Innovations drive Italian aftermarket’s recovery from recession
Italy’s aftermarket and its related automotive supplier import and export opportunities appear to be on the right track as a recent headline in Il Sole 24 Ore declares, “The car components industry sees the light at end of the tunnel.”
A reporter from the newspaper was invited to moderate one of 20 sessions presented throughout the AutopromotecEdu program during May’s Autopromotec exposition in Bologna. More than 2,300 Italian and international visitors attended the seminars, including a session entitled, “The economy is picking up. Cars can restart.”
Held every other year, the overall expo attracted a record-setting 103,989 attendees through the turnstiles; 83,343 of them were Italian, with 20,646 foreign visitors arriving from numerous other nations – including the U.S.
Italy’s and Autopromotec’s importance to the global industry was highlighted at this past fall’s Automotive Aftermarket Industry Week (AAIW) in Las Vegas by a delegation representing the Chicago office of the Rome-based Italian Trade Promotion Agency, known as ICE, which provides a wide range of services to assist Italian and overseas operations interested in connecting with mutual business endeavors.
More than 1,500 exhibitors displayed their products and services on Autopromotec’s show floor, amounting to a 12.5 percent increase from 2013’s figures as 663 non-Italian firms representing 47 countries had a booth presence. Twenty-nine were from the U.S. “The strong growth in foreign exhibitor and visitor figures makes Autopromotec a landmark event in the international trade fair scenario,” reports Autopromotec Brand Manager Emanuele Vicentini.
“Our exhibition is related to the Italian Garage Equipment Manufacturers Association (AICA), and through the association we do observe how many companies are getting more and more interested in the U.S. market,” says Autopromotec spokesman Guido Gambassi.
“On one side, this is due to recent changes in the American automotive market, which has moved toward some more ‘European’ car models, creating new opportunities for our companies,” he says. “On the other side, the U.S. is now going through a phase of full economic recovery, encouraging Italian businesses to approach or strengthen their presence in this market.”
Gambassi goes on to observe, “For U.S. businesses it could be more complex to approach the Italian market, as we are talking about a smaller country, which is, besides, still facing some economic issues and challenges. But Autopromotec should be seen, first of all, as an international marketplace, offering several business opportunities at a global level: The exhibition in fact is the greatest industry event in Europe and in the Mediterranean area in the odd years, a real gateway to many strategic markets.”
“They are interested in American products, and they are very interested in our training programs,” says Lakisha Pindell, director of meetings for the Maryland-based Tire Industry Association (TIA). “Our retail training was very popular” among Autopromotec attendees from a variety of nations, she adds, noting that providing a specialized series of Italian-language industry educational sessions is currently under consideration.
An automotive breakthrough
While buying-power challenges persist amid tight personal finances affect much of Italy’s citizenry, Il Sole 24 Ore’s coverage cites a promising outlook as portrayed in March’s Osservatorio sull’Automotive report released by two chambers of commerce in collaboration with ANFIA, the Italian Association of the Automotive Industry.
Entitled 2014: Breakthrough year for the car industry, the study’s authors describe a positive trend of recovery from the nation’s lingering economic difficulties.
“After seven years of crisis, the sector of the car finally resumed the race,” says Turin Chamber of Commerce President Vincenzo llotte, referring to a 3.6 market increase compared to 2013’s figures, a development that “certainly gives new breath to the entire sector.”
“The Italian components went through the crisis head-on thanks to the high factor of innovation and quality of products and processes of our companies,” according to Aurelio Nervo, chairman of ANFIA’s components division. Imports into other nations amounting to 19.3 billion euros are already exceeding pre-crisis levels. “In 2015, exporting companies can take advantage of the depreciation of the euro against the dollar and the collapse in oil prices,” he says.
An Italian aftermarket valued at 301 million euros in 2014 is expected to reach 326 million euros by 2018, notes Richard Brown, senior automotive analyst at Verdict Automotive, a division of Verdict Retail, which provides international business research, information and market-targeted consulting.
Brown attributes much of the anticipated growth to higher component costs that “can require motorists to dig deep into their pockets,” adding that Italian drivers have become accustomed to seeking lower-priced parts and services.
“Consumer purchasing power has strongly decreased with the consequence that repairs and maintenance has been postponed or not carried out at all, impacting on the performance of the aftermarket to date. Although motorists are servicing and maintaining their vehicles, they are doing so less frequently, and choosing to use cheaper channels and more mid-range/budget brands,” he says.
“While the crisis badly affected manufacturers and OEM suppliers, the aftermarket was less severely affected,” according to Brown, “and while many motorists have started to seek out cheaper components and fitters, and opted to retain ownership of their aging vehicles for longer, they still needed to maintain and service them.”
At present Italy is home to about 36,000 independent repair shops, more commonly called garages or workshops.
“When looking at Italy’s aftermarket, it is key to focus on the current market growth, which, according to industry experts, is 2 to 3 percent. Similar to Europe overall, Italy is facing a decline of mileage, which is affecting the aftermarket business. On the other hand, the average age of the vehicle parc is getting higher, which is favorable for the aftermarket activity in Italy. When you consider the current age of the car parc in Italy, it is likely the aftermarket will grow,” says Daniel Berreby, Southern Europe marketing manager at Delphi Product & Service Solutions.
