Austria
Mexico
Pakistan
Russia

Austria's Aftermarket Accessory Market

Austria is one of the richest countries in the world, and one of the things Austrians like to spend their money on is the automobile. In the year 2000, there were 4,097,145 passenger vehicles registered in Austria, up 2.18% from the year before. Considering Austria's population of just under 8 million, a simple act of division reveals a per capita automobile rate that is among the highest in Europe. Little wonder, with the number of passenger vehicles on the road in Austria increasing steadily by around 100,000 units yearly for the past ten years.

Austrians spend over $2 billion yearly on automotive parts and accessories. Accessories alone account for around $860 million spent annually. With such a promising market, it is disappointing to note that U.S. suppliers play such a small role. Though there are no exact figures, we estimate that U.S. products account for less than 5% of this market. This has several reasons. The cars that are on the road in Austria are very different from what you see in the United States. In America, SUVs, vans, and larger sedans dominate the streets, and detailing is highly popular. Here, compact and sub-compact sedans with little or no detailing are the norm.

A second important factor is the predominance of German-origin vehicles. Over 52% of all cars on the road in Austria were made in Germany. By far the most popular make of car is the VW (Germany), which has a market share of nearly 20%. Only 1.5% of all cars currently registered were made in the United States (and that is including all Chrysler and some Mercedes models assembled locally).

The statistics would indicate that the accessory aftermarket is stagnant or perhaps even shrinking due to the fact that new cars come with so many traditionally aftermarket accessories already built in at the factory. In fact it is more accurate to consider that a redefinition of the accessory aftermarket is taking place. Where 10 years ago the classic aftermarket product may have been a stereo, today a range of products and services, many of which did not even exist 10 years ago, battle for the attention of the car-owner.

Austrian accessories customers can be divided into four categories: conservative, immediate needs, sports-oriented, and high-end lovers. Though a single customer may belong to several of these categories, it is useful to see which customer buys which product. Where a conservative driver is interested in keeping his car tidy and clean, the sports-oriented driver wants a lower, sexier, faster car.

Accessories aftermarket distribution in Austria is clear-cut. The lion's share of sales are through car dealers and garages, followed by retail chains, tire stores, and niche sellers. Each of these distribution channels indicate different product specializations and, to some extent, different customers.

Best prospects for U.S. suppliers are automotive chemicals, interior comfort and design products, winter equipment, sports products and services, and a category of "evergreen" sellers including luggage boxes and racks.

Market Facts

In the year 2000, there were 4,097,145 passenger vehicles registered in Austria, up 2.18% from the year before. The average age of an Austrian automobile is 8.7 years old, and the average length of service is 12.5 years. Over 52% of all cars on the road in Austria were made in Germany.

According to a recent report published by AC Nielsen, Austrians spend over $2 billion yearly on automotive parts and accessories. Accessories alone account for around 43% of that figure, or around $860 million. Though there are no official figures, we estimate that U.S. companies have been able to capture less than 5% of this market.

According to Nielsen, the total spent on aftermarket parts and accessories is growing by around 5% annually, however, growth in these two segments is not equal. While total spending on replacement parts is growing along with the ever-growing number of cars per capita, spending on accessories is seemingly stagnant or falling. This can be explained by the fact that new cars tend to come with ever more "accessories" such as a good stereo, air conditioning, and aluminum wheels already built in at the factory.

Interviews with industry players indicate a slightly different picture. While it may be true that the traditional accessory market is stagnant, what is in fact happening is that the definition of aftermarket accessories is changing. Where 10 years ago, the classic aftermarket accessory was a good stereo, today we see a range of products and services - many of which did not even exit 10 year ago - that make cars faster, prettier, safer, and cleaner.

Who buys automotive accessories?

Perhaps the easiest way to think about today's automotive accessory aftermarket is to define customer categories and take a look at the accessories that they tend to purchase. Please keep in mind that these categories were invented by the author and serve only to illustrate certain behavior patterns, i.e., a single customer may be found in more than one category.

Conservative Customers
The conservative customer is concerned with the care of his car, with safety, and with obeying the law. This customer buys products for washing the car, car wax, protective covers for the floors and seats, and keeps the legally required first-aid kits and emergency flares (these are orange triangles in Austria) in his trunk. If he has a cell phone, he will buy a legally required cell-phone hands-free device.

