What is an Original Equipment Manufacturer (OEM) in the Automotive Industry?

What is OEM?

OEM stands for Original Equipment Manufacturer. The OEM is the original producer of a vehicle’s components, so OEM auto parts are identical to the parts used in the production of a vehicle. Aftermarket parts are produced by other suppliers and do not necessarily have a consistent level of quality or compatibility with the vehicle.

Understanding OEM

Consumers who replace damaged vehicle components can choose to purchase OEM parts to ensure that the replacement parts are fully compatible with the vehicle and produced to the same quality standards. As original suppliers of a vehicle’s components, OEMs often sell their products at name-brand car dealerships and are available for order through the automaker directly. OEM products are backed by the automaker and are often significantly more expensive than aftermarket parts. OEM products and aftermarket products have different benefits and drawbacks for the customer. In the future, new technologies such as 3D printing can transform OEM supply chains and improve competitiveness.

For customers, many OEM and aftermarket products are nearly equivalent. Aftermarket components differ in quality, but they have many high-quality products available, often at a lower price than OEM parts. Competition with aftermarket manufacturers drives prices down and eventually OEM prices may be in line with aftermarket offerings. OEM products are generally only available for purchase directly through dealers, while aftermarket parts can be purchased online from a variety of vendors.

The OEM market

The automaker generally guarantees that OEM parts are compatible with the vehicle; The installation of the parts may also be guaranteed in some cases. Aftermarket parts may or may not be compatible and many vendors do not certify compatibility. A wide range of companies produce replacement parts at many different prices, allowing for a wide range of options, but can also be a confusing experience. OEM parts generally only offer one or two options for consumers, making the parts replacement experience considerably less of a hassle.

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Fierce competition in the auto parts industry creates a great need for OEM and aftermarket manufacturers to distinguish themselves in the parts market. Among aftermarket manufacturers, this competition results in a wide range of prices and unique part characteristics. The quality of some aftermarket parts equals or exceeds OEM products, while other parts companies compete by offering lower-priced, lower-quality products.

Competing with aftermarket companies, OEM companies are increasingly innovating supply chains and product lines to offer a superior product at competitive prices. Both OEM and aftermarket companies are actively using technologies like 3D printing to efficiently create parts on demand and make their supply chains more flexible. Rapid changes in demand for products can be costly for traditional production and may require companies to maintain higher inventory levels. On-demand production provides auto parts manufacturers with additional production options.

Value Added Resale

An OEM is different from a Value Added Reseller (VAR), which is a company that purchases the original product or component from the OEM and then adds to its value by adding features or services to the product, or incorporating it into a larger product. product, before finally reselling it, most commonly to end users.

OEMs typically sell their products on a business-to-business basis, while VARs typically sell to consumers or other end users. One of the most basic examples of the relationship between original equipment manufacturers and VARs is the relationship between an automobile manufacturer and auto parts manufacturers. Various parts required for assembling a car, such as exhaust systems or brake cylinders, are manufactured by a wide variety of OEMs. The OEM parts are then sold to an automobile manufacturer, which adds value to the original product by making it part of a motor vehicle. The motor vehicle is then sold to individual consumers or other end users.

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It is also possible that a company is considered a VAR of the products of a company that is already considered a VAR. This most commonly occurs with businesses that primarily provide services rather than goods.


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Mark Holland

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