Learn about the reasons you should sell heavy-duty engine parts if you sell heavy-duty truck parts.
Episode 101: Should aftermarket heavy-duty parts distributors sell heavy-duty engine parts, or should they leave it for the OEMs? That is the question we answer in this episode and to help us answer that question we invited Bill Mirth, Director of Business Development at IPD, to come back on the show. If you want to catch his past interviews check out episode 10 and episode 74.
Watch the Video
Benefits of Selling Engine Parts
“It’s a good business, at a good margin, and it’s important,” explained Bill Mirth.
There are three main reasons heavy-duty parts distributors should consider selling heavy-duty engine parts:
- There is a huge demand for high-quality diesel engine parts.
- It is a good way for distributors to make money.
- A new revenue channel for some distributors.
“For some, it’s something there that scares them, they feel uncomfortable selling engine parts,” said Bill Mirth.
People hold back from selling engine parts because they feel:
- It’s too complicated.
- Too broad of a market.
- Too intimidating.
- It can cost them lots of money.
Reasons to Buy Aftermarket Engine Parts
“Aftermarket a lot of times brings solutions to problems, because products are built to replace OE parts, and have a chance to see where problems are with OE parts,” highlighted Bill Mirth.
Two reasons to buy aftermarket:
- Aftermarket is more affordable.
- Same if not higher quality than OE parts.
Will EV Eliminate Diesel Engines?
“The world changes pretty slowly. Electrification will be a part of our business moving forward, but it won’t take over tomorrow,” predicted Bill Mirth.
Reasons that EV will not completely replace diesel engines in the foreseeable future:
- Lots of hurdles to overcome.
- Rare minerals required for EV vehicles.
- Rolling Brownouts in California are common because they can’t handle everyone using AC’s, never mind electric vehicles on the grid. Therefore, it will take time to upgrade the electric infrastructure to handle the additional demand.
- Pockets of industry may go EV in the near future, but the majority will still be traditional diesel engines.
- Still need diesel technicians for a long time.
Complete Transcript of Episode
You’re listening to the Heavy-Duty Parts Report. I’m your host, Jamie Irvine. And this is the show where you get expert advice about the heavy-duty parts you buy and sell, and keep you informed about what’s happening in the industry.
Welcome to the Heavy-Duty Parts Report. I’m your host, Jamie Irvine. When I was selling heavy-duty parts for large distributors, one of the things that we didn’t sell a lot of was engine parts. It was a category that for two of the main distributors I work for they didn’t really get involved in that at all. And I always felt like we were missing out because of it. You know, engine parts is one of those critical components. It’s definitely something that is important for keeping vehicles, commercial vehicles on the road. And when you’re selling parts, you want to be able to provide them with a total solution. But some distributors, especially in the aftermarket, tend to shy away from selling engine parts. And so today we’re going to tackle this and find out why exactly heavy-duty parts distributors should be selling heavy-duty diesel engine parts. And to help us with that, we’ve got a returning guests I’d like to bring Bill Mirth back on the podcast. And he is the Director of business development for IPD. Now he was episode 10 and again, Bill was on an episode 74 and links will be in the show notes if you’d like to go back and watch those episodes. But we’re really happy to have bill back on the show to be able to discuss this important subject with us. Bill, welcome to the Heavy-Duty Parts Report.
Jamie it’s great to be back. You’re looking good.
Ah, thank you very much, so are you, always happy to talk to you about this great industry that we work in. Bill let’s get right to it. Why should parts distributors embrace selling engine parts for diesel engines, the heavy-duty engine parts?
Because it’s a good business and it’s a good margin and it’s important. I mean, in your intro you had said that you worked for distributors that did not really push engine, but that was by choice. It wasn’t that the fact that there was no demand for it and that their customers weren’t using engine parts. It’s basically the independent distributor, I think doesn’t feel that they understand it, or they might be fearful of it, but it’s a very good business. And in today’s environment where so many private label programs are coming in and prices continue to become more and more competitive, and it’s even hard to tell the difference between one brand and another, and the way some of the technologies are going, like in brakes where you have drum brakes giving way to air disc brakes, which everybody’s going to be in the air disc brake business. So it’s going to be harder and harder for them to grow the business with the profit. And I think engine a great new avenue for them to tap into some new revenue channels and some new margin.
You know, I think you’re absolutely right. The parts distribution companies that aren’t selling engine on, especially on the aftermarket side, it is a choice. And I’d like to talk a little bit more about the kind of common objections that some leadership groups of aftermarket parts companies would have of why maybe they wouldn’t want to be. And let’s talk about those objections. And then, then we’ll talk about why there’s another side to that coin.
