Benzinga | Sep 29, 2020 01:55PM EDT

BofA: Auto Parts Retailers Have Strong Margins In $300B Market

Bank of America is out with thoughts on the $300 billion aftermarket auto parts and repair market based on survey results.

The Takeaways: Suzuki highlights four large companies in the auto parts market in AutoZone (NYSE:AZO), O'Reilly Automotive (NASDAQ:ORLY), Advance Auto Parts (NYSE:AAP) and Genuine Parts Company (NYSE:GPC).

"The US automotive parts and repair market is large, stable, highly profitable (versus other segments of the auto value chain, and relatively fragmented," analyst Elizabeth Suzuki wrote in a note.

Auto parts retailers have seen a 13.5% average margin compared to 5.4% for new vehicle manufacturers, 8% for parts manufacturers and 3% for auto dealers.

In the do-it-yourself market, AutoZone leads the way with 14% market share. Advance Auto Parts, O'Reilly and Genuine have market shares of 6%, 9% and 3% respectively. New car dealers make up 4% of the market.

The do-it-for-me market sees new car dealers have a 35% market share. The four auto parts companies mentioned each have 5% or less market share in the category.

What's Next: Suzuki expects consolidation to continue in the industry.

The threat of Amazon.com (NASDAQ:AMZN), the largest seller of auto parts online, is something to watch, according to Suzuki. The survey showed that customers favor retailers that offer buy online, pickup in-store as an option, which could fend off the large online retailer for now.

Price Action: O'Reilly is the only gainer in 2020 with shares up 4%. AutoZone, Advance Auto Parts and Genuine Parts shares have fallen 3%, 4% and 10% respectively on the year.

Photo credit: Steve Morgan