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Ahead of the Curve Auto Supplier Blog

August 07, 2013

Till 'End-of-Service Requirements' Do We Part

Since the Great Recession, the automotive industry has become accustomed to change.  The most recent development – other than record sales - involves the record-setting age of cars now on the road.  News agencies are reporting that in 2013 the average age of a car is 11.4 years. There appear to be two reasons behind people keeping their cars and trucks longer than ever before.  First, the quality of the cars has improved.  Second, due to the economy, more people are holding on to their cars so they can avoid the monthly payments that come with a new car.  So it seems the days of  people buying new cars every few years are long gone.  What does this trend of aging cars mean to you?  Service parts!  Most terms and conditions impose anywhere from 10 to 15 years of service part obligations. When you combine this with the new, average age of cars, you are suddenly obligated, and actually may need, to provide service parts for platforms that ended production in 2002-2003.  Past service obligations likely cannot be changed.  Going forward, it is important to keep in mind this new trend for aging cars. Pay careful attention to the service part obligations in new sales agreements and whether those obligations are realistic within your business plans.  Key issues for service part requirements are: 
  • Ability to adjust prices
  • Ability to pass the same obligations on to your suppliers
  • Ability to maintain tooling and facilities necessary for continued production
 

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