2 Auto Replacement Industry Stocks That Can Navigate Cost Headwinds

The Zacks Automotive Replacement Parts industry faces a challenging setup as multiple pressures weigh on its outlook. Persistent cost inflation and intensifying competition continue to dampen margins and pricing power. At the same time, increasing vehicle complexity is raising operating costs and execution risk across the aftermarket, particularly for smaller players. Tariff exposure adds to cost volatility. Offsetting these headwinds, an aging vehicle fleet remains a key demand stabilizer, as consumers continue to maintain older cars amid elevated vehicle prices. Against this backdrop, two industry players — Genuine Parts Company GPC and Dorman Products DORM — are expected to benefit from their strategic initiatives, expansion efforts and investor-friendly moves.About the Industry

The Zacks Automotive – Replacement Parts industry includes companies involved in the manufacturing, marketing and distribution of replacement components for the automotive aftermarket. Industry participants supply systems, components, and equipment used to repair and maintain vehicles, including engine, steering, drivetrain, suspension, brake and transmission parts. Demand for replacement parts is generally more resilient than new vehicle sales, as consumers tend to maintain existing vehicles rather than purchase new ones during periods of economic uncertainty. Repairs may be undertaken either by vehicle owners themselves or through professional service providers. That said, the industry is undergoing a period of transition, with evolving consumer expectations, rising vehicle complexity and technological innovation reshaping cost structures and competitive dynamics.

Factors At Play

Margin Pressure from Persistent Cost Inflation: Elevated labor, freight and sourcing costs continue to put pressure on profitability across the replacement parts value chain. While companies have implemented price increases, incomplete cost pass-through—amid a price-sensitive repair market—has constrained margin recovery, particularly for manufacturers and smaller distributors with limited pricing power.

Rising Vehicle Complexity Weighs on the Aftermarket: Increasing reliance on advanced electronics, ADAS, and EV-specific systems is raising the cost and complexity of vehicle repairs. Aftermarket players must invest more heavily in diagnostics, training, and inventory while adapting to rapidly changing vehicle platforms. These higher fixed costs and execution challenges are expected to weigh on margins, especially for less-scaled replacement parts providers.

Tariff Exposure Adds Cost Volatility: Ongoing reliance on imported parts, particularly from China and Europe, leaves sections of the auto replacement supply chain exposed to U.S. import tariffs. While some of these costs can be passed through, incomplete pass-through risks margin pressure and higher repair costs, increasing earnings volatility for parts manufacturers and distributors.

Intensifying Competition Limits Pricing Power: Heightened competition—driven by private-label expansion, aggressive promotions, and growing omnichannel offerings—has constrained pricing power across the industry. At the same time, elevated investments in technology and supply chain capabilities are raising operating costs, further hurting returns on invested capital.

Aging Vehicle Fleet Supports Replacement Demand: The steady aging of the vehicle fleet continues to underpin demand for replacement parts, as older vehicles require more frequent repairs and maintenance. With new and used vehicle prices still elevated, many consumers are delaying purchases and opting to keep existing cars on the road longer. The average age of vehicles in the United States has climbed to nearly 12.8 years, which bodes well for the auto replacement industry.

Zacks Industry Rank Indicates Glum 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 #208, which places it in the bottom 14% of around 240 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 estimate for 2026 has declined 54%.

Still, we will present a few stocks from the industry worth considering for your portfolio. But before that, 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 around 5% against the S&P 500 and the sector’s growth of 18% and 30%, respectively.

One-Year Price Performance

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 9.64X compared with the S&P 500’s 17.29X and the sector’s trailing 12-month EV/EBITDA of 28.92X. Over the past five years, the industry has traded as high as 12.15X, as low as 7.32X and at a median of 10.26X, as the chart below shows.

EV/EBITDA Ratio (Past 5 Years)

2 Stocks to Watch

Genuine Parts is a leading global distributor of automotive and industrial replacement parts, offering both products and value-added solutions across multiple end markets. The company continues to expand its footprint through acquisitions, including KDG, Gaudi, MPEC, Walker, and the recent buyout of Benson Auto Parts, which added roughly 85 stores in Canada. GPC’s Industrial Parts Group—operating under Motion Industries—is benefiting from steady MRO demand, rising data center activity and onshoring trends supported by shifting trade policies.

At the same time, management is executing a global restructuring initiative to better align its cost base and asset footprint with current market conditions, which should enhance operational efficiency. GPC’s shareholder-friendly approach remains a key positive. Being a dividend aristocrat, the company has paid dividends since 1948 and raised its 2025 payout by 3% to $4.12 per share, marking its 69th consecutive annual increase.

Genuine Parts carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for GPC’s 2026 sales and EPS implies 4% and 10% growth, respectively, from the projected 2025 levels.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price & Consensus: GPC

Dorman Products is one of the leading automotive aftermarket suppliers focused on the replacement and upgrade of parts across the automotive, medium-, and heavy-duty vehicle markets. Dorman continues to expand its addressable market by launching hundreds of new direct replacement parts and assemblies that meet or exceed original equipment standards. This steady product innovation supports organic growth and helps the company capture demand tied to an aging vehicle fleet. The acquisition of SuperATV further strengthened Dorman Products’ growth profile by broadening its product portfolio and exposure to adjacent aftermarket categories.

DORM rolled out a redesigned website with an upgraded e-commerce platform. The modern, user-friendly interface is tailored to the next generation of heavy-duty repair professionals, improving part identification, order accuracy and delivery efficiency. This digital investment should support operational scalability and reinforce Dorman’s competitive position over time.Additionally, the company’s share buybacks demonstrate management’s commitment to shareholder value.

Dorman Products Parts carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for GPC’s 2026 sales and EPS implies 6% and 9% growth, respectively, from the projected 2025 levels.

Price & Consensus: DORM

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Genuine Parts Company (GPC) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.