Immediate Needs Customers
This is a practical customer type who buys an accessory to full a particular need. Products that she buys would include motor oil and anti-freeze, winter products such as snow tires/wheels, snow chains, snow-clearing brushes, a luggage rack, a child safety seat, a trailer, etc.

Sports-Customers
There are two kinds of sports-customer, and both are interested in souping up their cars. The first and more important kind of sports-customer is the mid- to high level manager, male, aged 30-50, who puts a high value on understatement. This person generally has a rather new and expensive car, and wants to make it a little bit faster and a little bit sexier. He will get the car lowered a little, put slightly larger and wider tires on it, add a spoiler perhaps, or even do chip tuning, whereby the performance of the motor is optimized by modifying the electronics.

The second type of sports-customer is younger, poorer, has an older and less expensive car that he wants to turn into an attention-grabber. This sports-customer is far less common than the well-to-do manager, but this is a target group that is being actively cultivated and is growing. He will give his older car an eye-grabbing paint job, lower it, put on spoilers and larger and wider tires, and in most cases add an ear-blasting stereo.

High-end Customers
This customer type is interested in the latest gadgets that make driving more comfortable and/or productive. He drives (or is driven) for several ours most days on business travel. This person is interested in a satellite navigation system, a fabulous stereo system, and an engine-block prewarmer for those chilly winter mornings. There is no limit to the kind of customization that this customer will have done. Some build computers into the seat panels, others set up a whole mobile office in the back of a van.

Distribution Channels

Austria's aftermarket distribution channels are clear-cut. The majority of sales are made at dealerships and repair facilities (69%). Within this category, a distinction should be made between manufacturer-affiliated and independent businesses. Aftermarket retail is in second place with around 15% of the market, followed by tire retailers (13%). The rest is split between home improvement stores, gas stations, and auto clubs with around 1% each.

Manufacturer-affiliated dealers and garages have captured the largest share of this market. Not surprisingly, they concentrate on make- and model-specific products. Purchasing is done both through internal manufacturer- or importer-based ordering systems and through contacts made at trade shows. They target new car customers and the owners of warranty-protected cars, thus it is no surprise that the manufacturers with the most cars on the road in Austria also do the best accessories sales. It also comes as no surprise that different products sell better for different makes and models. Products that are currently selling well are satellite navigation systems, performance enhancements, larger/wider tires and aluminum wheels.

Because over half of the cars on Austrian roads were built in Germany and less than 2% in the USA, most of the aftermarket accessories sold at manufacturer-affiliated dealers originate in the EU, with Eastern Europe, Turkey, and Asia also playing a small but not negligible role.

Independent dealers and garages are the second most important distributor type in Austria. They also provide make- and model-specific products, but these are purchased through independent channels. They target the owners of older cars that are no longer warranty-protected. Products that are currently selling well are luggage racks and boxes, trailers, larger/wider tires and aluminum wheels, cell-phone hands-free systems, and satellite navigation systems. Growing in popularity are also sports products and services such as setting the car lower or adding a sport exhaust and filters.

Most independent dealerships have a relationship with one of the large Austrian independent parts wholesalers, through whom they order most or all of their stock. In particular the high-value products originate to a large extent in Europe. Commodity-type accessories tend to be imported from the Far East.

A small but lucrative niche within the independent garage category is the "tuning" branch, which specializes in high-end customization. There are only a handful of firms operating in this sector, but they are booming.

Third on our list of accessories distributors is the retail sector. This sector sells primarily products that are not make- or model-specific, though there are some exceptions (car mats, for example). They serve a broad customer base with basic products such as cleaning products, motor oil, and anti-freeze. People also purchase first-aid kits and emergency flares (triangles) at retail outlets, as well as less expensive comfort items such as car mats and other interior protection and decoration.

There are only a handful of large retail chains in Austria, and they account for most of the retail market. They import most of their products from the Far East, and find new products by visiting several European trade shows every year.

One reason why tire dealers have such a large share of the market is that most every Austrian car has two sets of wheels and tires: one for summer, and one for winter. In the fall, people mount snow tires (it is required by law to use snow tires during certian parts of the year); in the spring, the snow tires are put into storage along with the wheels, and the regular tires mounted.

