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Auto Parts and Equipment Market in France

From FEDA| May 30,2007

SUMMARY

France is the fourth largest automotive market in Europe after Germany, the UK and Italy.  While we currently have no official figures for 2004, the light vehicle automotive parts market appears to have expanded due to an increase in the registration of passenger and commercial vehicles: 2,422,159 in 2004, versus 2,009,246 in 2003.  This was a welcome change over the previous year as the strong euro/weak dollar exchange rate let to decreased parts sales--down to $26.5 billion--due in part to a decline in car production in 2003. 

The market for light vehicle automotive parts breaks out into three major segments: Original Equipment Manufacturers (OEM), Original Equipment Suppliers (OES) and Independent Market (IAM).  The primary parts and equipment categories covered in our statistics are locks, volumetric oil and fuel pumps, miscellaneous machines, electrical equipment, measuring and checking instruments, transmission units, fuel supply and exhaust equipment, engine components, steering, suspension and braking, climate control equipment, seats, diagnostic instrumentation, as well as some other products.

The OEM market in France is dominated by big multinational firms, many of them American with French or European operations.  The French Vehicle Equipment Industries Association (FIEV) federates the main parts and equipment suppliers in France.  Large U.S. suppliers are already present in France and are doing well.  Of the top twenty suppliers, eight of them are American firms (Delphi, Visteon, Johnson Controls, Lear, TRW Automotive, Dana, Arvin Meritor, Federal Mogul).  Generally, there is little to no room for mid-sized exporters in this very closed and competitive environment.  However, U.S. automotive equipment manufacturers with high tech products, sophisticated diagnostic tools, and innovative parts otherwise difficult to find in Europe may find a niche.

Price is the main determining factor for French end users, meaning that once an automobile’s manufacturer’s warranty expires, end users then turn to the lower-priced IAM for repairs.  Due to new regulations, the IAM will be better placed to respond to end-user demands, as car dealers are now authorized to sub-contract repair activities to independent repair shops without the authorization of car manufacturers.

MARKET OVERVIEW

With an estimated increase in the size of the light vehicle automotive parts market to $29.2 billion (which in real terms represents a one percent increase, exclusive of exchange rate fluctuations) and 2,422,159 new light vehicles registered in 2004, France has seen steadily upward movement in automotive production.  Considering a decreasing number of road accidents and increasing vehicle registrations, the number of registered passenger and commercial vehicles on the road in 2004 may surpass 30 million (29.3 million in 2003).@@page@@

The best prospect sectors for parts and equipment sales in France in are:

• Electrical equipment for engines
• Transmission units
• Steering, suspension and braking
• Fuel supply and exhaust
• Engine components
• Seats
• Climate control equipment and measuring and checking instruments for motor vehicles
• Alloy wheels, advanced material body kits and sport utility vehicle (SUV) accessories
• Diesel parts and equipment for diesel engines

MARKET TRENDS

The light vehicle automotive parts market is constantly changing, so it is difficult to speculate as to how it will develop in the future.  This market depends primarily on car sales and has recently been affected by the increasing sales of Asian car brands in France.

Automotive parts suppliers feel pressured by car manufacturers to invest large sums of money in R&D and to open new plants near manufacturers in order to share risk and cooperate in export strategies.  Technical improvement is focused on engines and parts as well as HVAC equipment. 

As a result of European CO2 regulations, and because 60 percent of registered light vehicles in France are powered by diesel engines, outside competition in the emission technologies segment will increase.  There is an ever-growing market opportunity for new replacement diesel parts and diesel diagnostic servicing equipment.

IMPORT MARKET

Sales of original equipment (OES) parts faced an estimated decrease of 0.66 percent, and represented $22.74 billion (85 percent market share in 2003 versus 85.5 percent in 2002). However, the market share of aftermarket (IAM) parts sales increased by 0.7 percent (14.5 percent market share in 2003 versus 13.5 percent in 2002) and represented $3.9 billion.  Domestic parts suppliers are increasing the share of their sales made outside France; 57 percent of total sales are now made outside France.

Most U.S. industry players are supplying the French market from their European subsidiaries or are pursuing joint ventures. @@page@@

In 2004, the estimated total market grew to $29.2 billion, which represents a one percent increase in automotive parts demand over 2003.  This modest increase is due to increased sales of auto parts in Eastern Europe and in the Chinese and Japanese markets.

  

 
2002
2003
2004*
A. Total Market Size
21.320
26.584
29.198
B. Total Local Production
25.168
29.864
32.801
C. Total Exports
16.284
20.814
22.862
D. Total Imports
12.436
17.534
19.258
E. Total Imports from U.S.
404
573
630
F. Exchange Rate:
USD 1.00/Euros
1.1078
0.8840
0.8129

(Figures in $ millions)
Source FIEV (French Vehicle Suppliers Association)

COMPETITION

All of the main suppliers sell to the OEM market.  This is an extremely competitive environment, which allows little room for mid-sized exporters due to the manufacturers’ requirements for physical proximity, timely delivery, and lowest cost.  The aftermarket, which includes the OES and IAM markets, is an important market with a lot of sales potential for exporters.  The same suppliers may sell to both these two distribution channels.

