Car Parts Market Needed

Posted: July 12, 2014

The busy summer driving season has peaked. We encourage everyone to exercise caution and patience and get to the beach, or lake, or family gathering safe and sound. But as we all know, more traffic means more accidents. If you do need to replace a damaged part for your vehicle, you have options to keep costs down and it is important to retain those options.

That is the intention of bipartisan federal legislation, the “Promoting Automotive Repair, Trade, and Sales Act,” (PARTS Act), introduced by Reps. Darrell Issa, R-Calif., and Zoe Lofgren, D-Calif., as H.R. 1663 in the House, and by Sens. Sheldon Whitehouse, D-R.I., and Orrin Hatch, R-Utah, as S. 780 in the Senate. It would prevent auto manufacturers from using design patents that last for 14 years to deprive consumers the choice to replace parts of the “skin” of a car — the hood, fenders, tail light, etc. — with quality, safe, less expensive alternatives to those made by the car companies — a choice consumers have benefitted from for over 60 years.

It is critical to preserve competition in the replacement parts marketplace to keep repair costs down. Roughly 13 percent of consumers pay collision repair costs themselves. With increased costs they may not be able to afford repairs for their vehicles. Moreover, if the insurance company pays for the repair, higher repair costs raise rates and increasingly leave insurers no choice but to declare damaged vehicles as unrepairable “total losses.” If reduced competition leads to higher prices for parts and higher insurance premiums, all consumers lose.

There are also clear economic benefits from competition in the auto repair parts industry. The alternative collision parts industry employs tens of thousands of American workers in cities and small towns across the country – from manufacturing to distribution to repair – in all 50 states. Quality alternative collision parts are readily available at more than 40,000 collision repair shops nationwide.

Say you drive a particular 2013 model SUV and you get into an accident that damages a front fender. You can get the part replaced with a fender made by the manufacturer for about $300 or you can get an aftermarket part that costs around $200, a savings of about 33 percent. The two parts look the same and are of comparable quality. Since using the aftermarket replacement fender has no effect on appearance or safety chances are you would go with the less expensive replacement option. At least you should have that choice. In general, car company parts are 25 to 50 percent more expensive than replacement parts. You start adding up all the fenders, hoods, grills and other parts and it is easy to see how consumers and insurers benefit enormously by having safe, lower-cost options. In fact, if you were to rebuild that specific 2013 SUV entirely from the manufacturer’s replacement interior and exterior parts, the bill would be $110,000 — almost four times the $28,500 you might have paid for it!

That scenario may seem unbelievable, but car companies already have an approximately 70 percent share of the replacement crash parts marketplace. If they had a complete monopoly for 14 years, then insurance loss costs could increase by over $1.5 billion a year, which would directly affect consumers.  Vehicle owners without physical damage insurance coverage might simply forgo repairs. This would hurt consumers, repair shops and part suppliers. 

The Consumer Federation of America and groups advocating for highway and auto safety have joined alternative parts makers, suppliers and insurers and other groups in support of the passage of the PARTS Act.

Since the early days of the interstate highway system, Americans have a love affair with their cars and the open road. When a consumer invests his hard-earned dollars in a car and drives it off the lot, it’s a win for the car company and a win for the consumer. But if the car company uses its design patents to eliminate competition in the repair parts marketplace, then it’s a loss for the consumer. The PARTS Act simply seeks to preserve the choice consumers have enjoyed for decades. Let’s hope that Congress does the right thing and passes it!

Mr. Menefee is the President & CEO of Rockingham Group, which is headquartered in Harrisonburg.

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