“There is also a general need for the installers to gain additional knowledge on technical products, such as engine management, fuel management, emissions or injection systems. This is a large opportunity for both distributors and OE manufacturers to provide not only technical parts, but the appropriate support. At Delphi, we provide our customers with parts, accessories, services and support, including a hotline and instructor-led training courses,” he points out.
“American companies working to sell their product and services in Italy need to first establish a local presence in the market,” Berreby suggests. “This should include a commercial office, a hotline in Italian, and, if possible, a local warehouse for the company’s products. It is key that companies understand the Italian consumers and installers continue to place great importance on face-to-face contact and the ability to communicate with them in Italian rather than in English,” he adds.
“It is possible to import directly to Italy; however, a lack of understanding of the Italian market and distribution can be a barrier to development,” Berreby explains. “Using an established Italian distributor as a starting point would allow companies to more easily penetrate the market while also providing the opportunity to gain necessary market information and experience. Then after a couple of years doing business via a distributor, a company could review their business model to decide if importing directly would be more beneficial.”
Rhiag-Inter Auto Parts Italia – a key distributor in the independent Italian aftermarket and one of the largest players across Eastern Europe through a network of subsidiaries – is in an expansion mode. In 2014 the company began enhanced operations in Poland under the Elit PL brand, and it purchased Italy’s ERA, an aftermarket distributor specializing in electric and electronic parts. In April of this year Rhiag consolidated its position in Spain by opening a new warehouse in the Iberian territory.
In Italy Rhiag has 17 branches and two central warehouses. Eastern Europe is served by 10 central warehouses and 193 branches; Switzerland is home to two national central warehouses.
An assortment of value-added services and specialized training is offered to retailers and shops as part of Rhiag’s program to instill customer loyalty. Nearly 50 million parts are sold each year. According to 2012 figures, 49 percent of the company’s sales were generated in Italy. Switzerland and Eastern Europe (including the Czech Republic, Slovakia, Hungary, Romania, Ukraine and Poland) are also significant markets.
Global networking
Venturing into a nation long known for its expertise in producing tires and other finely engineered and crafted automotive products, the TIA attracted a lot of attendee attention at Autopromotec as it staffed a booth and hosted a reception. TIA Executive Vice President Roy Littlefield characterizes the event as “an outstanding platform for global networking,” reporting that “the halls devoted to tires and tire equipment were the first to sell out this year, which is very exciting news for our industry.”
“Our dedication to excellence and Italian heritage are parts of our DNA that we are careful to translate into our operations globally,” says Pierluigi Dinelli, CEO and Chairman of Pirelli Tire North America. “Part of the strength of the brand is its ability to maintain a consistent level of quality while pushing the boundaries of technology and innovation.”
Headquartered in Milan and founded by Giovanni Battsista Pirelli in 1872 to initially manufacture scuba diving apparatus, the company has since expanded into more than 160 countries with a network of 10,000-plus distributors and retailers.
A diversified product portfolio that takes into account an individual nation’s purchasing patterns steers active R&D endeavors and targeted merchandising, which includes an ambitious and iconic reved-up global motorsports presence. “We make an effort to understand and focus on the needs of the market,” says Dinelli.
“In the U.S. there is a specific focus on all-season products – which is not as prevalent, for example, in Italy,” he explains. “Understanding the market as a whole can be a bit challenging, but taking the time to carefully analyze the full picture really allows one to devote extra focus to areas of opportunity and also learn where there is more possibility to grow.”
In 2012 Magneti Marelli, a subsidiary of FCA, inaugurated a new state-of-the-art component-testing laboratory in Bologna. “Guaranteeing customers higher and higher reliability and quality levels is an unavoidable commitment and a necessary condition if one wants to continue being competitive, especially on the automotive market,” says CEO Eugenio Razelli.
Brescia-based OMR Automotive (Officine Meccaniche Rezzatesi), with 10 locations throughout Italy, recently announced that it is constructing a 43,000 square-foot North American headquarters in Indiana. Operations in Speedway, Ind. are expected to begin by the end of the year, coinciding with a recruitment plan to hire engineering, administration, production line and quality control professionals as well as machine operators and skilled equipment mechanics. The $10-million facility will produce components for engines, transmissions and chassis. The family-owned firm’s OEM customers include FCA, General Motors, Volkswagen, Ford and Toyota.
“Our team looked across the region for a place that would maximize growth opportunities for our world-class manufacturing operations, building parts in cars on roads all around the world today,” says Chairman Marco Bonometti. In addition to admiring Speedway’s auto racing legacy, “We were impressed with the tax structure and affordable business climate in Indiana, and look forward to a long future here.”
Sirmax, a producer of automotive plastic compounds and resins based in Cittadella, Italy, is investing $25.6 million to debut a North American headquarters in Anderson, Ind. The project, slated to be up and running by October, includes building a 140,000 square-foot facility on the site of a former GM plant. With product lines such as auto interiors, exteriors and, under-the-hood components, Sirmax is seeking engineers, administrators, machine operators, quality control professionals, skilled equipment mechanics and production line associates.
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