Each of the small players on the market has their niche. Home improvement stores sell a similar, if smaller, product range to the aftermarket retailer. Gas stations sell primarily chemicals - motor oil and antifreeze. And the auto clubs specialize in safety and touring accessories such as child seats, first aid kits, trailers, and luggage racks.

Best Prospects

1. Chemical products: the demand for a wide range of chemical products is growing at a healthy rate. This includes everything from motor oil to anti-freeze to car cleaning and waxing products. Performance-enhancing additives are not as common here as in the States, which may be an interesting niche. The caveat for chemicals is the strict Austrian storage regulations. Because of fire and safety regulations, special storage facilities must be used. The company that can arrange for storage and delivery to point of sale would make his product particularly attractive.

2. Products for interior comfort and design are also selling well. This includes satellite navigation systems, mats and carpets, cell-phone hands-free sets. Products that are not as widely available here as in the States are plastic- molded auto "furniture", for example, consoles for papers and drinks that fit between the seats. Especially in the larger compact vans and SUVs, these kinds of accessories may be able to find a comfortable niche here. Another product that I have seen in the States but not here is a projector system for satellite navigation graphics that projects directions onto a part of the windshield. Another product group that may sell well here is aroma, esp. natural or esoteric aromas - except for the christmas tree that hangs from the rear-view window, there are very few auto aroma products to be found here.

3. Winter equipment is another strong seller. Engine block pre-warming is the most recent craze, but other winter-oriented accessories are in steady demand: snow chains, snow tires (required by law to be mounted from November-April), snow-removal brushes, etc.

4. Sports products and services are strong in coming. Taller, wider, flatter tires with wheels to match are highly popular. Sports exhaust pipes, front and back spoilers, and getting the car set lower are all increasingly evident. Sports accessories that are less common here are interior products such as steering wheels or stick shift options - perhaps an interesting niche.

5. Finally, there are the evergreens - these products are not really trendy, their sales are not skyrocketing, they are simply proven sellers: luggage racks, trailers, aluminum wheels, child safety seats. Important here is high quality and design.

Finding Austrian Distributors

Many purchasing agents with whom I spoke mentioned that they regularly attend one or more European trade shows. The most commonly mentioned was the Automechanika in Frankfurt, which takes place every second year. On Automechanika off years, they attend another Frankfurt fair, the IAA. Several also mentioned the Paris show, Equip Auto. U.S. pavilions and assistance in attending or exhibiting at these and other European shows is available to U.S. companies.

The Austrian market can also be targeted directly using one of several export assistance programs offered by the U.S. Commercial Service. If you would like more information about the Austrian accessories aftermarket, or for assistance in entering the Austrian market, please contact the author:

Marta Scheidl
US Commercial Service, US Embassy Vienna
Boltzmanngasse 16
1091 Vienna, Austria
Tel. (43 1) 313 39-2205
Fax (43 1) 310 6917
E-mail: marta.scheidl@mail.doc.gov
Web: www.importusa.at

Pakistan

The U.S.-Pakistan Business Council

The US-Pakistan Business Council is a private, non-profit, non-partisan, member-supported organization dedicated to promote a closer relationship between USA and Pakistan and strengthening bilateral relations through strong economic and commercial ties. The Council will provide solid market information, business and logistical support and services, and potential project leads to its members. The US- Pakistan Business Council is now affiliated with the United States Chamber of Commerce and is a part of the International Division at the Chamber. The United States Chamber of Commerce is the world's largest business federation representing over 3 million businesses and organizations of every size, sector and region for more than 90 years.

DR RIAZ M. CHAUDHRY
Vice Chairman,
US-PAKISTAN BUSINESS COUNCIL

DR. HERB DAVIS
Executive Director
US-PAKISTAN BUSINESS COUNCIL
Tel: 202-463-5382
Fax: 202-463-3173
e-mail: hdavis@uschamber.com

US-PAKISTAN BUSINESS COUNCIL,
International Division,
United States Chamber of Commerce,
1615 H Street NW,
Washington, DC 20062-2000.

