SEMA eNews Vol. 12, No. 9, March 5, 2009

A New Opportunity for Specialty Products Through Mass Customization

We are definitely in the age of mass customization. Today, consumers can get mainstream products designed specifically for them, such as:

  • Private labeled soft drinks (Jones Soda, etc.) 
  • Customized candy (M&Ms, etc.)
  • Customized toys (Build-A-Bear, etc.)  
  • Custom designed shoes (Nike, etc.) 

Naturally, car companies began to respond to consumer expectations. The answer was to offer increased numbers of models and more variations of existing models. Did you know that the United States has gone from less than 50 light-vehicle models in 1947 to more than 300 today?

Automakers offer more than 300 nameplates in the United States today.

AutoPacific, an automotive industry research firm labels the approach the car companies have been using as “atomization.”

Atomization: Adding new, incremental car and light-truck nameplates to more accurately hit customer target needs, wants and desires, resulting in increased overall sales.

This rapid addition of nameplates is a result of product strategists and marketers attempting to provide products targeted at much more finely defined product niches. Consumers prefer focused products, and today’s automotive research can identify exactly what those consumers want. The conclusion has been to develop a vehicle targeted at each identified buyer group.

The chief risk to this strategy is the loss of profitability as production costs increase. When sales of cars and light trucks remain constant and the number of models increases, the sales per nameplate must decrease. This means a vehicle has to be profitable at a lower volume. In down sales years, such as 2007 and 2008, sales per nameplate drop precipitously and profitability becomes nearly impossible.

“Lean customization and atomization principles are having an increased impact on vehicle engineering and offer new product-development opportunities for OEM and SEMA companies," says John Waraniak, SEMA vice president of vehicle technology. "OEMs are being driven to reduce vehicle complexity while simultaneously having the flexibility to build more models and top-hat variants off of fewer platforms.

Waraniak adds: “SEMA member companies can also help take the complexity out of the assembly plants by collaborating with OEMs to develop products and vehicle architectures with cost-effective, simplified bills of material that can be profitably customized with factory and SEMA-member branded parts and accessories at dealers, customization centers and independent installers."

At the previous industry peak, in 2000 when sales hit 17.3 million units, there were 208 car and light-truck nameplates sold in the United States. From those numbers it is easy to see an average volume of slightly more than 83,000 units per nameplate. In 2008, when sales were 13.2 million units and there were 285 models, the average volume dropped to only 46,300 units sold per nameplate.

This was a whopping 36,700-unit deterioration (-44%) in the sales volume per nameplate. Furthermore, in just one year—from the end of 2007 through 2008—sales per nameplate fell more than 10,000 units.

In other words, carmakers needed to make a profit while selling a lower volume of cars or trucks per model or model variant. As the OEMs are forced to cut back the number of nameplates they offer, there is an opportunity for the specialty-equipment industry to partner in ways that have never existed before.

For the car companies to have satisfied customers, they must offer some level of customized vehicles, but at the same time, to be profitable, they have to increase the production runs of each model. — SEMA Research & Information Center

For more original market research, visit www.sema.org/research.

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