How to Start an Auto Parts Manufacturing Business in 2022 (2023)

Do you want to start an auto parts business? If YES, here is a detailed guide on how to start a car parts manufacturing business with no money or experience. Setting up a manufacturing business is a huge financial commitment, because this is a business where you would be required to plug in money for your tools, equipment, logistics, and of course you have to hire staff and pay them.

The Auto Parts manufacturing industry is composed of businesses that produce a litany of motor vehicle parts, accessories and components, including airbags, thermal systems, exhaust systems, wheels and windshield wipers. Importantly, this industry does not include manufacturers of engines, electronics, suspension, braking, transmission, seating and metal stamping products for automotive use.

Auto parts manufacturers play a pivotal in the supply chain of the U.S. transportation system. The automobile industry would suffer a huge set back if the auto manufacturing industry crashes. This is why it is necessary for this industry to remain healthy.

15 Steps to Starting an Auto Parts Manufacturing Business

1. Table of Content

   • Research
   • 2. Get a Business Plan
   • 3. Seek out a support system
   • 4. Come Up With Partnerships
   • 5. Get the legal details sorted out
   • 6. Get a great Location
   • 7. Seek Funding For Your Auto Parts Manufacturing Business
   • 8. Find the right factory
   • 9. Assess Competitors
   • 10. Put together a great team
   • 11. Your Business model
   • 12. Consider daily operations
   • 13. Have A Working Plan
   • 14. Consider diversification
   • 15. Take baby steps

   Research

The first step to starting any business is research. Research is essential for every business to succeed. You should undertake thorough research on both the product you want to manufacture and the auto spare parts market. Doing this will make you save costs while starting by using the right amount of money to start up to avoid making losses.

While doing this, you also have to conduct critical research on your competitors to find any inherent loopholes. You can then correct their flaws and make them work to your advantage to win more clients. Your research will also help you find out the various ways you can make your products better and unique. You can use the services of company magazines and even approach a mentor to guide you on your way up.

2. Get a Business Plan

A great business plan is always a strong foundation for growth in your startup auto parts wholesale and manufacturers business. Business plans address a wide range of issues, including startup financials. Not surprisingly, lenders immediately turn to the financial section and use the accuracy of your forecasts to gauge the value of other parts of the plan.

With so much riding on your business plan, you need to get a firm grasp on business plan financial basics before you start writing the other parts of your business plan.

3. Seek out a support system

When you start out in your business, you can be so full of enthusiasm that you feel you can single-handedly take on the world. But at some point you are going to come unstuck and that’s when you need a helping hand. Don’t wait until it happens to look for support as you’ll have enough on your plate already.

Do some research in advance. Organisations such as the Federation of Small Businesses, Chambers of Commerce and UKTI offer everything from grants to free expertise and guidance. This will save you money and could prevent certain mistakes from being made.

Also, think about finding a business coach or arrange to meet up with a trusted colleague once a week for a chat. Having someone experienced with whom you can talk things through helps to keep you focused and can prevent you from taking your worries home with you.

4. Come Up With Partnerships

Creating partnerships that will be of mutual benefit is essential to the growth of your auto parts manufacturing business. Starting a manufacturing business alone is not easy because you have to deal with established companies that you can’t out-muscle their financial might.

It’s, therefore, essential to coming up with a good selling point to make them interested in forming a partnership with you. They might be having the equipment you need but lack the product you offer. Your partners shouldn’t necessarily be a manufacturing company as well.

You can always consider doing business with branding or marketing companies too. The best way to avoid using money when approaching a potential partner is by choosing to work with commissions. You can decide to offer a certain percentage of every sale you make therefore saving the money you’d be using for expenses.

5. Get the legal details sorted out

Well, it is a fact that you cannot start a business without letting the government know. So when you have put modalities in place to start up your auto parts manufacturing business, you have to legalize the business by giving it a legal entity and getting the required licenses and permits.

You can visit local government websites and talk to people in the know about the kind of licenses and certifications you require to set up shop. Once this is done, you can confidently go ahead with buying equipment and hiring employees for your business

6. Get a great Location

It might be tempting to look for cheap premises when starting your auto parts manufacturing business, but growing this business requires a good support infrastructure, and the geographic area that you choose is crucial for many reasons.

Are there good transport links to get your product out to your customers? Will it take a long time for your raw materials to arrive from your suppliers? Are there people in the area with the skills you need? Can you get tax breaks from the government or local authority for setting up in a particular place, such as a regeneration area? All these factors will affect the success and profitability of your business.

7. Seek Funding For Your Auto Parts Manufacturing Business

Sourcing for funds is another popular thing to do when setting up your auto parts manufacturing business. It’s a way of incorporating third parties or investors to your business. When using this method, you will most probably have to surrender a piece of your business to another company or an individual.

The interested person will be able to purchase a stake in your company. Depending on how much they have invested, they can as well have the right to assist you in crucial decision making regarding your business. Another to mitigate the financial risk of a startup is to modify your approach to tap into the financial benefits of buying an existing auto parts wholesale and manufacturers business.