Yeah, I mean the ones that do it, do it very well. And there are some independent heavy-duty truck parts distributors that do a great job with engine and they’re very important to us. And even some of the biggest national footprint players in the market do extremely well with engine and they could even do more. So I do believe there’s something there that scares them, or they just don’t feel comfortable or they feel it’s too complicated or they feel it’s too broad. I mean, there’s a lot of different engines out there and, and engines are, you know, have thousands of components. I think an IPD brand, we have close to 20,000 different part numbers. So it can be a little bit intimidating. And that’s why we we’ve brought a program to the independent distributors called Make Engines Easy, where we want to be that extra counterman behind the counter that is knowledgeable on engine that we’re very accessible, we’re just a phone call away or online click, and we can get you the answers and the expertise that you need to feel comfortable. And a lot of times it could be going back to the OE and the OE of course, is going to use that to their advantage, to sell, you know, wheel end components and lights all the other stuff that the independent distributors selling. So why let them into your business, why not compete with them on all aspects of the truck and not just a couple of different areas?
You know, one of my mentors in sales taught me that objections are the signposts that lead you to the sale. So when it comes to this reluctancy and even fear, I think some of it’s also connected to the fact that if you sell the wrong part or a part that doesn’t stand up for a wheel end, like it can be bad, but it’s not necessarily the same cost to the end user customer as if the engine needs to be rebuilt a second time. And so I know I’ve heard people actually say that, they’ve said, “Hey, look, if something goes wrong with the wheel end, it might cost us $2,000, if something goes wrong with the engine, it could cost us $40,000, so I don’t want to go there.” What do you say to someone who has that concern?
Well, I mean, if something goes wrong with the wheel end it could cost a life. An engine when it breaks the engine, the truck stops. A lot of these other critical components, it may not cost much to do a warranty, but there are also a lot of liability involved in it. So I think that kind of evens its way out. But when you take a look at potential mistakes that are made, the distributor isn’t necessarily dropping those engine parts into the engine. So there is a bit of shared responsibility there for the person that is actually doing the rebuild. And I think a lot of their customers they might be installing brakes and everything else and they might be also building engines. So there’s some shared responsibility there but we do have warranties that if there is any sort of a defect in something that has caused a failure there is a two year unlimited miles, progressive warranty, meaning that if one part fails, we restore that engine back to its original condition. By the way, if that customer bought something from the OE and the OE did not install it a lot of times, they’ll just give you back the part you’re still on the hook for the labor and everything. So an independent distributor can actually give it enhanced protection to their customers, with the aftermarket warranties that are out there as opposed to an OE warranty. So that’s one objection, and we’re very good at what we do. You know, because these are critical components, you gotta get it right, because we don’t make something that’s going to cost $500 replacing oil seal, or something. We make a mistake and it can cost thousands and thousands of dollars. So there’s a lot of technology, a lot of quality monitoring, a lot of our own manufacturing and others that really make sure that that part that we put in the box is right the first time. Right from quality standpoint, right from a fit and finish and dimension standpoint and right from a support standpoint to say, this is the right part to put into that engine.
We’re going to take a quick break. We’ll be right back. Do you want to make your marketing standout? Well you can’t sound or look like everyone else. If you sell heavy-duty parts, it’s time to create your unique message, a message that truly stands out and we can help. Our team provides consulting and marketing services to heavy- duty companies go to heavydutypartsreport.com/standout to learn more that’s heavydutypartsreport.com/standout. Before the break we were talking about why parts distribution companies, especially in the independent channel, why they should consider selling engine parts and Bill, you were talking about some of the differences in warranty from let’s say, doing wheel end, where the parts on the warranty might not be that much, but a life is at risk. On the other hand with an engine that truck just stopped. So it’s not necessarily risking someone’s life, but then of course, the cost to repair that engine a second time is so much higher. This is part of the fear that seems to be almost embedded in selling engine parts, kind of preventing people from selling engine parts. You know, I remember talking to a few independent repair facilities as well when I was selling parts and talking to them about whether or not there was a willingness on their part to buy engine parts from an aftermarket supplier and manufacturer, what kinds of things have you heard of people? Like what kinds of objections do they have on the independent repair side? And how do we overcome that?
Yeah, that’s a good question because they want to save money too. I mean, the whole aftermarket is in place to not only bring a competitive price to the market, but also a lot of times we can outperform the OEs when it comes to service and quite honestly quality a lot of times. So a lot of times there’s an education factor there for that independent rebuilder to understand that for years it’s called will fit, might fit, won’t fit parts and so forth. But the industry has really evolved so much past that, that this is highly technical high quality products that once you can start to show them, and not only how we meet the demands of the current part, that they might be buying, if it’s from an OE as an example, but then how the aftermarket, a lot of times brings solutions to problems or enhancements to products because our products are built to be replaced with parts, not on the original engine. So a lot of times we can actually improve on the products, improve on designs, or come up with something totally different to fix a problem that has become inherent with that particular engine. So that’s a luxury that we have on the aftermarket side that we’re always looking to improve and find new ways of doing things.
