Diesel Market Dynamics

Mar 5, 2010

Word on the street is that diesel performance is still going strong. Having survived fuel price spikes and an economic recession, these big, strong vehicles continue to push forward.

Companies that manufacture aftermarket components for this market say that late-model Dodge Cummins applications are leading the way, with Duramax and Power Strokes not far behind, as consumers look to upgrade stock products for everything from everyday towing and hauling to competition diesel drags and sled pulls.

From the “big three” power-adders of chip, intake and exhaust, to deeper-engine pieces such as heavy-duty clutches and pumps, and even service items for shops that offer that type of thing, there is a long list of products shops can provide their diesel customers.

Here’s an overall look at the current state of the market, including some sales suggestions for ways to capitalize on diesel’s significant momentum.

Why Diesel is Working

So, what’s the current state of the diesel performance market?

“Diesel performance continues to be a strong market segment. Whereas there seems to be some softness in higher-ticket items ($1,000-plus), programmers/tuners, air filters/intakes, exhaust systems and other power/efficiency improvers are strong,” notes Matt Snow, president of Snow Performance, Woodland Park, Colo.

He attributes the strong market to a customer base that typically has a higher average income than many U.S. families, as well as the use of diesel pickups as work trucks.

“Also, there is a trend to keep vehicles longer, and a trend showing high growth in the younger age groups that will bolster the diesel performance market,” he adds.

Max Wyman, director of marketing for DiabloSport Inc., Delray Beach, Fla., agrees that diesel truck owners are always looking for power and performance.

“Diesel performance is still a niche market where people spend money-it always will be,” he says. “While the days of everyone ‘hot-rodding’ their diesel truck may be a thing of the past, there are still plenty of people looking to modify their diesel for performance, economy, towing, or any combination of the three.”

Stephanie Spencer, vice president of Diesel Performance Products Inc., dba FASS, in Marthasville, Mo., believes that any earlier dips in the diesel market over the past few years have now gone away.

“I think the market is starting to aggressively come back,” she says.

And a newer trend is that a market previously dominated by powerful diesel pickups is now making room for diesel cars as well.

Cheralyn Smith, marketing manager for Advanced Clutch Technology, Lancaster, Calif., notes that in the sport compact market, the VW Jetta and Golf, as well as Mercedes and BMW models and soon the Subaru Forester are all available in diesel options.

“The diesel (car) performance market is still relatively in its infancy stages here in the United States. Diesel engines have been around for quite some time and in European countries have been used in many vehicle platforms as the main power plant,” she says. “Here in the U.S., until recently, diesel power plants have been overlooked for both the performance and efficiency they can offer as compared to their gas counterparts. With the addition of more diesel platforms by auto manufacturers such as Dodge, Ford and GM, the performance market will flourish with performance upgrades and replacement parts.”

Some Challenges

But the diesel market still faces plenty of challenges, ranging from stricter government regulations to product education for shop employees.

“The changing weather patterns around North America have resulted in a change of performance parts sales and servicing needs. Consumers are more fuel-cost-conscious, and there are concerns about emissions, especially in California,” notes Brian Roth, president, BD Diesel Performance, Vancouver, B.C. “Fewer new trucks are being purchased and fewer products are available for the new trucks, with the exception of emission-defeating devices with fuel economy-improving benefits.”

Challenges shops face, he notes, include, “access to inventory of components when they are needed, and pricing to compete with the OE dealer.”

But he does see new opportunities in diesel competitions.

“The race market is becoming more defined, and more engineered technology is reducing some of the trial-and-error for those that want to learn from industry experience,” he explains.

Snow also views government regulations as a challenge to the market.

“There are significant negative forces, especially the new CARB rulings on emissions testing, increasing fuel costs, and reduced diesel efficiency from unduly stringent federal emissions requirements that are sure to impact this market more and more,” he notes. “It seems that anything electric or hybrid is good, and anything diesel is considered bad. Diesel needs a stronger advocacy at the federal level.”

He also outlines challenges diesel shops face, including “increasing Internet sourcing, and increasing market differentiation. For example, the towing market looks to different sources than the power/hot rod market for parts. Each market segment wants to go to an expert within their segment.”

