We write primarily about brake drums and rotors because that’s the largest part of our business, but it’s probably the segment of aftermarket parts most interesting to our customers because it typically represents a significant percentage of their sales. So, what’s happening with drums? If you are reading this, it’s quite likely you are already getting calls from us, and we tend to lightly survey most of the people that we speak to. From our calls, we know that Webb is shipping in relatively short times and is shipping all its backlogs out, and since many had so much on order, now they have a significant amount of inventory, and many customers are stuffed to the gills.
However, sales are still quite strong for DuraBrake. While 2022 was a very strong year for all parts. 16792X (Gunite 3922X/Webb 56864B) was a larger part of our sales for the first 75% of the year vs the last 25%. As inventories were building up, we saw more of our sales turn to parts other than 16792X. We’re still seeing a significant increase in sales of 16792X over previous years, but we are seeing many customers holding off on ordering containers because they have a large amount of inventory since everyone received most of their backlogs. It also appears that customers are canceling existing backlogs with other suppliers because of their excess inventory, which will likely create excess inventory at some of our competitors.
We know many of our customers are worried about price drops if they place container orders, and so we are offering tools to help you stay competitive: 1) customers can cancel orders prior to shipment from overseas (two weeks from order), 2) we’ll guarantee that if prices drop by the time we ship orders from overseas (two weeks from order), we will honor the lowest pricing. Don’t miss out on getting the best pricing by buying in container loads because you are worried about price reductions. We also have options for quicker deliveries (some as low as 1 week) in trailer-load quantities.
Looking at the truck tonnage index, trucking still seems quite strong, and so we believe that the demand for aftermarket parts will continue to stay strong for some time as long as trucking holds up. Class 8 truck orders were up last year, and there is still a backlog of trucks, but the backlog is reducing as new orders are declining and supply chain issues have been primarily resolved. While it will take some time for dealers and distributors to get through their inventory, things will get back to a “relative” normal. Dealers and distributors will likely lower their margins to increase sales until their inventories become manageable again. During the pandemic, everyone became used to higher margins as limited availability caused fleets and consumers to be less price-conscious. Hopefully, brake parts won’t go back too quickly to the cut-throat, low-margin commodity status for a while, and dealers and distributors will be able to continue to sell based on the value they add and not just the lowest price.
We anticipate that our sales will stay at a similar level as in 2022 because we obtained a significant number of new sales channels, including several buying groups (VIPAR, HDA TruckPride, Aftermarket Auto Parts Alliance), one truck OEM (Volvo), several trailer OEMs and several small bus OEMs. In addition, the market changed significantly in 2022, with some of our competitors having significant issues, upsetting many customers, or getting out of the business completely.
We’ll keep you posted on what we hear in the market so you can try to stay ahead of the market.
