will last 40,000kms today. The new material replacing asbestos has quickly been developed to last longer than the old asbestos units – despite initial excessive disc wear caused by the first generation of asbestos replacement friction material that had a high metal content and was harsh on discs. Brake disc units can now be expected to last around 80,000kms. What drums there are fitted to cars tend to last longer – possibly 120,000kms. More about drums later. Monitoring Brake Efficiency and Maximising Lining Life CV braking systems are of course generally more expensive than those fitted to cars. With this in mind Ferodo and Duron launched a brake-monitoring device for CV operators during 1998. Called Brake Alert it enables CV operators to assess quickly and immediately the condition of drum brake linings – particularly those on trailers. In fact it provides information that predicts lining replacement up to two weeks before it is needed. This means that the system can help maximise brake-lining life as well as predict those units requiring early replacement. A control unit capable of monitoring up to six brake units prompts replacement when a test button is pressed. It is powered by its own 9 volt battery which itself has an inbuilt condition indicator. But whether it’s cars or CVs, simple best practice of selling in pairs and/or axle sets can prevent many problems occurring. The move towards selling discs in pairs is gaining pace in the UK, which is still behind many other European countries in this respect. And fitting kits is another underused product compared to countries like Germany where on average AP Lockheed sell 1 kit to every 2 sets of pads. In the UK it’s more like 1 kit to every 10 sets of pads. Who Carries Out the Work? According to Mintel, across Europe franchised dealers carry out around 50% of all brake replacement jobs. In Germany it is as high as 64% but in the UK, with its comprehensive aftermarket, it is more like 27%. Most of the UK replacement brake work is carried out by the 15,000 or so independent garages, with fast-fits as a growing player accounting for 10% of the total aftermarket. In fact according to Datamonitor, independent garages controlled 46% of the UK brakes market in 1997 and they put the fast-fit proportion as high as 16% and growing. DIY brake replacement is in decline. Installer Programmes Most of the major brake aftermarket suppliers have been busy developing ‘distance retailing’ programmes for garages and fast-fits - to help focus their assistance and marketing efforts on national networks of outlets of known quality standards. The latest Castrol Trend Tracker lists the following details of such brake programmes. Outlet brand Programme operator number of outlets Brakes Safety Centres Automotive Products 1370 Brembo Brake Centres CDS 499 Clutch & Brake Express Clutch Express Limited 56 Ferodo Appointed Brake & Clutch Federal Mogul Aftermarket 800 Ferodo Brake Specialists Federal Mogul Aftermarket 400 Lucas Brakecheck Centres TRW Automotive 171 Quick factor Brake & Clutch EBC 38 All of the programmes require some level of upfront costs and/or commitment to purchases/standards/training. They all require some level of identity and marketing. So do they work? Clearly developing a local identity as a brake specialist with the right environment and retail atmosphere - which includes technical knowledge, equipment combined with sales skills - is going to make it easier to raise the profile of the benefits to be gained by considering brake safety and quality. It will help establish a level of consumer confidence before the service experience. Although it will probably still require a price beater to lure the customer into the net in the first place.
He see the main benefit as assuring customers - by using a well known and very visible brand - that the components are of top quality. Using top quality helps him operate a more efficient business (less fit problems and comebacks for example), and the specified tools list along with the training have helped move his business to a much higher plain. Rob Webb of Langarth Garage in Cornwall is on the Ferodo Brake Specialist programme. He too places strong emphasis on the technical knowledge support aspects. He says, "New friction materials are being developed all the time so it is all the more important to have excellent support from your component manufacturer". He also points out the dangers of DIYers with insufficient knowledge making damaging changes to a vehicle’s braking system.