Setting Up a Business in Russia

Provided by:

Tanya Shuster, BISNIS Deputy Director
Tanya_shuster@ita.doc.gov
Judith Robinson, BISNIS Legal Specialist
Judith_robinson@ita.doc.gov
www.bisnis.doc.gov

Author:

Marina Parshukova, U.S. Commercial Service
U.S. Embassy, Moscow
www.buyusa.gov/russia/en/

SUMMARY

The following report provides updated information on the business registration forms and procedures for foreign companies in Russia. Depending on the purpose of doing business in Russia, U.S. business people may open a branch of a company, accredit (register) a representative office, or set up a company. The report explains differences in the legal status of the above entities and describes the registration procedure for each. Contact information can be provided by CS Moscow on request.

Basic Business Registration Issues

Business registration in Russia is regulated by the following basic laws and Government resolutions:

- The 1999 Federal Law "On Foreign Investment in the Russian Federation,"
- The 1999 Civil Code,
- The August 8, 2001 Federal Law "On State Registration of Legal Entities" (entrepreneurs),
- The Russian Government Resolution No. 319 "On Authorized Federal Entity of the Executive Power, Providing State Registration of Legal Entities" of May 17, 2002, and
- a number of legal acts.

Conducting business without registration is illegal. Although the federal law governing the process is uniform throughout Russia, it is often subject to local interpretation.

Russian law offers several commonly used modes to conduct business:

- Limited liability company (OOO),
- A privately held, closed joint stock company (ZAO),
- Publicly held, open joint stock company (OAO) (the above three modes are referred to as Companies in the text below),
- Representative or branch office of a foreign company,
- Registration as an individual private entrepreneur.

Branch offices and accredited representative offices are both legally distinct from Russian corporations, which may be established by foreign firms either as joint-stock companies with partial Russian ownership, or as wholly-owned subsidiaries of the foreign firm. Foreign ownership can be as high as 100 percent, except in certain sectors. For example, foreign stakes are restricted to 25 percent at defense-related enterprises.

Branch Offices

In Russian terminology, branches are not considered independent legal entities, though they can negotiate, market or provide other business support on behalf of firms based outside Russia. However, they can not technically generate a profit on their operations in Russia. Setting up a branch may be worthwhile if a foreign company has started to pursue business in Russia and is exploring opportunities. Many large U.S. firms originally began their Russian operations as locally established branches. U.S. firms should not use the term branch with registration authorities if the purpose is to register as a company. Branches could be accredited from a one to five-year term.

Accredited Representative Offices

Registration of Branches and Accredited Representative Offices

Like branches, accredited representative offices are not independent legal entities and can not earn profit in Russia. Advantages of an accredited office include annual (rather than monthly) reporting requirement for some activities (including some tax payments), and greater leeway in issuing invitations for U.S. partners to visit Russia on business visas. Up to five foreign employees may work with an accredited office of a foreign company. Offices are usually accredited for one to three year terms.

Registration of Branches and Accredited Representative Offices

Accredited Representative Offices and Branches should register with the State Registration Chamber (with the Ministry of Justice of the Russian Federation), and Accredited Representative Offices may also register with the Russian Chamber of Commerce and Industry. Several Russian government agencies and ministries supervising the industry in which a company operates may also require accreditation. Such agencies include the Central Bank, the Ministry of Economic Development and Trade, the Ministry of Finance, the Ministry of Transportation, and the Ministry of Industry, Science and Technologies of the Russian Federation.

According to the law, accreditation of a representative office or of a branch should take 21 days. Accreditation fees vary from $1,000-1,500 for one year to $3,000-3,500 for three, and $3,500 for 5 years (for branches only). Above those amounts, an additional $500 should be paid for an expedited accreditation within seven days.

Further information is available on the State Registration Chamber Web site: www.palata.ru

Companies and Company Registration Procedures

Beginning July 1, 2002, companies (full-fledged businesses) should be registered with the local Tax Inspectorates (based on their official address in Russia). Documents for the state registration should be prepared and submitted to the local Tax Inspectorate in accordance with Chapter 12 of the August 8, 2001 Federal Law "On State Registration of Legal Entities." The list of documents to be submitted for the company registration may be obtained from the following Web site: http://www.mosnalog.ru.

In accordance with state registration procedures, companies should be registered within five days of the receipt of registration documents, for a fee of 2,000 rubles (about $65).

