The Influence of Private Equity on the Vehicle Customization Sector

This past weekend, rumors began to spread that the renowned tuning firm Hondata has been purchased by Engineered Performance Technologies. This is the same private equity-backed parent company that owns Cobb Tuning, AutoMeter, Ecutek, and other significant players in the car modification realm.

Hondata Acquisition Update

On Saturday, I came across what appears to be a leaked press release on a Facebook Group dedicated to Honda Type R parts stating, “Engineered Performance Technologies (EPT) is thrilled to declare the acquisition of Hondata Inc., the leading creator of engineered software and hardware solutions for the Honda and Acura performance market.”

Interestingly, the actual company name is Engineered, not Engineering. It is also peculiar that there have been no official statements from Hondata or EPT (I have sent some inquiries and will update this report if I receive a response). Thus, I suspect it is a leaked draft. Nevertheless, this seems way too detailed for someone to fabricate. I suspect either someone shared the announcement prematurely (the staff at Hondata’s retailer HA Motorsports is currently on summer break for another week as I write this), or I just read an AI-altered version of a release hidden on an industry-facing press wire page.

In any case, if we choose to take the release at face value, here’s the detail that you will find interesting if you’re at all curious:

“This acquisition guarantees that Hondata will gain access to enhanced corporate resources, cutting-edge research facilities, and increased manufacturing capabilities. Customers, dealers, and tuners can expect the same specialized assistance they have relied on for years, along with expedited development for future platforms, CANFlex systems, and next-generation software features.”

So far, it indicates that it will be a continuation of business as usual, which would be fantastic. However, whenever private equity becomes involved, I tend to become slightly apprehensive. More on that later.

Quick Background

Here’s a quick overview of the context you need to fully understand today’s Hondata news:

In the summer of 2013, Avante Capital Partners (also known as Avante Mezzanine Partners) and Promus Equity Partners acquired the well-known car gauge manufacturer AutoMeter and began constructing its own little aftermarket car-parts empire. Engineered Performance Technologies (EPT) emerged as the corporate umbrella company to function as an AutoMeter parent and soon to manage other brands in the sector.

At that time, AutoMeter was already owned by another investment firm, which had its network of subsidiary companies (Stack, Ltd., Dedenbear Products, and ProParts LLC producing NASCAR’s Spek-Pro gauges).

In 2014, EPT acquired Cobb Tuning, primarily recognized for Subaru computer tuning, but its applications have now expanded to a wide range of vehicles. This acquisition provided EPT a foothold in the crucial ECU tuning realm.

A few years later, Ecutek, a British ECU tuning company, was also acquired, securing the parent company’s presence in Europe.

Last year, EPT took over PRL Motorsports, which manufactures hardware (intakes, intercoolers, and other similar components, predominantly for Hondas).

Considering all this, it makes perfect sense for this Engineered Performance Technologies entity to pursue Hondata, a significant authority on Honda ECU tuning.

With this action, EPT has effectively constructed two parallel empires. In the Subaru segment, it possesses the software (Cobb) and the hardware (GrimmSpeed). Now, in the Honda/Acura segment, it has achieved the same configuration with the software (Hondata) and the hardware (PRL Motorsports).

What’s Next for the Enthusiast Aftermarket?

In the best-case scenario, Hondata secures a financial boost and enhancement in infrastructure, enabling the brand to broaden its offerings without reducing support for existing products. In the worst case, the brand could be stripped of talent and struggle along, relying solely on brand recognition for as long as its new owners can extract profits from it. The reality will likely be a blend of both.

Regarding the car-modification industry as a whole … it’s complex.

Flatirons Tuning recently hosted a podcast featuring Justin Grimm from Overtake (formerly GrimmSpeed) and Dan Hurwitz from Mach V Motorsports discussing private equity in the automotive aftermarket. You can listen to it here:

Well, to be precise, their discussion focused on the consumer-oriented performance aftermarket. (In automotive industry lingo, “aftermarket” often refers to non-branded replacement parts like the brake pads, control arms, and sway bar end links you purchase from your local parts shop or Amazon.)

