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The Drive For Performance Import Profits
By Doug Kaufman
The automotive industry has seen a great number of specialty niches since the first automobile owner decided to customize his Model T. Since that time, the search for the next great profit opportunity within the aftermarket has continued.
The newest niche in the specialty aftermarket is the import performance market. Although modifying these small, powerful cars and light trucks to be even faster and have better handling is certainly not a new idea, the rate at which the market has been growing is simply incredible.
For many engine builders, the word "performance" means big block Chevrolets, Ford 351W or Chrysler Hemis. But it’s naive to believe that American motors have a monopoly on performance: the Honda Civic and Acura Integra, as well as many other Japanese and European nameplates, have a dedicated, educated and often affluent following.
Look at some numbers from the Specialty Equipment Market Association (SEMA) on the rapid growth of the performance import market. From 1997 to 2001, the market for import and compact performance products skyrocketed by more than 430 percent, growing from $295 million in retail sales to more than $1.59 billion. While the market may have been started and fueled by West Coast (particularly Southern California) enthusiasts, all areas of the country have seen significant interest in performance imports.
That being said, however, how much potential is there for custom engine builders who don’t currently handle performance import engine upgrades to catch the wave? An initial assumption might be to jump into the market quickly - after all, while the market continues to grow rapidly, it hasn’t achieved the explosive year-to-year growth that it experienced in the late 1990s. It might be prudent to get your share while you can, some suggest.
But a closer look suggests that succeeding in the performance import engine market means increasing your dedication to excellence - and more.
How Big is the Potential?
The opportunity to make money selling engine components and machining to the performance import market is great, say engine builders and suppliers who currently do so. But the opportunity isn’t universal across the country, and it isn’t without risk, they caution.
Dan Minick, who writes the column "Just Imports" for Engine Builder magazine, predicts urban areas of the country will continue to see a growth in the sales of these "pocket rockets," and primarily on the coasts and in the South.
"The Midwest and rural areas will tend to be limited, because in those areas, performance is still thought of in terms of a small-block Chevy," Minick believes.
Tom Nichols, president of the Import Car Parts Division of Automotive Machine & Supply, sees growth in his area, Fort Worth, TX.
"The import performance market represents about half of our revenue and is growing every day," Nichols says. "We recently increased our high performance engine parts inventory by $60,000 just to better support our machine shop’s parts needs. And, we also sell performance engine parts to other shops and jobbers, as well."
Like Nichols, Al Oramas, Proformance Engines, Denver, CO, is both a member of the Engine Rebuilders Association (AERA) and an aggressive supporter of the growth of the import performance market.
"All I do is import high performance work. From complete engine building to adding turbos, superchargers and the like, we build performance," says Oramus. "Occasionally, we’ll build a stock motor, but that’s just on an as-needed basis."
This business method has changed over the past few years, Oramus explains. "I used to have a shop that did normal production engines, and did performance on the side. But I sold that business and now focus on hot rod and performance, particularly imports."
According to latest reports from SEMA, the growth in the market will come from females (expected to comprise at least 25 percent of the market by 2003), older drivers (those aged 26-30 will make up a larger share of the market) and a more ethnically diverse public. More African-Americans, as well as Latino enthusiasts, will contribute to this diversity as their general populations increase throughout the country.
The nameplate of choice is Honda, says Oramas. "Of the import market, nearly 74 percent of the cars being done for performance are Honda Civics or Acura Integras. There are some Preludes and some Accords, but not many compared to the others."
Nichols agrees: "What’s hot? Honda, Honda, Honda, Acura and Mitsubishi...did I mention Honda?"
But being too popular might be a problem as well, according to Craig Paisely, Paisley Automotive, Hempstead, NY. "Hondas and Acuras are so popular we won’t even touch them," he explains. "There are plenty of other shops out there who work on them, so there’s no need to compete with them."
Paisley sells and installs engine, suspension and braking equipment for Japanese performance cars, with a specialization in Toyotas. He acknowledges the continued interest in the European aftermarket as well but says his customers want more from their cars than just performance.
"There’s a whole lifestyle around this aspect of the performance market," Paisley says. "You really need to understand that about these customers."
