The channels through which vehicle replacement parts move from component producers to installers present an extremely tangled pattern. A guide to the sector’s structure of distribution, prepared a few years ago by the Automotive Distribution Federation, identified no fewer than 17 different types of distributor. Within this framework, motor factors - defined for the purposes of this report as businesses which distribute vehicle components for and on behalf of manufacturers and manufacturers’ agents - fulfil a crucial role. Principal customer segments include independent garages, franchised dealers, bodyshops and fast-fit centres.
Motor factors vary from single branch family businesses to sizeable groups with multiple branch networks. During the second half of the 1990s there was a widespread expectation that Finelist and Partco, two major independent groups with nationwide coverage, would merge to become a blockbusting force. In the event, Finelist went bust while Partco was acquired by Unipart in 1999 and now, with more than 200 branches, is part of Unipart Automotive’s mechanical repair division.
Although Partco Autoparts is the UK’s only motor factor group which can claim convincingly national coverage, there are significant regional players. These include Allparts, Andrew Page, Camberley Auto Factors, Dingbro and SC Motor Factors, but there are many more. As an example, Andrew Page with its headquarters in Leeds operates through 33 branches in Yorkshire and the North East.
The origins of Andrew Page can be traced back to 1917, but many of today’s more substantial motor factors were established in the 1970s and 1980s and have subsequently experienced steady expansion. Mill Auto Supplies, based in St Austell, was founded in 1971 and has expanded during the past ten years to 13 depots in the South West. However, it is not necessary to have a branch network in order to be big. PCS Motor Factors has a single branch but has around 100 employees.
Typically, a mid-sized motor factor with, say, three branches would hold 1.5m parts covering 90,000 references. In some cases motor factors have specialised, as seen with Multitruck Components which serves the truck, trailer, forklift, construction and agricultural sectors. Others specialise in products, especially exhaust systems where CES claims to offer the widest range of exhausts and catalysts in the UK.
Few installers have the space to carry extensive stocks and even fewer want to see their financial resources tied up in this way. What they seek is a ‘just-in-time’ service – hence the sight of factors’ vans scurrying from depot to customers with several drops a day if necessary.
To achieve this at a competitive price, smaller players tend to involve themselves in buying groups – namely the Factoring Services Group (FSG), Independent Motor Trade Factors Association (IFA), UK Parts Alliance (UKPA) and the more recently-formed United Aftermarket Network (UAN).
Each has its own character. The IFA, for example, claims to be the UK’s largest buying group of independent motor factors with members from Dundee to St Austell and with a presence in Northern Ireland. Formed in 1977, the IFA has mutual status and is owned and operated by its 42 members.
The FSG was established in 1974 to provide independent motor factors with a total package of business support services. The organisation is now a subsidiary of Alliance Automotive International, a group with major interests in the European automotive aftermarket. The FSG’s membership currently stands at around 360 factors in the UK and Ireland with 650 points of sale and 120 approved supplier partners.
Meanwhile, the UKPA was formed in 1999 and comprises seven major regional players. Members benefit from the buying power of a national group but do not encroach on each other’s territory.
Supplementing the basic requirements of availability and pricing, there has been a clear trend for the more forward thinking motor factors to add other services. For instance, Edinburgh-based Pentland Component Parts has shifted from being simply a parts distributor to offering ‘an all-round service package’ to customers which embraces, among other things, manufacturer training, stock management and computer support.
Similarly, Andrew Page offers what it calls ‘promotional full service’ alongside technical commercial and equipment training.
But what of the future? Will the sector replicate trends evident in the retail motor industry where consolidation is rife and large groupings are developing? Perhaps more to
the point do they have a valid business proposition and the financial resources to carry it through?
Studies by Plimsoll Portfolio Analysis reveal a mixed bag of companies and performance. For instance, the latest research has identified 50 motor factors which are achieving nearly 15% more sales and double the profit per employee compared with the average for the sector as a whole. At the other end of the spectrum, 30 companies are notching up sales per employee 35% lower than the average and are in danger of seeing their wage and salary costs spiral out of control.
Of particular interest is the tendency for the larger motor factors to compete against each other, leaving the smaller companies relatively unscathed. David Pattison, senior analyst at Plimsoll, reports that ‘there is clear evidence of stagnation at the top of the market with 41 of the top 93 companies failing to increase sales above inflation compared to 35 last year’. The conclusion is that size does not necessarily equate to success. Even so, there is evidence that the sector’s financial fortunes are beginning to improve after a period when, for many, they could best be described as parlous.
It remains to be determined, though, how the sector will be structured in the future. At present some groups are expanding but there seems little appetite to indulge in the kind of acquisition assaults of the type mounted by the likes of Pendragon and Reg Vardy in vehicle distribution. Nor is there any evidence of a desire to attain public company status.
Maybe the debacle of Finelist still haunts owners and managers. However, many of the entrepreneurs who have overseen the growth of the sector’s more dynamic players are coming up to retirement and it is inevitable that the question of succession will move increasingly centre stage in determining the future role of motor factors in the complex web of parts distribution.