Motor parts industry revs up

Good car sales bode well for the motor parts industry, reports JASON BAKER from IBISWorld.

By Jason Baker

Booming new car sales have boosted revenue in the $12.3 billion motor parts industry over the past three years. New motor vehicle sales during the past five years reached a record of 1,003,882 units in the 2006-07 financial year. 

But declining spending on after-market motor vehicle parts kept growth over the past five years to a modest 1.7% on average annually. Industry revenue fell 2.1% in 2006-07.

Growth will be slightly stronger over the coming five years. IBISWorld forecasts that this industry will grow at an average annual rate of 2.4% during the five year period to 2012-13.

IBISWorld believes industry revenue is expected to return to positive growth in 2007-08, following increased domestic vehicle production and relatively strong demand from after-market. Industry revenue is predicted to grow 3.5% in 2007-08 to $12.8 billion.

IBISWorld forecasts modest industry revenue growth the following year. Present forecasts indicate that real GDP growth will accelerate and the labour market will firm, which will positively affect industry demand.

But revenue growth is expected to slow in 2009-10, as new vehicle demand softens in the lead up to vehicle tariff adjustment. While demand for new vehicles will remain high, some consumers will hold off in the later months of 2009 in the hope of attaining a price benefit.

Industry revenue is then forecast to grow until 2013, with the relatively strong labour market continuing to underlie disposable income gains, and hence increased discretionary spending on automotive parts and accessories.

A factor that will influence the growth in imports is the relocation of parts manufacturing activities in the South East Asian region to countries such as Malaysia and Thailand.

On the other hand, the export markets which have been developed are expected to be expanded, as the sourcing of motor vehicle parts becomes progressively global.

IBISWorld supplies business information databases, including industry reports, company reports and business indicator reports. www.ibisworld.com.au