Price rises are affecting auto parts too

After months and months of price increases from tyre manufacturers, owing to the fact that demand for raw materials such as natural rubber has gone through the roof, it is now clear that the same pressures are affecting those purchase automotive parts too. Asking the question, what is driving current price increases? Dave Cheetham, exhaust maker Klarius Group’s chief financial officer, has warned that further price rises are inevitable in the aftermarket auto parts supply chain as well.

“We may not be feeling the full rejuvenating effects of growth in UK manufacturing industry yet, with the government celebrating meagre increases in GDP and higher interest rates inevitably around the corner, you would expect prices to level out, but, we are now more than ever, being affected by changes in the global economy; price rises in raw materials and fuel alone are likely to drive-up replacement component prices in the UK over the next twelve months.

“The cost of manufactured goods is still rising; driven partly by demand from economies that are bouncing back faster than the UK and increasingly by raw material and oil prices on the world market. Demand for steel is now at record high – recent comments from major German producer ThyssenKrupp for example stated that demand was up significantly, production was at capacity, and demand is already outstripping supply even though world output will top last year’s record at some 1.39 billion tonnes.

“Combine this demand with accelerating raw material costs such as metal ores and financial commentators are warning that the knock-on effect will continue to affect prices in the UK well into 2011. Predicted price increases also invite market speculation and those traders who have weathered the storm will be looking to cash-in on market buying trends, again forcing prices up.

“Most OE manufacturers have raised the prices of new cars substantially since 2009, and the market forces that are driving those increases also apply to parts manufacturers. Just as an example, CAP reported in January this year that over 70 per cent of car manufacturers have increased the price of their new cars in addition to the rise in VAT to 20 per cent.

“Many manufacturers that reduced capacity during the 2008 – 2009 recession are now struggling to increase production because of the raw materials competition, and the lack of available machining capacity, so that again is increasing prices in manufacturing industry.

How does this affect the price of auto spares in the UK?

“Simple economics points towards imports becoming more expensive, from Europe and the Far East and domestic manufacturers pushing prices up. The Klarius Group is in the fortunate position of having invested in its manufacturing base over the last three years and increased production and distribution efficiency, while developing long-term partnership strategies with key suppliers.

“Prices will go up, but supply should never be a significant issue for Klarius, hence customers are already benefitting from the best availability ever from us, and while car parts require replacing we have found the market is turning towards quality and availability in order to satisfy customer demand and secure trade going forwards, rather than getting hung-up on price increases.”

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