Established auto parts wholesale and manufacturers businesses have reliable revenue streams and loyal customer bases – both of which will shape your company’s financial landscape. But most importantly, existing auto parts wholesale and manufacturers businesses have documented financial histories.

Although you can create pro forma earnings and financial statements for a startup, a business-for-sale should have a well-documented, multi-year history of financial performance. It’s advisable to sell your idea to people in the manufacturing industry. They can perform the critical advisory role to facilitate your business’ growth.

Listed below are the various ways that help you seek funds for your business?

• You can register at an incubation hub, and once it’s successful, they will mentor and financially assist your business till you’re stable enough to continue on your own.
• Use crowdfunding methods to seek financial help
• Apply for fast loans- if your business idea is very viable and has the potential of returning your investment quick enough, you can always go for a loan.

Some financial institutions have no credit check; hence, you can access your loan quickly.

8. Find the right factory

Now that you’ve chosen your location you’ll need to find your premises. The type of auto parts you plan to manufacture should be the prime consideration when deciding what you need. Is it a product that requires lots of power to make? Will it be light and bulky, or small and dense?

These things determine how much warehouse space and the type of racking you need. Is the floor robust enough to withstand high volumes of traffic? If you are intending to use pallet trucks or fork lift trucks, for example, it is essential the floor can withstand this level of stress on a daily basis.

Are the telecommunications systems suitable for what you want? Is there enough office space and parking? These things can seem inconsequential when you’re faced with the huge task of setting up an auto parts manufacturing business, but they actually have a large impact on the efficient running of your business.

9. Assess Competitors

Before you open an auto parts wholesale and manufacturers business within your community, it’s a good idea to see how strong the competition is. Prior to opening your doors for business, be sure you fully understand the competitive landscape and where your new business will fit in.

10. Put together a great team

This is the most important considerations of all. You can have a great product, the perfect location and optimized premises but without the right team, your chances of success will be greatly diminished. It’s absolutely crucial to make sure you will have a skilled labour pool to select from before you start your company. Speak to the local university for advice; they usually have good information on this topic.

Also, make sure that you are near to good transport links. Being limited on your recruitment pool really holds a business back. Finally, try to find out what average salaries are for the roles you will need. There’s no point in knowing the skills that are available if you can’t pay the going rate.

11. Your Business model

A great business model will bring about good success in your auto parts manufacturing business. Is your product unique enough to guarantee a market? Do you have the requisite administrative and managerial skills to co-ordinate the many people and processes that constitute a manufacturing enterprise?

All of these factors can seem obvious, but for that reason alone they are often ignored. In all the excitement of a new venture it’s too easy to get distracted by the big picture. It’s the little things, the small details, that can make you come unstuck, so don’t ignore them. Get these elements in place and you will already be five steps ahead of most new manufacturing businesses out there.

12. Consider daily operations

As a manufacturing entrepreneur, your day-to-day activities depend on your level of involvement. You’re likely to spend time refining and managing on the actual manufacturing process or finding a market for your products.

In the initial stages, you will carry out many roles (e.g. operations, inventory management, sales, marketing, public relations, etc.). After you raise enough revenue or you secure funding, you may delegate some of your tasks to outsourced third-parties, freelance project managers and eventually your own employees.

13. Have A Working Plan

Rather than blindly jump into starting a business, use a lot of your time in creating strategies and the different ways that they can be implemented. Having a plan will make your business avoid a lot of issues along the way. A good plan will attract angel investors to invest in your company due to the seriousness and potential they’ll be seeing in you.

A plan will make you foresee some of the probable problems that may arise. This will make you ready hence save the little money you have by avoiding the same issues. Identify industry drivers that you might seek advice from while creating your plan. They will offer vital feedback that is necessary while making an entry to a new field.

14. Consider diversification

In today’s auto wholesale environment, diversification is a startup essential. An extensive product line and broad customer base are helpful, but may not be the most important targets for diversification.

Instead, you’ll need to consider offering retailers and mechanics options that include new, OEM (Original Equipment Manufacturer) and aftermarket parts. Tune-up parts, belts, hoses, engine parts, lights, exhaust systems and other items are all fair game for multiple product options.

You’ll also need to think about how your startup may be able to create a more diverse marketing strategy. While some retailers and repair shops prefer traditional parts catalogs, many more have transitioned to online parts ordering — and that means your startup will need a high quality ecommerce website.

15. Take baby steps

Setting up your own manufacturing unit takes a lot of time and money. You cannot afford mistakes. Producing physical products can be expensive depending on the specifications, expertise required, capital expenditures etc. You can’t afford to make grievous mistakes. It’s important to run lean and mitigate all associated risks.

Entrepreneurs must avoid risks in the initial stages by leasing or renting space and equipment instead of buying them immediately. Depend more on manual labour and low-investment tools in the first few months since the product will undergo several minute changes in that period. For you to start and run a successful auto parts manufacturing business, you should make it a point to start small and increase gradually.

Conclusion

When starting your auto parts manufacturing business, you have to make it a point to avoid competing with the big companies from the start. Identify existing gaps in the overall manufacturing industry, create incentives for customers, reduce your logistics costs and leverage smart partnerships. Gather as much information as you can from manufacturing experts, and learn from your own process refinement.