Spencer echoes concerns about emissions regulations.

“I think the biggest challenge for shops today is staying informed on the changes that are beginning to arise, primarily with the EPA,” she says. “Part of that includes the changes that many (manufacturers of) products have been making in order to comply with U.S. standards.”

Among the challenges shops face, notes Wyman, are “much tougher restrictions by the EPA, more expensive jobs to give customers what they want, competing with the Internet for market share, and maintaining a reputable name in the industry.”

And Smith adds employee knowledge to the list.

“The biggest challenge for retail shops will be to educate their staff on selling the correct products to their specific customer, especially if they have no prior diesel experience,” she says. “Many of the aftermarket parts are a direct result of higher demands for power and performance by the customer-either due to durability issues with stock components or because the vehicles are being built-up for truck pulling or commercial heavy-haul use.”

Good Ideas

The good news is that there are plenty of good ideas of ways performance shops can capitalize on the diesel market. Each manufacturer offers some suggestions.

“Invest in the products that your market uses,” says BD’s Roth. “Sales can be lost with delivery delays due to location. Communicate with your customers on a regular basis.”

ACT’s Smith recommends knowing the products and the market.

“Shops will earn more diesel business if their staffs are educated about diesel-specific products and can explain the advantages of these products to the end-user,” she says. “Try to be a guide, not just a salesperson. Also, get involved in diesel events, both on a regional and national level.”

Snow from Snow Performance agrees that understanding products is at the top of the list, with the understanding that customers look to you as an expert.

“More than ever, customers need to know that the modification is going to ‘change their life’ and affect them on an emotional level-really push the button they are trying to push,” he explains. “The customer is more discerning and shops need to key in on this by offering the products that offer the biggest benefit and multi-benefits.”

Also, with increased product knowledge comes added selling points.

“For instance, stress the fuel economy benefits of various modifications. The ‘I need to ask my wife’ objection can oftentimes be overcome with this,” Snow adds. “Also, in mid- to high-population centers, the shops that seem to be busy now are the most specialized. This shows the customer’s desire in most markets to deal with experts within their segment.”

And, just in case you missed the point about learning the products, FASS’ Spencer puts it succinctly: “Be informed about what you are selling! Know your products! Be informed about what you are selling! Know your products!”

Finally, DiabloSport’s Wyman expands on the market’s finer selling points.

“Build a user-friendly website, provide excellent customer support and, of course, pricing helps,” he says. “One of the major things I would like to see change in the marketplace is instead of ‘selling’ your customers, educate your customers with enough information that they feel comfortable making a decision on their own. Of course you can sway a customer to purchase a specific brand, but explain to them why it’s better, instead of just calling it better.”

Down the Road

As diesel manufacturers continue to clean up their act, the performance aftermarket should continue to cash in with products that make these powerful vehicles even stronger and more fun to drive.

“The future of the diesel market is very bright and is still virtually untapped. With more time for manufacturers to learn about the advantages of diesel as opposed to gasoline engines, the amount of products that will become available is immeasurable,” says Smith. “There are several vehicle manufacturers developing ‘clean diesels,’ which will start appearing in more passenger cars.  Many of the hybrid vehicles may also go the route of diesel-electric. This product expansion will become a benefit for not only retail shops but also the increasing number of diesel owners and enthusiasts.”

Snow sees a bright future as well.

“I think diesel performance will be very strong for another five to10 years in class 2/3 trucks, with cars increasing. Heavy-duty trucking, especially classes 7 and 8, will be especially strong as operators/fleets look for efficiency,” he says. “Even with government intrusion, the diesel market in all forms is a huge juggernaut.”

Spencer also sees the heavy-duty market as a growth area, and believes government involvement is the biggest unknown affecting the market’s future.

“Diesels are in an iffy spot with the EPA, and that will only continue to increase, so it’s hard for some manufacturers to project the market values in the next year,” she says. “I do see growth for many shops and manufacturers. For both, I believe that strength is derived from staying involved and informed.”

Roth is projecting “another great year for those that work hard at making things happen. Training of personnel and investment in products designed to service the towing and race markets are needed to make it happen.”

And Wyman says, “I believe we will see an increase of diesels on the road in the years to come.”