The automobile spare parts industry is evergreen and holds a promising future for all business entities. It is one of the most profitable and lucrative automobile businesses in the industry. Every vehicle needs spare parts after a certain period.
Despite the COVID-19 pandemic, the Indian automotive spare parts market made the business of 16 billion U.S. dollars alone at the end of the 2021 fiscal year and that was a huge fall for the industry.
If you are also planning to invest in the automobile spare parts business or if you want to learn “how to start automobile spare parts business” then it is the perfect time to do so. The pandemic has passed and people are moving forward.
Many people are planning to buy personal vehicles and start repairing or maintaining the existing ones. The automobile industry will see a boom and no time is better than today to learn “how to start automobile spare parts business”.
What Are The Pros And Cons Of Starting An Automobile Spare Parts Business?
Before you learn how to start an automobile spare parts business and devote all your time, effort, and funds to planning a business. you must gather all the information you can even if you are an experienced mechanic.
Maintenance of automobiles and managing and running an automobile spare parts business are two separate things. Therefore, you must analyze your advantages and disadvantages beforehand.
- Dealing in the automotive spare parts business can be self-satisfying. You are following your passion and helping the customer to resolve their issue firsthand.
- You have the freedom to choose the supplier and manufacturer of the part and provide the best quality product at reasonable rates instead of going only for the OEM in comparison to low cost and high quality after-market spare parts.
- Being a local automotive spare parts supplier, you have the advantage of local connections. People around your area would prefer you to others because you are near to their home and coming to you is more convenient.
- You possess more knowledge than any other dealers in your area because you deal with different make and model every day. You can give the right suggestion to your customers that will build trust and your business reputation.
- This business relies on referrals even one good work can bring you new customers and expand your target market.
- Finding a good supplier to collaborate with can be a bit difficult. Despite the plenty of suppliers and manufacturers finding the right one is a trial-and-error process.
- There are very low-profit margins. Thus, keeping the expenses in check can be challenging to maintain the profit ratio.
- You are always on a time deadline. If you are not able to fulfill the needs of the customer on time then you will most likely lose them and your business reputation forever.
What Tools Do You Need to Start an Automobile Spare Parts Business?
There are many kinds of tools you need to start an automobile spare parts business and most of them depend on your niche. There are many types of automobile spare parts businesses such as automobile repair shops and online automobile spare parts suppliers.
Basic aftermarket spare parts tools and dealer’s equipment you will need to start an automobile spare parts business are as follows:
- Cooling system
- Suspension parts
- Braking system
- Ball joints
- Body parts
- Fuel pumps
- Bushes and shock pads
- Clutch and pressure plates etc
Other essentials you should keep in mind are:
- Business license, permits, and registration
- Shop Act registration ( if your shop is located within the Municipal limits)
- GST registration
- Skilled and experienced staff
What Is the Basic Setup Cost for Opening An Automobile Spare Parts Business?
To estimate the basic setup cost for opening an automobile spare parts business can differ from one niche to another. To arrange the finances, you first need to analyze your business model and its size.
Calculate your basic requirements for the start-up cost such as rent for the shop and inventory, basic tools cost, aftermarket, and OE spare parts cost from manufacturers or suppliers, cost of staff, cost of permits, license and registration, and others.
In our opinion, the basic setup cost could fall between $20,000 and $50,000 for all types of automobile spare parts business models and sizes.
How Do You Prepare for Launching an Automobile Spare Parts Business In 2021?
Now is the time to put your dreams into action. You are now aware of your initial requirements and basic setup cost. It is now time to write a business plan to launch your automobile spare parts business model.
Learn about your local competitors and their services, find out their pay structure, make connections with your local vendors, suppliers, and manufacturers. Find out your initial expenses and arrange capital funding for your business model.
Set out your goals for the next 2 years and find the best marketing and advertising tools to promote your business. We know it is too much but if you want to learn “how to start an automobile spare parts business” then you have to write your business plan in detail step-by-step to take the action to make your dream come true.
The first step of your business plan involves market research. Market research plays a crucial role to start any business. It helps you to analyze the nature of your business, provide information about your competitors, your target market, and the best suppliers and vendors to collaborate with to reduce your initial cost.
Focus your market research on these key areas to make game-changing decisions.
- Make up your mind about the location of your business.
- Decide which products you would like to deal in
- Find your target market.
- Decide the initial size of your business.
Business Name and Logo
Choosing a perfect business name and logo is important. This is your first impression of your customer’s mind. Thus, you want it to be smart, personal, and catchy.
As simple as it seems, we would advise you to search online and find a name that gives hope to your customers and make them feel welcome. Also, make sure that your business name and logo are unique and don’t have any similarities with your competitors.
When it comes to selecting your niche, you just can’t wing it. Till now you have learned about the market size and returns. You are also aware of your skills and limitations. Now, it is time to select your niche that will help you to fulfill your dream and launch a successful business.
Types of automobile spare parts business models you can start are:
1. Automobile spare parts retail store
2. Automobile spare parts store with workshop
3. Automobile spare parts online shop such as Trendy
4. Automobile spare parts franchise
Select Your Target Market
The target market for the automobile spare parts industry is quite wide and huge. There are different types of the target market for any automobile spare parts business model to focus on:
- Racing industry
- General automotive or household industry
- Logistic and transportation industry
- Taxi companies
- Auto parts store
- Rental and leasing industry
All these niches are most profitable and have a great scope of growth in the future. Therefore, this is the right time to start and learn “how to start an automobile spare parts business”.
The target market is spread out evenly across the globe. Thus, you don’t have to relocate to start an automobile spare parts business. You can approach and attract your target market from any place or locally if your marketing and advertising skills are above par.
