There have always been tariffs on imported goods. But typically, tariffs are in the 2% to 4% range, while recent increases in the tariff on goods from China have brought the effective rate on tariffs for most truck parts closer to 30%. That could go even higher if the next round of tariffs is implemented.
Overseas factories have not been passing along the entire increase — yet, according to Jim Hastie, vice president of product development at CarParts.com, a distributor of aftermarket parts for automobiles and trucks. “They try to work with us. While they do not give it all back, in general they have helped out 10% or 12%. The rest gets passed along, and eventually I believe even the 10% to 12% relief we are getting now will end. I don’t know how much longer we will get that reprieve direct from the factory.”
Hastie believes the heavy-duty parts business felt the effects of the tariffs sooner than the automotive industry, because trucks, which travel many more miles, see more parts consumption than cars. “I am talking about things like belts, brake parts, hoses, radiators, turbochargers — all those things that are on a fleet’s maintenance schedule.”
How much are the tariffs affecting fleets? “Quite a bit, as they are now definitely paying more for parts,” Hastie says, especially because of mark-ups of the tariff at each step of distribution.
The good news is that there are a lot of new entries into the truck parts aftermarket that are providing value to fleets, so they have more parts-buying options.
However, he cautions fleets to be diligent about where they get parts, “because you do not want to give up quality.” With new brands coming into the market, fleets will need to review them carefully to ensure they are not sacrificing durability and quality for a cheaper price.
Hastie also cautions fleets that are considering deferring maintenance to mitigate the price increases resulting from the tariffs. Deferring maintenance can lead to more breakdowns, which will wipe out any savings in the cost of the parts. That does not mean fleets should not consider stretching maintenance schedules, but they need to do it carefully, and monitor breakdowns between PMs more closely.
Truck manufacturers’ all-makes parts programs may be the big winners here, as more fleets may consider these value line products earlier in a truck’s life cycle. “These all-makes products may give fleet managers the ability to meet their KPIs [key performance indicators] and to be successful,” Hastie says.
There also may be a growth in reman parts. “Reman has always been the cheaper way to go than new OEM parts,” Hastie says, but they are not without their issues, especially in finding cores. “Will reman now be that much cheaper that it will make more people consider it? Fleet managers are going to have some work ahead of them to see where [reman parts] might fit. Where it might not have been a consideration before, it may become part of their playbook,” he says.
“It has to be a balance. If the part is cheaper but not durable and you break down more, you are not saving money. You have lots of new players that are coming in that say, ‘I can build that hose and get it to you for 50 cents cheaper,’ but the question is, what are they doing to make it 50 cents cheaper?”
The best strategy for dealing with the increases in parts costs caused by tariffs is a combination of buying better, stretching maintenance cycles where it makes sense, and passing along some of the cost, according to Hastie. “You can’t do just one of these; it has to be a multi-prong attack.”
Originally posted on Trucking Info