A glance under the hoods of these cars reveals several upgrade opportunities. According to Dave Darr, owner of Darr Auto Repair, Uniontown, PA, a billet aluminum flywheel that is half the weight of a stock flywheel will allow the engine to increase rpm at a faster rate. Replacing the stock air filter box with a cone-shaped version and intake pipe will produce up to 20 more horsepower.
Larger turbos are available for some cars, including the Nissan 300ZX Turbo. To get the most from that modification, a boost control will be needed, and upgrading the ignition is called for as well.
Bolt-on performance is one thing, but internal engine modifications are big, too.
"For us, it’s cylinder head work - porting, multi-angle valve jobs, thermal coatings," says Nichols. "Plus, we’re boring and sleeving blocks for big bore kits. I can also see where installing turbos, nitrous oxide and remapping fuel injection systems has a lot of growth, too.
Paisley says people are less intimidated to open their engines to upgrades. "Four years ago, you couldn’t talk people into doing that except for extremely hardcore types. Today, people are coming in and asking for it."
Although Paisley doesn’t do the machine work himself, he refers interested customers to qualified engine builders. PAC Motorsports’ Oramas says referrals are a critical part of his business.
"I do both a jobber business and a retail business. I’m a jobber with the local speed shops and I let service garages know that I do the engine work they may not. Then, when they get calls about projects, they can send their customers to me," says Oramas.
And people do come, Oramas says. "I build engines for people who drive from Arizona, Minnesota, Texas, Kansas and Washington to have them installed in our Denver shop."
Automotive Machine & Supply’s Nichols agrees that today’s import consumers are more willing to find the power within their engines. "I’ve noticed the market is more ‘do-it-for-me,’ rather than ‘do-it-yourself.’ While today’s typical high performance car owner is very knowledgeable about the sophisticated fuel and ignition systems, they know little about the internal workings of an engine. So we spend a great deal of time educating and explaining things to folks...but that’s what brings in our customers."
Nichols says that dealing with his customers has required a major commitment and time - something he urges engine builders considering entering this market to remember.
"Import car makers ‘invented’ parts proliferation," Nichols says, only half-jokingly. "Even as a small regional parts distributor, we stock almost a half-million dollars in import engine parts and are continually adding SKUs."
Knowing the parts is only a portion of the challenge, continues Oramas. "Because our customers read so many magazines, they are very well educated about their plans for their cars. They’ll come to us and ask for specific modifications."
Paisley spells it out even more clearly: you must be well organized to take advantage of the opportunities.
"The machine shop geared up toward domestic engines isn’t necessarily geared up for import engines. Although the techniques may be practically the same, the tolerances are different and the tooling is different. Shops must make the investment in their tooling and equipment to take advantage," he believes.
"Import performance is in all areas of the aftermarket," points out Minick. "Street performance, drag racing and SCCA are all big. Make yourself known at local events, become a sponsor at some races. It doesn’t have to be big dollars, just make your presence known and make it known that you are supporting the customer’s passion."
After all, Minick points out, the import performance customer often considers his or her car an extension of a lifestyle, rather than just basic transportation.
"There may be a feeling by owners of imports that the traditional shops shun them, or treat their ‘beloved import engine’ as a second-rate motor, or something that should power lawn equipment. Don’t look down on these guys and their hobbies. Let them know you believe that their passion is legitimate."
The best way to do that, says Minick, is to become knowledgeable about the cars, the engines and the market itself.
"These customers could care less that you have a wall full of small block Chevy parts or that you know exactly what to do to wring out a few more horsepower from a Chevy 350," Minick says. "Nothing could be worse to these customers than confusing a Toyota 3SGE from a Celica with a Honda D15 in a Civic. How would you feel if the shop you went to didn’t realize the difference between a Ford 390 and a Chevy 400?"
Nichols says the import performance market is definitely cyclical, and opportunity will continue to exist.
"As the market matures, internal engine upgrades are becoming more and more frequent. We saw the same thing happen with the air-cooled VW market back in the early ’60s. I see today’s import performance market developing into a great opportunity for engine builders."