Analysis Opens Hood to Ongoing Auto Parts Controversy

Which car parts are better original equipment (OE) or aftermarket?

Although this issue looks like it should be a no-brainer, it is hardly that. Instead, it takes on the look of a holy war every time someone reopens or revisits the issue as both sides of the argument just can’t agree on it.

It is interesting to note that while this debate has moved out of the limelight, it is still widely discussed in and out of offices throughout the auto industry and its related subsidiaries like, as well as within the offices of aftermarket industry. And, whenever the sides come together to discuss the subject, sparks fly.

Let’s look at the basic disagreement. The disagreement revolves around the issue of parts quality. The industry’s position is simply: aftermarket or non-OE parts are poor quality. The insurance industry and its supporters believe simply: there is no difference in quality between OEM and aftermarket parts. It is a view that hasn’t changed in over 30 years.

In making the case that OE parts are better, the industry expects that its blanket assessment of OE parts as better than non-OE parts will just be accepted as face value. It is as if the auto industry believes the old line that everyone hears from their parents, at one time or another, “because I said so.”

In the event that someone doesn’t accept its parts statement at face value, the OE industry trots out a mixture of hearsay and anecdotal evidence. The hearsay consists of second-hand quotes from aftermarket and body shop sources that state, among other things, that aftermarket parts are flimsier than OE parts and that that aftermarket major body parts do not line up well and have to be massaged to fit. No further proof is offered. The anecdotal evidence consists of third-hand quotes on the experiences of others (if the evidence consisted of direct quotes with attribution then it would stand up to scrutiny. Indirect quotes are not reliable evidence because there is no way to check the attribution for accuracy).

The aftermarket supporters base their evidence on studies conducted by the Insurance Industry for Highway Safety (IIHS) that show that there is no difference between OE parts and aftermarket parts in major crashes. The studies used aftermarket and OE parts in a series of crash tests and the results yielded those results. One of the tests specifically looked at aftermarket parts, while the other used both. (Because the tests yielded empirical results they can be looked at and used again and again. The tests are like direct quotes and that makes this evidence stronger than the OE industry’s evidence.)

In an apparent effort to contradict the aftermarket’s use of hard data as the basis of their evidence, the OE parts-makers quote a study conducted by Consumer Reports that was claimed to show that OE parts are better than aftermarket parts and, even though they may cost more, OE parts are still a better deal for consumers because, Consumer Reports noted, they last longer due to their quality.

The funny thing is how the sides have lined up on this debate. On the OE parts side, of course, you have the auto industry that stands to make extra money on the sale of higher-priced parts and the supporters of the auto industry who also stand to make more money. And, in an interesting twist, you have consumer advocates lining up with the OE parts industry. They believe that even though OE parts, for example axle suspension are more expensive their quality makes them a good deal for consumers.

One wonders how consumer advocates can overlook the savings that result when aftermarket parts are used? It is an interesting question.

It was soon after the use of aftermarket parts was okayed that an interesting phenomenon occurred, OE parts prices came down by at least 40 percent. The OE market had to compete with the pricing of aftermarket pricing. Consumers benefited from this because the price of all parts fell dramatically.

No one, except the OE industry, complained about that turn of events. For the first time, aftermarket and OE parts competed on a level playing field. It was a situation that could not last because one had to know that the OE sector was not happy with this move, even if many states allowed it, following Department of Transportation approval. Apparently looking for a way to reverse the situation, one that had an impact on their bottom line, the OE industry joined lawsuits challenging the quality of aftermarket parts.

The suits were brought by motorists who were joined by consumer activists and a coalition of interested parties, including carmakers and other standalone OE manufacturers – the manufacturers do not have the capacity to handle the demand for their parts so they farm out their work to other OE parts shops. Those shops, and the carmakers, were comfortable with the old pricing structure and, of course, they used any means to work against it. The suits, brought in connection with accidents in which the use of aftermarket parts was verified, claimed that the inferior parts led to the crash. The suit that they joined was turned into a class-action in the courts and the judge ruled for the parts industry, finding that aftermarket parts were at fault. There was a huge award given to the victims of the accident.

In a second case, the OE industry joined a suit against a Texas law that mandated the use of aftermarket parts. The suit claimed that the legislature had overstepped its authority in trying to regulate a market. And, they further claimed that the law also created a level playing field by allowing OE parts and aftermarket parts to compete, driving down prices and lowering costs. The law, however, only stated that the aftermarket parts could be used in repairs and did not address to quality issue. The judge ruled against the industry suit and dismissed the suit. In a note within the ruling the judge said he could not speak to the industry’s contention about quality and that the ruling only applied to the industry’s contention that the legislature had overstepped its bounds. He noted that the legislature could act on the legislation.

Suits were just one arrow in the industry’s quiver. They lobbied effectively in many states and managed to have amend laws allowing aftermarket parts. The amended laws the use of either type of part on repair orders. It was the consumer’s decision.

Besides lobbyists, the major OE parts manufacturers, the carmakers, also had another very effective tool, their public relations departments. Their in-house PR shops employed experienced spokespersons who knew their craft and who were able to not only indirectly launch the whole parts debate, while keeping their employers above the fray. At the same time, they were able to insert questions in the minds of many consumers.

In all of this there are several conclusions that can be drawn:

Aftermarket parts are better than the OE parts industry is willing to admit (why was there an adamant stance against them if the parts weren’t equivalent?
Aftermarket parts cut into the OE parts industry’s very large profits excessively and that could not be allow (no one will say it, but the conclusion is obvious)
The OE parts industry had to demonize aftermarket parts to return to the status quo.
The OE parts industry had to establish a long-term program to keep aftermarket parts down, so the parts battle (which one is better, OE parts or aftermarket parts) would rage for years.

After looking closely at the entire issue, it seems that these are the only conclusions that can be drawn. Even today the controversy continues to steam, albeit at a much lower temperature.

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