As many of you already know, some of the OEM parts manufacturers are cutting their list prices to be more competitive with the aftermarket parts manufacturers.  The problem is that in many cases, the list price is lowered while the bodyshops' cost remains the same, thereby seriously eroding the profitability on the part.

An Open Letter to the OEM Manufacturers
Counterfeit Parts and OEM Competitive Pricing Structures
Sirs,
Obviously, the aftermarket parts industry has placed a huge burden on vehicle manufacturers and collision repair shops.  The data we collected in recent months revealed that 57% of the aftermarket parts we received were rejected due to poor fit, incorrect application, or damage.  These deficiencies, along with a long list of others, are part of the many compromises collision repairers must endure when using aftermarket parts.

Speaking on behalf of the majority of the collision repairers, we would much prefer to use OEM replacement parts.  For years, when the price of an OEM part was close to that of an aftermarket substitute, we purchased the OEM part and absorbed the additional cost.  This benefited the customer, the technician, and our sanity.  It was simply less painful to pay a bit extra than to suffer the pitfalls of using aftermarket parts.

The logic of OEM’s cutting list prices to compete with the aftermarket parts industry makes sense.  The objection that I, and many of my colleagues share, is the practice of cutting the list price but not the wholesale cost.  This practice often leaves the repair shop with a meager 8% margin (or less) on many of the most common collision replacement parts.  Knowledgeable collision industry experts agree that a minimum of 25% GP is required on all parts to maintain an acceptable level of profit overall.

In spite of our preference to utilize OEM parts, this practice of stripping the gross margins only encourages our industry to tolerate the deficiencies of aftermarket parts.  We understand the economic pressures that OEM’s are experiencing at the hands of foreign parts counterfeiters.  But we can’t understand how collision repair shops should be expected to suffer the financial burden of this problem.

We propose that the OEM’s immediately restore the gross margins on all parts to a respectable level of 25% or more for wholesale purchasers, i.e. collision repair shops.  Not doing so will only result in promoting counterfeit parts usage and further diminishing OEM parts sales. We also propose that the OEM’s put their efforts toward legislation and other strategies that would guarantee the motoring public replacement parts of “like kind and quality”, delivered in an organized and timely manner that the counterfeiters obviously cannot accomplish.

Please consider our position.  For those of us in the collision repair business, if there is no profit in OEM parts, there is simply no reason for us to use them.  Sincerely,
Joe Hinkens