Engine Kit Opportunities
By Brendan Baker
In nearly all aspects of today's competitive consumer market, the customer is king, brand means everything, and warranties on parts and services are a given, right? Great news for the value-minded shopper, but what about the supplier?
In the automotive industry, of course, OEMs have been offering unprecedented warranties and financing terms for the past three years. On any given day, a vehicle owner may choose to purchase a new car at unbelievable terms instead of paying you to rebuild his engine in his not-so-new vehicle. So how does the custom engine rebuilder (CER) compete? A couple of ways are by utilizing the quality engine kit program with your engine parts supplier and offering the optional warranty that goes along with it.
Engine kits have been a growing market segment for suppliers over the last several years. One of the biggest advantages offered by engine kits is that engine builders are freed from having to call around and source out every part to be replaced in an engine. No longer do engine builders get out the parts catalog and source out each and every part; instead, they simply call their supplier and order a kit for the type of engine they're working on.
Master engine kits have, in fact, changed the way engine builders do business. One prominent engine builder has said that he finds buying individual components to be a waste of time and he doesn't save enough money to make it worthwhile. By purchasing a master engine kit, say suppliers, engine builders can concentrate on what they do best - building quality engines for their customers instead of searching through various sources for the best and/or cheapest parts.
Engine builders also don't have to worry about stocking parts anymore. Today the majority of engine parts suppliers have warehouses dotted across the country and modern shipping methods mean they can get parts to you in less than three days. Most shops, unless they're way out in the boondocks, will be able to get parts in about a day.
Dave Deegan, Engine Lab of Tampa, says he has found that his relationship with his suppliers is as important as the parts he buys from them. "We've been buying parts from two suppliers for over 10 years and we're very happy with the service we get from both of them." Deegan says he has gone from stocking individual parts to now simply ordering a kit and receiving the parts the next day. "One of my suppliers' warehouses is right here in Tampa, so it makes it very convenient."
Types of Kits
"The full master engine kit is by far the best selling kit we offer," says Hunter Betts, Enginetech, Carrollton, TX. "It has everything including the cam and lifters, and comes with all that you need to rebuild an engine. A rebuild kit is essentially the same as the master kit except it doesn't include the cam and lifters."
Master engine kits may be the most popular kit programs offered, but they are not the only type. There are many other kits. There are re-ring kits, which are essentially top end kits. These kits include everything you need to rebuild a cylinder head and top end. There are also re-main kits, which are kits that contain everything to rebuild the crank and bottom end of the engine. Some suppliers even offer cam kits, which, you guessed it, contain all the necessary parts for replacing the cam.
In the early days of the evolution of engine kits, they were typically available only as pre-packaged sets. When you ordered an engine kit you couldn't pick and choose what brands and you couldn't make substitutions. Today, thanks to better order processing and parts picking technology, customizing an engine kit to meet your specific needs is becoming the norm.
"In our area we were one of the first warehouses to come out with an inclusive engine kit program that had flexibility," says Bob Christopher, Engine Parts Warehouse. "Back then, if you bought an engine kit from one of the large manufacturers you bought it how it was. With our kit program it was just a starting point."
According to Christopher and others who offer flexible engine kit programs, if an engine builder wants a specific brand and the supplier doesn't carry that brand, then that part can be left out of the kit and the kit is requoted right there on the spot. "Basically, when we receive the phone call, the customer knows they can make any deletion or substitution and we will ship only what they want. Our customers aren't forced to buy anything in the kit they don't want," says Christopher.
Some suppliers sell economy-type "pre-packaged" kits. These kits may have limitations but they do offer affordable alternatives as well, say some. "We do offer an economy kit to certain customers," says Josh McNicol, Clevite Engine Parts. "With the economy kit you can't have any substitutions or deletions. That means you can't substitute a different camshaft or delete the oil pump out of the kit if you've already bought one from somebody else."
Branded or Private Label?
Whether or not you purchase engine kits with branded engine parts depends on a couple of factors. Some engine builders buy branded parts because they are well known in the industry for quality products.
"The vast majority of our kits are master engine kits with branded merchandise," says Deegan. "We buy branded kits because the parts inside are very recognizable names that anyone in the industry would know. Obviously it's easier to be able to tell our customers that we're putting in name brand parts - there's never a question about the quality."
Liberty Engine Parts takes pride in offering branded parts in its kits. "We do have a few components that we market under the Liberty Performance banner, but they are, for the most part, performance parts," says Scott Crieghton. "All the standard replacement parts are your well-recognized name brand gaskets, timing components and oil pumps. It's all the name brand stuff our customers want to have. Our rebuilders are confident in these brands and feel comfortable buying and installing them."
Other reasons Creighton feels branded parts are so popular is because most of the major brands advertise nationally. "It's much easier to sell something rebuilders already know about," Creighton says. "Let's face it, when you're selling those products you're sort of riding their shirt tales. It works out well for us."
Yet Dave Deegan urges engine builders not to discount the value of private label parts, particularly for import applications. Private label brands can have many benefits to engine builders. Often times private label brands are cost competitive because of the fact they aren't as heavily promoted as branded products typically are. Some private label brands are very recognizable in the industry and some are even advertised as their own brand.