"Turnover on brakes has at least doubled over two years. The programme is excellent, especially the marketing package. The quality of the signage just draws the people in. I would recommend any garage who wants to increase their brakes business to seriously look at becoming a Brake Safety Centre". Technical Developments and Market Trends As with most automotive products, trends in braking technology at o.e. level dictate demand in the replacement brake market. An interesting development at original equipment level is the apparent rebirth of drum brakes in a new hi-tech format. Disc brakes have not proven to be the most practical option for hand brakes and cars are being produced with drum and disc brakes on rear wheels. Added cost and weight. Electronics and other developments like ABS have resulted in a new age drum brake providing vehicle assemblers with reduced costs and weight. AP is thought to be at the forefront of these developments. 4x4 transmission brakes is another drum brake application. Over time, braking by wire systems will gradually replace many mechanical parts and friction materials become more efficient. The result will be a further decline in volume that will not be counteracted by increased vehicles in the parc. It will also result in replacing brake components becoming more complex and requiring higher skills. Another good reason for focussing effort on outlets of known quality. But an increase in the value of a brake job per car reflecting higher tech components and skills is not guaranteed - due to the competitive nature of the industry and owners of older cars not being capable of funding expensive maintenance. And installer growth will likely have to come from conquest sales from the DIY sector or other lower tech outlets. And growing the market by increasing replacement rates by presenting motorists with good reasons to change before their vehicle handling is compromised due to hidden components entering the safety critical twilight zone. And although installer profitability is high, from a brake distributor’s viewpoint margins are likely to remain thin, and costs in the distribution channels as a whole will be under more pressure. The UK market for replacement car brake parts in 1998 is estimated by Mintel at around £314m at retail, which includes VAT. FT Management makes it slightly higher at £337m and on the surface Datamonitor appears even more bullish with their market values. But LCVs are included in the latter research and there could be other variances in the samples. The value of the market has increased but when you apply a factor for inflation the increase is not so great. The predicted rates of apparent growth between the Mintel and Datamonitor research are similar.
UK brake component market
Source; Mintel/Datamonitor Based on an annual trade spend of £225m per annum in 1997, the Automotive Research Unit estimated the annual spend on replacement braking parts as £8.65 per car. It came in fourth position behind chemicals/bodyparts, tyres and exhausts. Estimated annual spend on replacement parts per car £s at trade prices
Source; Automotive Research Unit So the introduction of EC90 will result in a more even playing field. But as we have a market that offers the fourth highest annual aftermarket spend per car, plus the fourth most frequent purchase made by drivers in the UK, it will continue to be one that is flooded with product. This will results in the distributor margin being thin. They will face the on going pressures to increase stock in line with part number proliferation. Installer profitability is good, but they will continue to demand ever-quicker delivery times to stop their profitability going down the stock-in-hand drain. They will also increasingly demand more technical support. As higher installer facility costs increase due to more sophisticated vehicles reaching aftermarket installers, volume per site and specialism will become the route to success. It means more buying power to these bigger installer outlets or chains and the pressure on distributor price will continue. So unless brake parts manufacturers and distributors are involved in brake installer programmes of one kind or another - whether as a brake programme or with brakes as part of full service programme - they will find themselves at best marginalised; but more likely completely out of the brake business. However, the programmes will really have to add value to the distribution/installer channel, which will clearly have to become more integrated than in the past. Better marketing and selling practices that result in conquest sales and increased replacement rates is the only profitable growth strategy available. (10/99) |
Micheldever
Tyre & Auto Services signed up for the Lucas Brakecheck Centres
programme and reported an immediate impact on the group's turnover.
They felt the Lucas brand helped build the trust between the outlet
and the customer. Target Auto Parts is another fast-fit company on
the Lucas programme, this time based in Guernsey. David Whalley estimates
he has tripled his brake sales since taking the programme on-board
around 2 years ago and he expects to grow it further when he shortly
moves to his new premises. This will be an eleven bay operation with
two of them dedicated to Lucas Brakecheck.
Scunthorpe’s
Ashby Auto Care has been in business for 35 years and became an AP
Brake Safety Centre in 1997. John Hulley of Ashby said,