Right and the expression, heavy-duty engine parts. I mean, that is a really broad category as well. Could you speak to some of the opportunities that maybe people in the independent aren’t even aware of?
Well, I mean, once you’re in the engine parts business, the world is your oyster. I mean, there are engines everywhere. There’s generators, agricultural applications, pumps, oil and gas applications, and so once you get good at it, everything starts coming at you from an engine standpoint. So it’s not just the 18-wheeler going down the road there’s a lot of industrial applications there too. And so once you embrace it you’ll be amazed at how many opportunities there are. And that could also open up doors and new market niches for a distributor that might’ve only been focusing on one particular market niche within the heavy-duty realm.
Richt, I’m thinking something as simple as if you’re only doing Class 8. Now you have that medium duty truck that opens up to you. Then, like you said, you get into industrial and agriculture and all of those things, all of a sudden now, what other parts can you sell? What other products can you sell to those customers? It really starts to expand the addressable market that you have as a independent and aftermarket distributor. So that sounds really good to me. You said one thing that just triggered my mind an auxiliary question. You said ‘once you get good’, what kind of investment, what kind of timeframe does it take a company to really get up to speed where they can be proficient?
The engine parts business is a deep rabbit hole to go in. There’s different ages of engines and different technologies of engines. I think there’s five different piston evolution of piston designs over the last 20 years and so forth. Within the aftermarket we’re of course looking back about 10 years for the engines for the second or third owner when it comes out of warranty and so forth. So when I say get good at it, maybe it’s more get comfortable and have that commitment, even from the top down from, from a distributor that, hey, we’re gonna make this part of our portfolio, just like we’re going to embrace drive line, why not embrace engine? And the more you do it, the more comfortable that you get and knowing that you’ve got a partner behind you, like with IPD, with our Make Engines Easy that we’re going to get you the answers, we’re going to be your resident expert, if you don’t have one. But I think what I’ve noticed in time, I’ve traveled with a lot of distributors salespeople, and I’m kind of focused on my one brand or the bucket of brands that I’ve been involved with and you see this vast knowledge that they have. You know, I remember we’re doing some brake discussions and some field work and then the sales guy looks over at a trailer with a door broken and says, “Hey, let me order a door for you.” And he gets on the phone and says, “Hey, he needs a 4285 door, get it delivered.” You know, how do they know all of this stuff? So I think once they embrace it, a lot of the distributors have this wide range of knowledge that they seem to just kind of sponge in and absorb that I think they’ll become more, more comfortable and can identify an engine and know what they’re strong at and go after it.
I’m not going to hold you to this because nobody has a crystal ball. But what would you say to someone who says, well, hey look, the whole commercial, industrial, and even automotive, like the whole world is moving towards electric vehicles is this something I should even bother getting involved in today? What would you say to someone who had that objection?
Well I’m old and I lived through the fact that we were going to have an ice age back in the eighties. Now we’re all going to burn up. I remember we’re going to die from killer bees. I remember overpopulation by the year 2000, we’re supposed to be out of oil, so there’s always some trend that’s supposed to change the world. And if you really look back the world, you know, it changes pretty slow. And so don’t believe everything you hear. Electrification of vehicles, it is going to be something that is going to be a part of our business moving forward. But it’s not going to take over tomorrow. There are a lot of hurdles that particular market needs to get over. Number one, the contents of them are what’s called rare minerals, cobalt, and lithium and nickel and so forth, these are hard to get. It’s not like oil that’s coming out of the ground in places. You have to really go mine that and there’s only a few places around the world that has it. So I think that’s going to be a constraint. I’m also happy to live in California. And it’s kind of funny because our governor said, yeah, in 2030, you know, 2030, I think we’ll just pick that date, we’re going to be all electrical vehicles being sold in the California. And most Californians laugh because when it gets hot out, we have rolling brownouts. You know, we don’t often run air conditioners in California, but when it gets hot, we all turn them on and the grid is not enough to handle it so we have rolling brownouts. When the wind blows, because sparks happen from wires and we have these fire problems we actually turn off the energy, the electricity in large sections of our population to protect against fires. So if you are now just plugging in your car every day, how do you handle 50 million more cars being plugged in and run your air conditioner on the grid? So the grid is going to be an issue as well as charging stations and so forth. So there’s a lot that has to be done. It’s not going to happen overnight. Actually, it’s funny, because just last week, we presented to our board of directors because they asked the same question, where is this business going? And