If you are offering high-quality products and services at competitive prices, you can dominate the industry and become the authority itself.
like the automobile industry, skills required to even think about “how to start automobile spare parts business” have no limitations. You should be familiar with the skills, working style, and knowledge of an automobile spare parts salesman and manager. Only then you can open and run a successful automobile spare parts business.
- Customer and personal service
- Mechanical knowledge
- Transportation knowledge
- Developing operation strategy
- Ability to standardize the work order process
- Effective spare parts inventory management
- Calculating risk for every equipment
- Stocking spare parts for new equipment
- Ensuring a smart security system
How To Source Raw Materials to Start An Automobile Spare Parts Business?
The cheapest and effective way to source above mentioned raw materials is local. You only have to search and contact your local raw materials suppers and manufacturers to start your automobile spare parts business.
For example, AutoZone Inc is the largest auto parts supplier in the United States of America and Autoparts and Diagnostics Ltd are the largest raw material suppliers of OEM, OES, and aftermarket products in United Kingdom.
The top 5 automobiles spare parts manufacturers in India are:
2. Usha International Ltd
3. Rane Holdings Ltd
4. Minda Industries Ltd
5. Automotive Axis Ltd
There are some other legal requirements to start an automobile spare parts business such as permits, license, and registration. In India, you can apply for MSME Udyog Aadhar registration for a small-scale business online.
You might also need a license and permit for an automotive spare parts shop for that you can visit the Shops and Establishment Act. we would also advise you to meet with local suppliers and manufacturers to get more information to achieve your targets quickly.
How To Setup Your Price Structure?
Setting up the price structure effectively can turn out to be a milestone to make your business profitable. Implementing a crucial marketing and sales plan is vital for the growth and promotion of the business.
You need to have detailed information about the pay structure and methods of your competitors. We would advise you to offer competitive price rates to your customers. Also, try to offer a variety of services to stand out among your competitors.
Once you analyze the price structure of your competitors, incurred expenses, and cost of promotion and staffing. You will be able to set up your price structure with good profit margins.
Do You Need an Office?
Location of your business matters a lot. For the success of your automobile spare parts business and to reach your target market. You need to make a physical presence in the area you are about to serve.
You need to choose a location that is easily accessible for customers, and you can supply spare parts quickly to the area you are going to serve. Few attractive locations that can help you to jump-start your business are as follows:
- Shopping center and malls
- Industry regions
- Urban territories
- Central location within business development areas
Even if you have all the funding you needed to start the automobile spare parts business. It is always wise to have an external source of finances to maintain a steady cash flow. Once you have estimated the initial start-up cost for the successful launch of the automobile spare parts business.
The next step is to arrange those findings. Try to get the investments for the automobile spare parts business if you can as they come with their perks and can help your business to survive for the long term until you start getting a good return on your investments.
Other sources of financial arrangements are:
1. Loans from banks
2. Loans from private financial institutions
3. Angel funding
Do You Need to Hire?
Well, you can’t run an automobile spare parts business alone. Still, there is no set number of employees you need to hire to start an aftermarket spare parts business. The size of your business model will determine the number of employees you need to hire and for what purpose.
You might need an accountant, shop assistant, skilled mechanic or technician are necessary for both online and offline dealers, manufacturers, and suppliers with workshops, or a security guard. But for the start, we would advise you to hire 2-5 employees to take care of all the departments and then move forward as per your requirement.
What Could Be the Possible Hurdles To Start An Automobile Spare Parts Business In 2021?
There are three possible hurdles to start an automobile spare parts business. If you want to learn “how to start automobile spare parts business” of your own, then you must acknowledge the challenges you might face in the future and find the best methods to overcome them.
- Quality– you cannot compromise with the quality of the product but at the same time, you have to offer a reasonable price for the product to make the sale. Therefore, you have to be very careful about the location and customers you serve.
If you are dealing with expensive vehicles, then you have to deliver the high-quality spare parts and you can charge a good amount for that but if you are dealing with the working class then you have to make sure that you still provide a good quality spare part that can last long at affordable prices.
- Staffing– you must be very careful while making the hiring decisions especially when you are hiring for mechanics. You need to make sure that they have the proper skills, experience, and knowledge. It could give a real sense of peace to your customers and build trust.
- Managing sufficient stocks and inventory– It is one of the difficult challenges you will face while running your own automotive spare parts business. Both lack and excess spare parts can cost you a fortune. You need to maintain a sufficient stock of aftermarket spare parts so that you don’t increase the cost incurred or lose your customer due to the supply chain issues.
Automotive spare parts industry runs on the demand of the customer and arranging a part could take some time which you don’t have. Many factors can affect the supply chain issues such as cost, optimize manufacturing and distribution, and delivery timings.
You also need to make sure to store plenty of stock for the right oil filters that will suit the wide range of domestic and commercial vehicles.
This is a complete guide on “how to start automobile spare parts business in 2021”. If you implement the right strategies for your automotive business idea, your business will grow rapidly as the industry booms.
First, you need to choose the right business model that can fulfill your passion and complement your skills. You cannot work part-time as the automobile business require full attention and dedication to stand out among your competitors.
Get your finances in order and do a thorough search. Collaborate with local suppliers and manufacturers to get high-quality products at the lowest prices. Provide your customers with honest opinions and suggestions to build trust and you will soon be an authority in your locality.
1. What is the startup cost for the automobile spare parts business?
The startup cost for automobile spare parts business for different models is between $20,000- $50,000.
2. What kind of license and registration you need to run an automobile spare parts business?
License and registration required for automobile spare parts business are following:
- Business license, permits, and registration
- hop Act registration ( if your shop is located within the Municipal limits)
- GST registration
We would also suggest looking into your state’s legal requirements or contact the local suppliers to get more information.
3. What are the average profit margins?
There is an average of 43% profit margin according to worldwide automobile statistics.