The market for car repair and services is decreasing because of more sophisticated and reliable parts, which last longer and require fewer repairs.  However, new marketing by repair companies, particularly those affiliated with manufacturers, have allowed them to compete and retain customers in their networks.  For instance, car manufacturers have established three-year guarantee strategies for new vehicles in order to keep repair activities within their network of repair garages and car dealerships.

Third world competition is also present in the French market, mostly in garage equipment, emission control, engines and parts, gears, transmission, tubes and tires.

The top 20 automotive equipment manufacturers in the French market are:

  

Company
2003 World Sales
Company Names
2003 World Sales
Delphi
30.6
Valeo
11.35
Bosch
29
Siemens VDO
10.31
Denso
23
ZF
9
Visteon
19.24
Dana
8.62
Johnson Controls
18.6
ArvinMeritor
8.5
Lear
17
Continental
7.92
Magna
16.67
ThyssenKrupp
7.75
Aisin Seiki
14.4
Yazaki
7.06
Faureica
12.45
Federal Mogul
6.04
TRW Automotive
12.36
DuPont
5.99

(Figures in $ billions exchange rate: $1 = €0.81289)
Source FIEV (French Vehicle Suppliers Association)

END USERS

There is an increasing trend for car owners to keep their vehicles longer.  The average age of a car in France was about 7.3 years old in 2003, with 31 percent between 11 and 15 years old.  The average annual number of kilometers driven was 15,000 (9,375 miles).

Car owners make purchasing decisions based primarily on price.  As they own their cars at least seven years, once the standard three-year guarantee expires, they tend to go to independent garages and auto centers for their car repairs and check ups, since they are less expensive than the services offered by car dealers.@@page@@
 
MARKET ACCESS

As the automotive parts market is constantly changing, it is also difficult to speculate about what safety standards may be mandatory in the future.  European legislation concerning automobile engine CO2 emissions are tightening, mostly because the percentage of diesel engines have increased, which means suppliers must focus on environmentally friendly products.

Moreover, OEM, OES and IAM products have to be qualified ISO or equivalent and have the CE marking in order to prove compliance with safety legislation.

With the advent of new 1400/2002 European regulations concerning automotive distribution (car sales and services), market shares may change:

• OES firms will be able to sell parts matching the quality of original spare parts directly to the independent network (garages, repair shops, car body shops) due to a new rule regarding the original label on spare parts.  OEM firms manufacture 73 percent of a vehicle’s parts and equipment.  Of this, 27 percent corresponds to assembly line activities handled by car manufacturers.

• Independent car repairers will offer consumers a better choice of parts considered to be original spare parts.  Free access to technical information, tools, equipment, diagnostic equipment and training is now possible thanks to a new regulation concerning car dealers’ rights to sub-contract repair services to independent repair shops without the authorization of car manufacturers.  Hence, professionals in the automotive aftermarket will have to invest in new equipment and devote budgets to training in order to compete effectively with the car manufacturer networks.

• Consumers still have a choice as to where their vehicles are repaired, which spare parts should be used to repair their vehicles, and how much they pay for those services (for more information: http://europa.eu.int/comm/index_en.htm).  However, the do-it-yourself auto center and hypermarket, essentially composed of “expendables” (i.e., car maintenance parts such as oil filters, alternators, exhaust pipes, etc.) should grow less rapidly in the future, due primarily to the increasing complexity of parts.

MARKET ENTRY

The automotive components supply industry as a whole posted sales of $58.8 billion in 2003. Automotive suppliers are responsible for about 75 percent of the costs of a passenger car produced in France (the remaining 25 percent corresponds to assembly costs).

• OEM Market Entry

French automakers source their component parts primarily from a group of “qualified” automotive parts and equipment suppliers.  When none of their usual suppliers provide satisfactory solutions (price and quality of the products) to their needs, the carmakers will then turn elsewhere. OEM suppliers act as assemblers of components systems and are followed by tier-one suppliers (+/- systems integrators), tier-two suppliers, and tier-three suppliers.

Given longstanding relationships and the time needed to meet the high standards required by automakers, it is quite difficult for “new suppliers” to become “qualified suppliers.”  For example, it takes about 18 months for a product to be accepted and integrated into a vehicle or system.  The design process for a new model starts two to three years before the production is launched in the factories.@@page@@

• OES Market Entry

This market concerns car dealers and repair shops affiliated with car manufacturers.  The process to get a new product referenced by the car manufacturers’ network for their aftermarket activities is very restricting, and the trend seems to be to reduce the number of suppliers in order to decrease bidding costs.

• IAM Market Entry

Purchasing offices supplying the IAM market are represented by:

- independent garages
- auto centers
- fast fit centers
- garages specializing in diesel engines
- agents

This industry also requires previous references by a panel of suppliers, but this process is less restrictive and fairly quick.

Payment practices vary among manufacturers and their customers but the most common method is deferred payment.  New customers are normally extended 30-day terms after approval of credit standing, and once a seller and buyer have established a relationship of trust, credit is often extended for a period of 90-120 days.

France is well positioned to provide full banking services to domestic and international customers, which also meet US requirements.  Financing packages can be designed for exports and imports of all types of goods and products.  Banks provide a full range of basic services, documentary and standby letters of credit, letters of guarantee, bills of collection, acceptance financing, export/import pre-financing, as well as recourse and non-recourse financing.  Accuracy and efficiency are ensured through a high quality communication network.  The Commercial Service works closely with the “COFACE” export financing agencies in France.

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