the best we could find with all the information that is out there is that energy is going to be very high demand. So everything is projecting by 2040 to grow, including oil will reach new heights, including natural gas, I think that’s an area that people ought to start looking at, I know we are, we have a lot of natural gas applications within our product lines. And then electrification is just one of them. And so I think they’re all going to grow but it’s not going to take over. And then of course in the heavy-duty business, we’re about 10 or 15 years behind the automotive and in the aftermarket we’re about 10 to 15 years behind the current truck that’s coming off the showroom floor today. We’re not going to have a crack at it from an engine standpoint replacement for maybe 10 to 12 to 14 years. So even if everything switched over tomorrow to electric you’re still looking at over a decade before we would even touch it. So I think that’s much ado about nothing at this point it’s something to definitely look at. I can tell you, I’ve got some friends with Teslas and pop open the trunk of a Tesla and there’s no parts in there. So I think we better hope that some of these governors and so forth are not correct and we all do run into, you know, with the batteries because it’s very boring from a parts standpoint, but I don’t think it’s going to take over there’s too many different variables, too many different costs and oil continues to be very, very cheap. And as long as that’s cheap, I don’t think it’s going to take over the world. So if you’re 15 years old and thinking about becoming a diesel mechanic, I would say, my gosh, do it. You can make a very good living. You can live anywhere around the world and you will always be in demand.
That’s one of the statistics that I saw in a conversation I had with John Adami, who works with OEs and he brought forth some information that basically said, if you are just entering the heavy-duty industry right now you will retire. You have the ability to work in it your entire life and still be able to be part of the industry. So you know, that gives you an indication of how long it’s going to take for some of these things to completely change. That being said, I think we all understand that pockets of the industry will change a lot faster than others. I’d like to end our conversation today with maybe a little story. Can you just tell us a story, a success story of someone who was a little bit hesitant to get into engine, but when they did, they had great success?
Yeah, I’ve got actually a distributor who I’m also Facebook friends with and he’s a truck parts distributor. And so I kind of gave him a hard time ’cause he posted something about a sale on some truck parts on Facebook. And so I shot him a note. I said, “Why don’t you just post something and I’ll give you some engine numbers.” And lo and behold, he posted them he sold a couple of kits. He was thrilled and he made some very nice margin on it. We actually drop-shipped it for him. We gave him the part numbers, we quoted him the price, he gave it to his customers, customer said, “I’ll take it.” We drop-shipped it. He didn’t even really have to touch it. And you don’t always have to, it’s nice to have them on the shelf, because when you have engine parts available and the customer needs them, they need it now but we were able to drop ship it for him. He went in to call on this customer and he found that this particular customer fleet was going to the OE for their brakes and drums and everything else. So he was able to capture that business too. And it became a great customer for him. And I sat and I asked him, I said, “look, you know, you just made a $4,000 sale and you made some nice margin on it. What would you have to do to sell that much in drums? You know, here you have just a little half pallet, nice, neat box with an engine kit in it, it’s all nice and clean.” And you know, he said, “I would have had to have three delivery trucks full of drums”, you know, and drums, which by the way are taking up half of his warehouse that he has to for every square foot for. And we both got a chuckle out of it that, yeah, “I need to sell more engine”, because, you know, it’s, you can’t get out of the drum business. It’s a necessary part of the offering, but you can really enhance things. And when you look at it like that, it’s like, wow, you know, this is probably something that I should look at. And if you do, I would say look to IPD. And remember our program of Make Engines Easy, we would love to kind of just put you into that business and then be that resource for you and be that guy to kind of get you started and build that knowledge base and you don’t have to be afraid of it from day one. You can start going out and shaking the trees and see what happens. There’s a lot of business out there. There’s a lot of great opportunities. And I think with the changes in the marketplace, the prudent truck parts distributor is going to start looking at engines more and more, and we will be there for them.
You’ve been listening to the Heavy-Duty Parts Report. I’m your host, Jamie Irvine. We’ve been speaking with Bill Mirth, Director of business development at IPD. He now has joined the club of the third time on the podcast. He’s with a very select group of people. To learn more, go to IPDparts.com. Bill, thank you so much for being on the Heavy-Duty Parts Report a third time.
Thank you, Jamie. I look forward to number four!
Thank you so much for tuning into this week’s episode of the Heavy-Duty Parts Report. I’m your host, Jamie Irvine. And I’d just like to remind everyone to focus on cost per mile. Let’s keep those trucks and trailers rolling.
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