Industry Overview
The Zacks Automotive - Replacement Parts industry comprises companies that engage in the production, marketing and distribution of replacement components for the automotive aftermarket. The industry players offer replacement systems, components, equipment and parts to repair as well as accessorize vehicles. Some important auto replacement components are engine, steering, drive axle, suspension, brakes and gearbox parts. The auto replacement market is somewhat less exposed to business downturns, as consumers are more inclined to spend on replacement parts to maintain their vehicles rather than splurge on new ones. Consumers can either opt for repairing vehicles on their own or avail professional services for the same. The industry is undergoing a radical change, with evolving customer expectations and technological innovation acting as game changers.
Factors Involved in Shaping Industry's Prospects
Rising Vehicle Complexity Strains the Aftermarket: The growing technological sophistication of modern vehicles is creating major challenges for the automotive supply chain. As cars rely more on advanced, integrated systems, their repair and upkeep require specialized skills and tools that differ from traditional methods. This transition can lead to longer service times, increased costs and added strain on aftermarket suppliers to adjust rapidly. The pressure is even greater with the expansion of electric, connected and autonomous vehicles, which depend on new components and service expertise. Altogether, these trends are expected to squeeze margins for companies in the replacement parts industry.
Tariff Exposure Puts Pressure on Costs and Margins: Some auto replacement part manufacturers produce only about half of the parts they sell in the United States within North America, while the rest comes from China and Europe. This means they remain significantly exposed to high U.S. import tariffs. As a result, part of these added costs will inevitably be passed along, whether to repair shops, distributors or ultimately consumers, potentially making vehicle repairs more expensive. If they choose not to pass on the full tariff burden, manufacturers could face pressure on their profitability.
Aging Vehicle Fleet Drives Strong Replacement Demand: As cars age, they need more frequent repairs and part replacements to keep running. With the cost of both new and used vehicles still elevated, many owners are delaying purchases and choosing to maintain their existing cars instead. The average vehicle age in the United States has increased to 12.8 years in 2025, up from 12.6 years in 2024. This expanding pool of older vehicles is expected to sustain strong demand for replacement parts and support industry growth.
Zacks Industry Rank Indicates Dim Prospects
The Zacks Automotive – Replacements Parts industry is part of the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #183, which places it in the bottom 24% of around 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dim near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a weak earnings outlook for the constituent companies in aggregate. Over the past year, the industry’s earnings estimates for 2026 and 2027 have moved down 37.4% and 8.1%, respectively.
Before we present a few stocks from the industry worth considering for your portfolio, let's take a look at the industry’s stock market performance and current valuation.
Industry Lags Sector and S&P 500
The Zacks Automotive – Replacement Parts industry has underperformed the Auto, Tires and Truck sector and the S&P 500 composite over the past year. The industry has declined 17.6% against the sector’s growth of 14.1%. Meanwhile, the S&P 500 has returned 14.2% in the same time frame.
One-Year Price Performance
Image Source: Zacks Investment Research
Industry's Current Valuation
Since automotive companies are debt-laden, it makes sense to value them based on the Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) ratio. On the basis of trailing 12-month enterprise value to EBITDA (EV/EBITDA), the industry is currently trading at 7.47X compared with the S&P 500’s 18.06X and the sector’s trailing 12-month EV/EBITDA of 22.93X. Over the past five years, the industry has traded as high as 12.15X, as low as 6.02X and at a median of 10.33X, as the chart below shows.
EV/EBITDA Ratio (Past 5 Years)
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
3 Stocks to Consider
Standard Motor: It is one of the leading manufacturers, distributors and marketers of premium automotive replacement parts for engine management and temperature control systems. The acquisition of Nissens, completed in November 2024, has helped SMP expand its geographic presence and establish a significant global growth platform. With the integration of Nissens, SMP anticipates achieving $8-$12 million in annualized cost savings within 24 months of the acquisition. In the second quarter, the company officially opened its new distribution center (DC) in Shawnee, Kansas. It plans to fully ramp up operations over the remainder of the year by transferring all activities from the nearby Edwardsville facility and shifting portions of volume from other major distribution centers. The transition to the new DC is expected to create a more balanced network, enhance capacity, and provide redundancy for risk mitigation.
SMP surpassed earnings estimates in each of the trailing four quarters, the average surprise being 40.85%. The Zacks Consensus Estimate for Standard Motors’ 2025 sales and earnings implies year-over-year growth of 20.9% and 19.9%, respectively. The stock currently carries a Zacks Rank #2 (Buy).
Price & Consensus: SMP
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LKQ: It is one of the leading providers of replacement parts, components and systems that are required to repair and maintain vehicles. LKQ’s strategic acquisitions and partnerships are strengthening its growth outlook. The acquisition of Uni-Select in August 2023 has expanded its global vehicle parts distribution business. LKQ’s efforts to streamline operations and cut costs bode well. On its second-quarterearnings call LKQ notified that it removed $125 million in costs over the past year and plans to cut another $75 million, mainly in Europe but also in North America.
LKQ surpassed earnings estimates in three of the trailing four quarters and missed once, the average surprise being 3.43%. The stock currently carries a Zacks Rank #3 (Hold).
Price & Consensus: LKQ
Image Source: Zacks Investment Research
Dorman: It is a leading supplier of Dealer Exclusive replacement parts to the Automotive, Medium and Heavy Duty Aftermarkets. The company recently rolled out its revamped website featuring an enhanced e-commerce platform that makes it easier for customers to find the correct parts for their needs and receive them on time. Designed with the next generation of heavy-duty repair professionals in mind, the new site’s modern look and user-friendly interface are expected to help the company scale its operations and strengthen its competitive position.
DORM surpassed earnings estimates in each of the trailing four quarters, the average surprise being 19.66%. The Zacks Consensus Estimate for Standard Motor’s 2025 sales and earnings implies year-over-year growth of 8% and 24.1%, respectively. The stock currently carries a Zacks Rank #3.
Price & Consensus: DORM
Image Source: Zacks Investment Research
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
