Price increases are continuing to carry over from the fourth quarter of 2011, according to TLG Research. This is occurring for all the reasons cited in Q4 2011, TLG says:
1. Concerns over materials price inflation: Currently raw steel and aluminum are off about 12 percent from this same time last year, but already increasing this year. It is important to note as well that March 2011 was a high point for steel and aluminum. On the other hand, while plastic was off 7 percent year-over-year, it is up 26 percent since last October, due primarily to oil price increases.
The trend toward increasing raw material prices is reasonably clear for 2012. The only offsetting factor will be how deep the financial issues are in China, and as a result, their demand.
2. The more immediate inflation demands relate to the workforce for various suppliers. With demand, and thus hiring increases, increases in benefit costs and wages, the costs are increasing. The primary driver for employees has been the significant increases in fuel, transportation, food and similar consumer prices. Until now the demand was tempered by a continuing high unemployment. And, while unemployment is still high, costs are outstripping wages and increases. Given that wages make up a very large part of costs for part manufacturers, this pressure is clearly being felt.
The one factor pressuring prices to hold is the influence of buying groups and retailers, who between them now control much of the aftermarket distribution. As a result, they hold a great deal of power in the price transition.
Given this is the first quarter report and there’s a bit of "history." It appears our original forecasts for overall pricing trends for parts will be close to 3.8 percent overall, greater than 2011.
Labor rates for technicians are poised to increase more than 3 percent as shops must meet capacity issues with wage increases for existing staff.
Definitions:
Parts Category
1. Based on reported pricing of parts to service repair centers
2. Represents change of current quarter over the prior quarter
Service Category
1. Represents total job repair order price to prior quarter
Methodology for Pricing Calculations:
The pricing is based on changes in the current quarter relative to the prior quarter. The data is collected from service repair centers with additional service repair center level pricing information provided by Nu-Way Automotive. The "Parts Categories" includes only the parts. The "Service Categories" include both parts and labor and is based on the average reported. Pricing is collected in percent change, and is averaged across the U.S. Where needed, the data is weighted in order to represent the entire market.
Focused exclusively on all segments of the global automotive industry, TLG Research (TLGR) offers clients a unique approach to obtaining and keeping a global competitive advantage. Recognized as the “Parts Problem Solvers,” TLGR provides information quickly and cost effectively. Founded in 1992 by Thomas Langer, a 30-year industry veteran, TLGR, through its proprietary database, provides a unique "menu driven" approach to offer services such as price comparisons and strategies, product/market data, channel information, competitive analysis, surveys, new product strategies and technical writing.