The Moscow Department of the Ministry of Taxes and Levies of the Russian Federation, the authorized legal entity for company registration (15 Tulskaya Street, Moscow) is currently providing counseling to business people on the new registration procedure and registration documents.

Further information on state company registration, including the list of documents to be submitted for registration, as well as contact information for local tax authorities and their operation may be obtained from the following web site: http://www.mosnalog.ru.

* * *

The U.S. Commercial Service would be glad to provide additional details on registration requirements and contact information for the authorized registration entities. Please contact Commercial Specialist Marina Parshukova at the following numbers and e-mail address: Tel.: 7-095-737-5034, fax 7-095-737-5033, e-mail: marina.parshukova@mail.doc.gov.

The U.S. Commercial Service will also be glad to provide interested parties with name and contact information of U.S. and Russian consulting companies who offer professional legal advice on company/business registration in Russia.

Industry Sector Analysis: Mexico

SUMMARY

The automotive parts industry supplies two markets: the original equipment manufacturer (OEM) market, for use directly in the manufacture of vehicles, and the replacement parts market, or aftermarket. This report focuses on the replacement parts market and includes engines, engine parts, automatic transmission parts, shock absorbers, ignition parts, and carburetor systems for automobiles and light trucks only, classified under HS chapters 8409 and 8708.40.

The total market size of the auto parts sector in Mexico is expected to reach USD 74 billion in 1998, with an anticipated increase of 15.5% over 1997. Approximately 60% of auto parts are manufactured in Mexico, (USD 56.3 billion) while the remaining 40% are imported (USD 22.5 billion) of which, 65%, (USD 14.6 billion) are imported from the United States. Of the total market of USD 74 billion, 70% (USD 51.8 billion) is used in the assembly of new vehicles, and 30% (USD 22.2 billion) are sold in the aftermarket sector.

This report will focus only on the replacement parts sector which is expected to be approximately 50% (USD 11.1 billion) of the total aftermarket parts sector of USD 22.2 billion in 1998.

The sale of new vehicles is expected to decrease about 24.5% during 1998, due to economic problems in Mexico which have caused an increase in interest rates and in the value of new vehicles. The average life of an automobile and light truck in Mexico has been 10 to 12 years. However, the increase in costs has now extended this length of life to be at least 15 years. This situation will produce an increase in the sale of replacement parts for used vehicles, especially parts identified for repairing engines, transmissions, and suspension systems. The sale of new and rebuilt engines is also expected to increase at least 27%; however, it is still a very small market.

Mexico has approximately 13.5 million vehicles in circulation with only about three million under five years of age. Ninety-five percent of the vehicles in circulation are manufactured by General Motors, Ford, Chrysler, Nissan, and Volkswagen. Government regulations have recently allowed the imports of high priced cars in a direct relationship to the number of Mexican-built cars that are exported. Brands such as BMW, AUDI, Honda, Mercedes Benz, and Porsche are now being sold in Mexico. High priced US-built automobiles are also being imported in small quantities, such as Buick, Cadillac, Chrysler Imperial, Lincoln, and several brands of U.S. sports cars. However, these sales represent less than 1.5 percent of the total automotive sales in Mexico.

The major end-users of the replacement market of parts in Mexico are the owners of nearly 11 million cars and light trucks that are over five years old that need replacement parts for the maintenance and repair of their units. About 60 percent, or 6.6 million, are US brands such as Chrysler, Ford, and General Motors. The other 40 percent are Nissan and Volkswagen. The North American Free Trade Agreement (NAFTA), initiated on January 1994, has considerably reduced the previously existing import regulations such as import permits and duties of auto parts, which were over 20 percent before 1994.

The auto parts covered in this report are: HS 84099903, pistons and sleeves; HS 84099102, pistons and sleeves larger than 45mm diameter; HS 84099103, balance levers; HS 8409901, yokes and connecting rods; HS 84099104, carburetor parts; HS 8409105, aluminum pistons; HS 84099902, valves, caps, and spring assemblies; HS 84099115, upper engine caps; HS 84099913, tappet rods; HS 84099122, air shock absorbers; HS 84099919, lift rods; HS 84082001 and 84089001, compression ignition engines of various sizes as well as all other parts used in the engine and transmission sections of vehicles; HS 87081099, cylinder and pistons for brake assemblies; and HS 87084002, automatic transmission replacement parts.