Auto Partner is a European auto parts distributor that is replicating a similar business model to that of AutoZone and O'Reilly Automotive, which could prove to be equally successful in Europe.
1) The rise in EVs could be a problem because a majority of the parts required relate to internal combustion engines. EVs require only a fraction of the parts that a standard combustion engine might require.
2) I should have spent more time on the competition piece. LKQ and GPC are the biggest Western competitors. LKQ in its most recent earnings report actually divested/merged its Polish business citing trouble competing as its primary reason. Inter Cars is the most formidable competitor, and not a bad investment candidate in its own right.
3) Very low levels of cyclicality. AutoZone, O’Reilly and LKQ did just fine through the GFC and you could argue that a global recession makes people more willing to repair vehicles than to buy new ones.
Hi Jake, thanks for the pitch. This does look cheap on first sight, and the comparison with US precedents is very interesting. As someone super naïve to this, I have a few questions.
- Why is the rise of EVs a problem? Surely these cars need similar parts?
- Who are the competitors? I can't imagine there is not a capable western player here.
- I'm interested in the exposure to cyclicality. Is there a 1:1 with the wider automotive cycle? I presume not, as this is the aftermarket.
Hi Johan, happy to try my best to answer.
1) The rise in EVs could be a problem because a majority of the parts required relate to internal combustion engines. EVs require only a fraction of the parts that a standard combustion engine might require.
2) I should have spent more time on the competition piece. LKQ and GPC are the biggest Western competitors. LKQ in its most recent earnings report actually divested/merged its Polish business citing trouble competing as its primary reason. Inter Cars is the most formidable competitor, and not a bad investment candidate in its own right.
3) Very low levels of cyclicality. AutoZone, O’Reilly and LKQ did just fine through the GFC and you could argue that a global recession makes people more willing to repair vehicles than to buy new ones.
Hi Jake, thanks for the pitch. This does look cheap on first sight, and the comparison with US precedents is very interesting. As someone super naïve to this, I have a few questions.
- Why is the rise of EVs a problem? Surely these cars need similar parts?
- Who are the competitors? I can't imagine there is not a capable western player here.
- I'm interested in the exposure to cyclicality. Is there a 1:1 with the wider automotive cycle? I presume not, as this is the aftermarket.