← Business Models: Industry Specific (Industrials & Materials) (all topics)
New vs replacement - auto components
What it is
Components sold to vehicle manufacturers for new assembly versus sold as replacement parts through distribution. OE supply is contracted, volume-driven and price-negotiated annually; aftermarket is brand-driven with materially better margins
The installed vehicle parc, not new sales, determines aftermarket demand
Impact on industries
- Aftermarket margins run far above OE, and demand follows the parc rather than the auto cycle, so it cushions downturns
- OE fitment builds the brand recognition that wins the replacement sale years later, so the low-margin business seeds the high-margin one
- OE customers extract contracted annual price reductions, so a supplier must remove cost every year merely to hold margin
- Counterfeit and grey-market parts attack aftermarket margins directly, particularly on older vehicles out of warranty