A souped-up market
Upstate businesses find success in auto parts, modifications
Rebecca Roper, Contributing Writer
Chris Osborne of Spartanburg spent the last week of June driving cross-country, but it wasn’t a joy ride. (hahaha soo she thinks ; <– I added that)
The 24-year-old entrepreneur was headed to California to meet with his vendors, suppliers and competition.
“There’s nobody out there that competes with me locally,” says the owner of Illstreet, a Web-based company that sells more than 3,000 products to dress up a vehicle, with a focus on carbon fiber hoods. And while Osborne admits he and many others in the industry have been spooked about the bad economy, his products are zooming off the shelves faster than he can supply them.
Osborne is on the receiving end of a head-scratching trend. Despite the fact that new car sales in the U.S. have taken a heavy beating in the past few years, the automotive aftermarket – supplies for cars and trucks after the original sale – continues to grow. And the Upstate business community is well aware of that fact.
Sam Konduros, president of Greenville consulting firm SK Strategies LLC, says growth of the automotive aftermarket industry in the GSA area is a “natural development for our region.”
“The fact that the Upstate has become such a significant hub for the automotive industry makes it a fertile region to also attract significant aftermarket companies and investments. We are already home to a major OEM (BMW Manufacturing Co.), several system integrators (such as Magna International Inc.), more than 40 tier one suppliers (like Lear Corp.), and a huge number of tier two suppliers (like Alfmeier Corp., which is also a tier one supplier for some manufacturers),” he says.
Clemson University has been forging a relationship with the Specialty Equipment Marketing Association and is looking to bring a SEMA roundtable event to the ICAR campus in the next year or two, Konduros points out.
More suppliers in the region would be great with Osborne. He’s trying to find someone locally who can manufacture carbon fiber hoods. Right now he imports them from China, and while he says the profit margin is “decent,” if he had a local supplier he could fill a lot more orders. “Carbon fiber is in crazy short supply,” he says. “But there are guys willing to pay as much as it costs for it.”
The hood is basically an appearance enhancer, Osborne says. It gives the car a sleek, shiny look and it’s very lightweight so it doesn’t slow the car down, which is pretty important to guys into autocross racing, which most of his clients are.According to Osborne’s Web site, www.illstreet.net, hoods range from around $350 for a Honda Accord to $1,250 for a Hummer H2.
According to Daniel Majcen of the Automotive Aftermarket Industry Association, the industry grew 4 percent last year. That rate was down slightly from the 5-5.4 percent increases it had seen over the past five years, but it was still healthy growth. The industry accounted for $190.5 billion in sales in 2004. The South Atlantic region, which includes South Carolina, accounted for the most growth.
Not all of that money is of the “Pimp My Ride” ilk, Majcen points out. “Because people are keeping their old vehicles longer and driving them more miles, they of course need more repairs,” he says.
While the industry does include accessories and enhancements, the bulk of Automotive Aftermarket Industry Association members provide replacement parts or tools and equipment necessary to make repairs. In fact, replacement parts account for 59.7 percent of the market, according to the most recent AAIA Auto Aftermarket Factbook. Chemicals, such as lubricants and fluids, account for 14.3 percent and tools and equipment 8 percent, leaving only 18 percent for accessories.
But obviously somebody out there is willing to drop big bucks on powerful engines and coolness enhancers. Illstreet recently conducted market research that showed the bulk of its clients were Asian and Hispanic males age 21-28. What surprised Osborne, he says, was the number of female buyers, who turned out to mostly be moms or girlfriends buying items as gifts.
Osborne says business always picks up in the summer – and this summer has been no exception. “I think the economic stimulus checks have helped a lot,” he says. “I’ve had several clients tell me that’s what they were spending their check on.” He says he did spend a great deal this year on advertising because he was worried luxury items such as his wouldn’t sell as well in current economic conditions. “I have the top spot on Google purchased (for several related keywords),” he says.
But so far, he’s been more worried about keeping up with the demand. It’s the same way for Hot Rod Construction of Piedmont, says owner Danny Wickett. His shop does reconstructions and modifications for classic automobiles and has won several awards for its work recently.
Nostalgia may play a role in the success of his business. And perhaps more guys are pouring money into that old flame in their garage rather than dropping dough on a brand new model.
“My clientele isn’t as affected (by the economy) as others,” he says. “They’re mostly wealthy gentlemen in their 50s and 60s who are reaching retirement and redoing the car they maybe had when they were in high school.”
Hot Rod Construction does 100 percent of its work in house, Wickett says, and that kind of custom work gets pretty pricey. Wickett says his clients often redo an entire car, which generally costs $100,000-$200,000, with souping up the engine being the heaviest expense.
If the cost of materials continues to climb, he is worried his business could be affected. “It’s definitely disposable income. This is something you want; not something you have to have,” he says.