OEM versus Aftermarket ?

Although we have no aspirations to get into the cut-throat world of automotive and heavier diesel engine gaskets – is it really that competitive if you’re marketing to the right customers?

A little in-depth study into parts we’ve recently been asked to make.

Is Quantity more important ?

Historically, the car industry – using smaller petrol and diesel engines, has been a highly competitive market in the UK.

Today those manufacturers no longer have the lions share of the market. To achieve qualification, and then to comply with the continual price and on-time demands of the industry, profit only comes with bulk supply. This means any supplier has to be set up to supply almost specifically to that market.

Consequently there are just a few companies that supply higher volumes to the OEM businesses – and profit margins, although sustainable, are often controlled by those customers.

The parts aftermarket however, sees much more competition – but perhaps more reality in what is offered. Whether the parts are true replicas – identical materials, same specifications, tolerances etc – or if equivalent materials are proffered.

The pricing discrepancy between the OEM ‘guaranteed’ product, an identical aftermarket part, an equivalent material part – or an item posted from the Far East – has probably never been so extreme.

Case Study: We often see products that we recognise – this part is a Water Pump Gasket for a diesel engine.

The OEM price for the part is £25.30 each + VAT – an aftermarket ‘original’ is £18.64 each + VAT – an aftermarket ‘equivalent’ is £8.10 + VAT.

Having made this part originally for the OEM – we knew the material was a 0.8mm FyE grade – that 20 years ago was being made in 100’s at around £0.53 each (so not a bad mark up for the engine manufacturer spares department!).

We upgraded the material to our 0.8mm Moto – and made 100 gaskets for £0.50 each – giving the re-seller we supplied a great margin, and allowing him to sell with 900% !

While these ‘soft-cut’ gaskets are relatively easy to re-produce – we also see pressed steel gaskets, where £1000’s have been spent on tooling – and we appreciate that the manufacturers need to reclaim their often considerable costs. However, these too can easily be ‘reverse-engineered’ using multi-axis machining centres, and often without the need for tooling, and we can often produce parts at 50 or 75% lower prices than the originals – a massive saving on a cylinder head gasket that could easily cost £250.00 !

The gasket opposite is CR4 Zinc plated with an HNBR moulded inside lip – OEM £38.15 – we managed to supply at £12.80 each.