"We promote one brand name and that's Enginetech," says Enginetech's Betts. "We sublet the manufacturing of most of our products, so there's not much we buy off the shelf from a traditional manufacturer. We're unusual in that we don't follow the traditional standards of sales and distribution of engine parts. There are segmented WDs across the country but we're the only ones that cover coast-to-coast. We're the only true nationwide distributor of engine parts. And we're private brand," Betts states.
Another distributor that also has its own private label brand is Engine Parts Warehouse; its brand is called PBM, which is used on its engine kits. The content of the kit isn't all private label, however, they do a mix of branded pistons, rings and bearings. "When we first started 23 years ago we were selling branded kits: we painfully discovered that they were our biggest competitor, so we started doing our own custom kits," explains Bob Christopher. "What that meant for us was we had to make an investment in a lot of inventory because we needed pistons, rings, bearings, cams and timing components with all the various oversizes and undersizes. At that point we made the commitment to get into this niche market, specializing in just engine parts."
Size Does Matter
It's not only brands or specific components suppliers find they must remain flexible about: size is an issue as well. "We sell very few standard sized kits," says Enginetech's Betts. "I have all of my engine kits set up in our accounting system, so when a customer orders an engine kit, the default is .030?-.010?-.010? (pistons .030? over, rods .010? over and mains .010? over). We can do any variation of sizes - .060? over and standard crank bearing sizes - but probably 80 percent of the engine kits we sell are 30-10-10."
Clevite's McNicol agrees that a significant amount of engine kit sales today have some kind of oversize or undersize to them. "On pistons and rings we typically go up to a .060? over," says McNicol. "The rods and the mains depend on whether it's a metric bearing or a standard measurement bearing. For the most popular engines out there, like the 4.3L GM, Chevy 350, Ford 302, etc., we offer every possible oversize and undersize. However, we don't offer oversize on everything, including the obsolete applications that don't have a lot of demand. We've phased out a number of variations for these applications over the years."
Egge Machine Company's Steve Markley loves to hear that companies no longer offer kits for certain older applications. Egge's specialty is supplying engine kits for obsolete engines - and Markley says these kits are entirely custom created. "We'll provide a complete priced-out list of recommended components - but if you don't need it you don't have to buy it. Still, customers typically find that our recommendations are right on the money."
PERs typically do not buy engine kits according to those we interviewed; they buy individual components, usually in a bulk purchase too. Most engine kit programs are geared towards CER machine shops, and these shops need to be able to offer some sort of warranty program.
For CERs to remain competitive with PERs and OEM suppliers, they have recognized the need to offer warranties on the engines they rebuild. Greg Dunlap, Engine Parts Group, says his warehouse members recognized the need for CERs to offer warranties about 3 years ago because consumers making high dollar purchases were looking for protection. Warranty protection was available from a PER but not from a CER, so it was a competitive reason to offer them.
"We introduced a program that addressed those market needs, and it has now become the industry standard," says Dunlap. "Now, almost every engine parts distributor offers an optional warranty with their engine kits. CERs have realized the value of selling warranties with engine kits and it's now quite common. But not all shops have signed on to this concept. Some shops are still a little behind the curve of understanding the importance of bundling the warranty with their engines. However, we have hundreds of shops that have embraced the concept, realize the importance of the warranty and order it with every master kit. It has become part of their cost and they simply bundle it with every engine they supply and don't sell it as a separate item."
"Smaller CERs have had to compete with the warranties that are given by the large PERs, many of which have their own warranty programs for up to 3-years/100,000 miles," says Hunter Betts. "A program like that makes it difficult for the CER to compete when customers see these kind of terms advertised."
Warranties work very simply, but not all warranties are alike. There are "day-one" warranties and "90-day" warranties. With day-one warranties, the coverage begins immediately after the end user has purchased the engine.
Most warranties offered on engine kits are done through third party warranty administrators. Parts suppliers will sell a warranty with their master engine kits but in most cases do not handle warranty claims: any claim that is made will be handled through the warranty company. The logistics are handled separately, however, the rebuilder may still participate in the repair. With any warranty claim, the rebuilder receives a check from the administrator for the work.
It takes the machine shop out of the loop and becomes a worry-free way of offering protection to your customers. The vehicle owner who is experiencing engine difficulties contacts the warranty administrator. It is a hassle-free way for the rebuilder to deal with the vehicle owner if there are comebacks.
Future of Kit Programs
In the light vehicle market, engine kit sales are holding steady, according to our experts. "We put our money on engine kits, says Engine Parts Warehouse's Christopher. "We believe it is a better value for our rebuilders to have all the parts they need in one package. However, with fuel injection being the norm now, we're not selling as many complete master kits as we are top-end kits. The bottom end is not wearing out as quickly as the top-end. If the engine has valve guide failure or wear, the rebuilder has to pop the head(s) off and do a valve job. So we're seeing an increase in valvetrain repair also.
The heavy-duty engine kit market, according to some experts, is taking off also. "Our heavy-duty sales are growing by leaps and bounds," says McNicol. "It has a lot to do with the new diesel emission regulations as many fleets are choosing to rebuild their old equipment and forego the cost of newer equipment."
Overall, there are many options available for the CER in today's marketplace. Engine kit programs have evolved to the point where rebuilders have more choices and flexibility than ever before. You can customize kits, order top-end kits and even buy and then bundle the optional warranty with a master engine kit. Warranties can add value to what you do and protect you as well as your customer. These options should help you sell more engines and concentrate on what you really want to do.