Grimm is especially knowledgeable about this topic, as his tuning business, GrimmSpeed, was sold to private investors around 2019 (it was incorporated into an aggregator called Aftermarket Performance Group). Grimm himself was let go soon after, and details of that situation emerged last year during a Reddit AMA.

Today, GrimmSpeed is owned by, guess who, the same company we’ve discussed for the most part of this article—EPT.

While the entire enthusiast market is too vast for any single investment firm to dominate (for the time being), it’s reasonable to expect this trend of consolidation to persist. Aftermarket parts firms are attractive targets for PE—they usually have strong brand identities, loyal customers, and opportunities for cost-cutting (apologies, I mean operational efficiencies) that a passionate founder might overlook but a corporate controller would be keen to implement.

We are still far from the car-enthusiast aftermarket being controlled by one money-grabbing mega-corporation, but I generally oppose consolidation and corporatization. My worry is that a reduced number of participants in the sector will lead to homogenized products, higher prices, and ultimately inferior quality.

Here’s hoping Hondata retains competent leadership and continues its excellent work.

**The Effects of Private Equity on the Car Modding Sector**

The car modification sector, often known as car modding, has undergone considerable transformations in recent decades. This field, which includes everything from visual upgrades to performance enhancements, has typically been led by passionate enthusiasts and small enterprises. Nevertheless, the introduction of private equity into this domain is altering its dynamics, presenting both advantages and obstacles.

**1. Boosted Capital and Resources**

Private equity firms frequently provide significant financial support. This influx of capital enables car modding enterprises to expand operations, invest in research and development, and broaden their product lines. Companies can now afford to bring on skilled engineers and designers, leading to creative products that appeal to a wider audience. Improved production capabilities can also enhance quality control and efficiency, ultimately benefitting consumers.

**2. Professionalization of the Field**

With private equity investments, the car modding sector is seeing a transition towards professionalism. Many small, family-operated businesses are embracing corporate structures and frameworks, which can enhance operational efficiency and customer service. This professional attitude can attract a new demographic of consumers who may have previously viewed car modding as a niche pastime. Consequently, the market is broadening, and modding is becoming increasingly mainstream.

**3. Brand Consolidation**

Private equity groups frequently adopt a strategy of consolidation, acquiring multiple brands in the car modding industry. This can create a more streamlined sector, where synergies between brands lead to lower costs and improved product offerings. However, this consolidation may also result in diminished diversity, as smaller, independent brands might find it hard to compete against larger entities with more resources. The distinctive character and innovation that smaller firms contribute to the market could be at risk.

**4. Emphasis on Profitability and ROI**

Private equity investors generally seek returns on their investments within a specific timeframe. This focus on profitability can compel enterprises to emphasize high-margin products and services, possibly at the expense of niche markets or less profitable areas. While this may result in improved financial performance for certain companies, it might also hinder creativity and innovation in segments that do not promise immediate gains.

**5. Influence on Consumer Trends**

The involvement of private equity can substantially sway consumer trends in the car modding field. With access to market insights and data analytics, firms can pinpoint emerging trends and consumer preferences, allowing them to customize their offerings accordingly. This can lead to a more responsive market, where products are created based on actual consumer demand instead of the whims of enthusiasts.

**6. Challenges and Risks**

Despite the potential advantages, the effect of private equity on the car modding sector comes with its challenges. The pressure to achieve swift returns may lead to short-sighted strategies, where businesses prioritize immediate profits over long-term viability. Furthermore, the influx of capital may generate a competitive landscape that could marginalize smaller players, diminishing the diversity and creativity that have historically defined the sector.

**Conclusion**

The effect of private equity on the car modding sector is complex, providing both opportunities for expansion and challenges that could reshape the industry. As the sector evolves, it will be crucial for stakeholders—from investors to enthusiasts—to approach this changing landscape thoughtfully. Balancing the quest for profitability with the passion and creativity that characterize car modding will be key to ensuring the vibrant future of the industry.