The Motor and Equipment Manufacturing Association (MEMA), founded in 1904, represented producers in the automotive manufacturing space. As the industry evolved, four different divisions were created under MEMA: Original Equipment Suppliers Association (OESA), Motor Equipment Remanufacturing Association (MERA), Automotive Aftermarket Suppliers Association (AASA), and the Heavy-Duty Suppliers Association (HDMA). “MEMA is the only association that exclusively represents aftermarket suppliers and focusses on advancing our members business interests through advocacy, market research, peer councils, trade shows and conference,” Ben Brucato, Senior Director of Membership and Sponsorship, AASA, told T Murrali of AutoParts Asia, in an exclusive interview. The excerpts: –
Q: What is the specific role of AASA?
A: AASA represents members who are manufacturers, and of the aftermarket. Our mission statement is to advance our members’ business interests, and we do that through different channels. Government advocacy plays a very important role through our Washington DC office. Working with NAFTA, and how it affects our members, is a big initiative right now. We have worked closely with the Boston Consulting Group (BCG), and filed our report to the Border Adjustment Tax on regulatory issues.
We provide our members with exclusive industry analysis and research data so that all of them have access to the market size and trends of the aftermarket, the replacement rates and status of the industry. We also work with our partner companies – IHS, SAP and a few others, and have several events like AAPEX, that AASA co-owns, and different conferences throughout the year. We have partnerships with Messe Frankfurt and other shows. We also have councils under AASA or smaller working groups that members can join to work on initiatives and challenges on any area. For example, we have the Overseas Automotive Council that promotes exports from the North American manufacturers.
Q: Do you also associate with similar forums in different countries?
A: AASA has three strategic initiatives. One is our international and global presence – our members span the entire globe. We have two councils, Overseas Automotive Council (OAC) to help North American manufacturers find new countries and territories to export their products, and we do Trade Missions; two years ago, we had been to Peru and last year we went to South Africa. We work with the Department of Commerce to match key services for members there. We also have the China Aftermarket Forum which helps our companies having operations there to work with the Chinese aftermarket industry. It’s a very vast global reach through AASA that helps members find new markets. We offer a report called the World Motor Vehicle Market Report that provides information on vehicles manufactured for many of the different countries so that members can better understand the markets there.
Q: When you take delegations to various countries, do you organise buyer-seller meets there?
A: Yes, we do. We work with the US commercial services in the embassies in different countries. They have certified trade missions that offer Gold-Key services. For example, when we went to South Africa we had a list of distributors there who we interviewed to find out what type of products they wanted and matched them with our manufacturers here. We then brought these manufacturers to the South African facilities so that they could discuss one-on-one with them. The success of the trade mission is reflected in the orders our members managed to get.
Q: What has been the value of trade with the countries you visited?
A: I can’t give you exact figures, but one sale covered the entire expense of the trip. The RoI was very good. Our members also get orders from smaller countries where the order size or value is less.
Q: What does AASA do in countries that don’t have trade agreements with the US?
A: There is ease in doing business with countries with whom we have trade agreements. In countries with no agreement but where there is a strong US commercial service presence we can identify opportunities and markets for our members. The other thing we do is interact with the OAC which has 315 members that include manufacturers, sales representatives, importers and international buyers. When a supplier wants to enter a specific market in a foreign country he makes use of a sales rep or an export management company. Some of the companies have their own brand but they may buy from the supplier, re-box it with their brand and sell in the country. The nice thing about export management companies is that they assume all the risks of the product.
Q: What are the challenges that your members face in the aftermarket because of the disruptive technologies?
A: Yes, there are disruptors in the aftermarket. Vehicle electrification is a big disruptor as is changing product categories. Companies need to comprehend what products they can change. We are helping our members to understand the shifts that are happening in the industry and the likely changes in the next five to 15 years. Looking at predictive analytics is a very big aspect; companies are already doing that on the heavy-duty side – they can predict the failure of the product. This is a huge change for the industry as it would completely affect inventories with just-in-time coming into parts storage. It’s a big disruptor as excessive inventory is a major problem for manufacturers today. Predictive analytics is going to play a big part in changing business norms.
Another disruptor is the access to vehicle data, which is a big issue in the aftermarket. MEMA and AASA are very active on government advocacy in partnering with automotive vehicle manufacturers to say that consumers have the right to decide where they can repair their vehicles; those repair facilities would need to have access to data. This is something we are very proactive on, working and filing on behalf of the aftermarket suppliers. We have close relationships with the European Association’s CLEPA and FIGIEFA as also with G-8 (eight largest associations of different countries) and other associations.
Q: After your advocacy are the OEMs in the US willing to share data with the aftermarket?
A: There is a ‘Right to Repair’ Act that did allow data to be shared with the aftermarket and the industry as a whole. Then it did not include Telematics Data and ADAS – advanced driver assistance system; it was more on specs, labour time, wiring diagrams and things like that. We are telling the auto makers not to cut the aftermarket out. One of the Toyota executives spoke at our conference last year and said the value of the Toyota vehicle is its resale value and the ability that the car is going to last a long time. The aftermarket does play a vital role in the value of the vehicle. But the biggest thing is educating the government officials and politicians; most political figures do not even understand the terminology of the aftermarket. We have to make them understand that if we do not do something about allowing this data to be accessed by the consumer, it could change the industry as we know it. People should be able to go to any shop they want to get their vehicle repaired.
