Exclusive Interview: Westport Parts and Service Represents a Huge Opportunity

Westport Innovations (WPRT 0.45%) announced a few weeks ago that it was taking a big step forward in capturing a larger piece of the global aftermarket parts and service market, which could be as large as the company's core market opportunity. 

At ACT Expo in May, Motley Fool contributor Jason Hall was able to sit down with Konrad Komuniecki, Westport's senior director of global service and aftermarket, to talk about this move. While it's still early in the story, this looks like this is a very long-term play, with the potential for big revenue streams for decades to come. 

Jason Hall: Hey, Fools! It’s Jason Hall. I’m coming to you from Dallas, Texas. I’m at ACT Expo here, the alternative vehicle fuel’s conference and the good folks at Westport Innovations have been kind enough to give me a chance to speak with Konrad -- and immediacy I forget.

Konrad Komuniecki: Komuniecki.

Hall: Komuniecki. Konrad works with the Westport parts and service group which is something that was just recently rolled out. Konrad, I’ll let you talk a little bit about that.

Komuniecki: Yeah, thank you. So, as you say we’ve just launched Westport Parts and Service and auto mechanic in Chicago a week ago. We’re very, very excited to be entering this aftermarket space. Of course, Westport’s been in business for over 20 years as Westport and almost 40 through our other subsidiary.

So, we’re not new to the parts and service business, but it allows us to mature into the aftermarket space as we move forward in time. So, Westport Parts and Service is really very simple. It’s about providing parts to our customers in the aftermarket and providing a service point in the aftermarket, which is outside of the OEM dealership.

Hall: So, if I think about it from the perspective of an automobile, something that’s easy to relate to; I drive a Ford car today. I buy that Ford car from a Ford dealer, and while I have a warranty I go to Ford. If it’s a Ford vehicle that has a Westport part in it, Ford’s going to continue to purchase that part form Westport. As Westport changes those parts over time to improve them, or lower cost, they’re providing training and service to the OEM that I’m dealing with.

But at some point I’m going to sell that vehicle to somebody else and they’ve got their local mechanic that they work with, and that local mechanic may have a parts supplier that they’re buying their third party, or OEM parts from that they’re using when they repair parts on that vehicle. So, to me, what it sounds like you’re doing is moving beyond just supporting the OEMs -- which is still critical -- but also making sure that through the entire lifecycle of that product, that whoever’s maintaining and repairing that product has access to OEM quality products and parts and service.

Komuniecki: Yeah. That’s right. You’ve touched on a key point. The support for our OEM customers remains very much a focus of ours. That’s been what we’ve built our service network and our capabilities throughout the years. So, our OEs are very important key and as high technologies come into the dealerships -- the Ford dealers, for example, or the automotive dealers -- have very highly trained technicians, they have the latest and greatest equipment.

But over time, just like you say with the second and third owners, they’re unable to retain those customers. So, where Westport Parts and Service is really going to be key is to get us that cradle to grave ability to service our customer throughout the lifetime of the vehicle, or the system that we have on the vehicle.

Hall: So, in terms of market size, what’s the opportunity for Westport compared to if you were to just remain completely, 100% focused on the OEMs and ignore this other market -- size wise, what’s the opportunity out there?

Komuniecki: The aftermarket is actually quite big. It makes up about 50% of the available market that we have with OEs. In North America it’s roughly over $100 billion business.

Hall: So, there might be some money to be made there?

Komuniecki: There is some money to be made, exactly. Again, it’s about the service life. It’s about -- I think it’s critical in alternative fuel, especially, to maintain good service to customers beyond the initial few years of warranty. That’s what we’ve been about at Westport. We’ve got a long relationship with a lot of customers, big and small.

Which are very critical to the longer relationship with customers that we’ve developed over the years. So, that becomes key and that’s a very large part of our idea here, to maintain OE quality parts in those vehicles, or in those systems for as long as possible.

Hall: Right. One thing that immediately comes to mind -- at least on the smaller vehicle side -- is, Westport has done a lot to consolidate things. You look at acquiring BAF a few years ago and how important that is with the Ford modification program. So, it seems like, in North America immediately, that’s a program that over time is going to become meaningfully important to be able to support those vehicles once they leave manufacturer’s warranty support and their owners are looking through their regular channels to get parts and service.

You have Volvo -- the Volvo vehicles that are in Europe now -- seems like kind of the same thing, right? I guess a few months ago you guys acquired Prins which is a European manufacturer.

Komuniecki: That’s right.

Hall: So, as things continue to get spread out, as these acquisitions happen, bringing things back together and unifying them and putting them all under that one Westport banner seems like it’s part of what you guys are trying to accomplish, too.

Komuniecki: Yeah, exactly. The parts and service program initially is going to focus on Westport owned systems because that’s where we have the expertise. But certainly it’s going to expand into other makes and other vehicles. Many of the natural gas components can be common because of standardization throughout the industry and safety regulations.

So, we feel that we have a unique position to be able to provide those to customers as replacement components and parts.

Hall: So, we’re talking about even moving beyond a vehicle that may have come from an OEM that had a Westport part. It may be something that you guys didn’t initially manufacture, but you can provide a part for.

Komuniecki: Absolutely. Yes.

Hall: Okay. Great.

Komuniecki: That’s really the exciting part. As we change and move forward in time, potentially looking at other acquisitions, or looking into other systems, that’s really where our service strength, I think, will show. Being able to leverage the service strength, and the teams we have in place to be able to capture that market as well.