BofA: Auto Parts Retailers Have Strong Margins In $300B Market

Bank of America is out with thoughts on the $300 billion aftermarket auto parts and repair market based on survey results.

The Takeaways: Suzuki highlights four large companies in the auto parts market in AutoZone AZO, O’Reilly Automotive ORLY, Advance Auto Parts AAP and Genuine Parts Company GPC.

“The US automotive parts and repair market is large, stable, highly profitable (versus other segments of the auto value chain, and relatively fragmented,” analyst Elizabeth Suzuki wrote in a note.

Auto parts retailers have seen a 13.5% average margin compared to 5.4% for new vehicle manufacturers, 8% for parts manufacturers and 3% for auto dealers.

In the do-it-yourself market, AutoZone leads the way with 14% market share. Advance Auto Parts, O’Reilly and Genuine have market shares of 6%, 9% and 3% respectively. New car dealers make up 4% of the market.

The do-it-for-me market sees new car dealers have a 35% market share. The four auto parts companies mentioned each have 5% or less market share in the category.

What’s Next: Suzuki expects consolidation to continue in the industry.

The threat of Amazon.com AMZN, the largest seller of auto parts online, is something to watch, according to Suzuki. The survey showed that customers favor retailers that offer buy online, pickup in-store as an option, which could fend off the large online retailer for now.

Price Action: O’Reilly is the only gainer in 2020 with shares up 4%. AutoZone, Advance Auto Parts and Genuine Parts shares have fallen 3%, 4% and 10% respectively on the year.

Photo credit: Steve Morgan