The other challenge is of vehicles becoming more and more complex. OEMs will say that the shops (service centres) do not know how to work on these vehicles. Organisations like ASA that represent service centres and service providers develop training programmes to help shops get relevant certification to work with ADAS and autonomous vehicles. We are working on these with partnerships.
Q: Is there a way for AASA to educate their members on the technological advancements like electronics in the automotive sector, and their use in new vehicles?
A: We are helping our members understand that there are new players and technology providers in this industry. We are trying to train and teach traditional producers that these are the new suppliers of software technology with which all manufacturers can partner and work with to take the industry forward. We are also reaching out to these suppliers to join our association to work with, and partner with the car part makers. We want to ensure they are proactive – expanding their lines, focusing on new products and doing away with obsolete components or technologies.
Q: Disruptive technologies increase the life of spare parts with more complexities. There is no repair, only replacing. What are the issues related to this?
A: This is not a new phenomenon. If you look at the fuel pump industry, 15 years ago it was a simple mechanical, in-line product that cost around USD 30. In early 2000, overnight, it became a USD300 product that lasted twice as long. We are seeing the same shift with disruptive technologies and electrification. Opportunities arise, not in replacing parts but in updating software for servicing and upkeep of the vehicle.
Another point to be considered is that whenever there is a shift in technology, there is also a window of high product failure. When GM switched from carburettors to fuel injectors the failure rate was high; this, ironically, helped the replacement market. The other thing we are seeing is that with fleets growing and trucks lasting longer there is a potential of increased mileage in vehicles, which in turn creates opportunities for replacement parts.
Q: Will the increasing shared mobility reduce the number of vehicles on the road and demand for parts. Will this impact the aftermarket business?
A: We see the share of the aftermarket increasing with autonomous vehicles and ride-sharing becoming the norm. Fleets are likely to increase tremendously as people may prefer doing their personal or official work in the car to driving the vehicle. Miles driven will increase as more and more people use driverless cars. Less people will own cars but more of them will use autonomous or contracted means of transport. With electric vehicles you are still going to have ride control, shocks, struts, brakes and other parts; sales of these items will increase.
Q: With the rise in e-mobility the need for parts and lubes will be less. Where do you see opportunities for the aftermarket?
A: It will be ignorance to think that some companies would be in business in 10 years. Parts are going to become obsolete and companies will have to look for new products and adopt the latest technologies to stay relevant. It will be the survival of the fittest. It’s a major issue and companies will have to diversify to continue in business. We are confident they will.
Q: Regarding advocacy, you interact regularly with the government officials and Legislators. Can you name some of the government policies that support the aftermarket?
A: The Border Adjustment Tax (BAT) was mainly on products that were coming (mostly from Mexico) into the US. There was a higher tax on components. Most of the manufacturers have plants there. AASA and MEMA emphatically informed the government that if BAT was put into place it would cost billions of dollars to our suppliers as many of them have factories in Mexico and import raw material and products from their own facilities. Though BAT was a good idea in theory to promote manufacturing in the US, the long-term effects on companies would have been devastating. AASA and MEMA together with BCG put together a lengthy, detailed report of exactly how much it would cost North American supplier companies if BAT was levied. We met with the Trump administration several times this year and they decided not to go ahead with it. We will be meeting them and work with Mexico on NAFTA; to bring awareness to the government officials how throwing out NAFTA completely would affect our members. We feel Mexico could then start doing a lot of business with China which would be detrimental to us.
Q: How about leading a delegation to India to look at the suppliers there?
A: Many of our members do business in India; we have several international members there. It has been a good growth market for us. We would be open to sending trade missions there. One of the things we find very beneficial is to work with local associations and we would like to do that in India also.
Q: Are you in touch with Indian companies?
A: We work with the Auto Component Manufacturers Association of India (ACMA). We have a relationship with them which we will continue and hopefully will grow even more to see how we can send a group to explore opportunities there.
Q: What’s your plan for the next five years?
A: One of the things we focus on through our councils is to be relevant to our members by seeing the potential opportunities and possible challenges over the next five years. We create councils to analyse this; the one we have formed recently is the Intellectual Property Council (IPC) which will go into counterfeit products – a huge issue and concern in this industry. Many industries like fashion and pharmaceuticals have been tackling this problem for long.
We have become proactive in educating our members on how to engage with counterfeiting and the agencies they could work with to come up with solutions. We have a whole team at AAPEX that walks the show looking for counterfeit products. Anytime we feel there is a disruptor in the industry, an opportunity or a challenge, we create a council, a conference or a summit around it to help our members.
Another council we have started is The Millennials Council; millennials have become the largest buying group in North America, and globally. We created a council called MIX (Modern Industry Expertise). The purpose of this council is interesting because, instead of executives mentoring the millennials we are doing it in reverse; the millennials mentor the executives to work with social media and develop a marketing plan.
There is great expertise available with some of the millennials that our member companies have. They put together different topics, various issues in a white paper, and report back to the executives. This has been very successful for us. We are looking at other councils down the line, but these are the two big ones we are working on right now.