A Look At The Racing and Performance Powertrain Market

SEMA News—April 2014

BUSINESS
By Mike Imlay

A Look At The Racing and Performance Powertrain Market

 

Making motor adjustments at Ed Pink Engines in Van Nuys, California. Established in 1960, the engine crafter supplies a wide range of powertrain solutions.
Making motor adjustments at Ed Pink Engines in Van Nuys, California. Established in 1960, the engine crafter supplies a wide range of powertrain solutions. 

   

Racers, street performance enthusiasts, four wheelers, restorers and boat owners all need engines, which means that, at some point, they tap into the performance niche occupied by engine builders and, more often than not, the specialty shops that install replacement engines. It’s a segment composed of small businesses, not-so-small businesses and by OEM crate-engine distributors—all offering powertrain solutions.

In fact, use of ready-made drop-in crate engines with known horsepower and torque specifications has become a driving force in the marketplace in recent years. In particular, the GM LS series has become a favored choice of racers and other enthusiasts. This has engendered some controversy among engine customizers, creating opportunities for some and complicating business for others. To be sure, not every engine supplier is opposed to the crate-engine trend. Some would even argue that the development of parts for such engines—especially the LS series—has picked up and provided fresh opportunities for individual manufacturers in the racing and performance arena. To gain a greater handle on this trend, SEMA News asked a variety of sources for their perspectives on the current state of the marketplace and the nature of customer needs as well as ways engine suppliers and installers are responding to a growing demand for crate units.

Race-Driven Demand

It’s not that the average car builder is necessarily opting to drop a ready-made LS engine into his project vehicle at a higher rate than those put together by traditional engine builders. It’s that those who race have become increasingly mandated to do so. And this is proving unsettling to engine builders for both motorsporting as well as financial reasons.

As Speedway Illustrated Publisher Karl Fredrickson explained, sanctioning bodies began the push toward crate engines a little over a decade ago. The basic idea was to limit horsepower, give every racer the same engine advantage and ultimately lower costs for entry-level and low-budget competitors.

An LS crate unit by Blueprint Engines in Kearney, Nebraska. Blueprint owner Norris Marshall sees a generational aspect to the LS crate market, adding that demand for the units hasn’t hurt the company’s sales of other engine types.
An LS crate unit by Blueprint Engines in Kearney, Nebraska. Blueprint owner Norris Marshall sees a generational aspect to the LS crate market, adding that demand for the units hasn’t hurt the company’s sales of other engine types.

 
 

“It’s inexpensive, and it seemed like the golden egg for motorsports because now we can tell these ‘confused’ racers, ‘Look, you have exactly what everyone else has, and now you’re on your way to stardom because only your talent shows, and it’s unaffected by your wallet,’” Fredrickson explained. “We’re always looking to do two things in racing, and that’s to lower the cost and level the playing field. I don’t know why we seek those things. Especially with the crate engine, we’ve gone as far in the wrong direction as we can imagine.”

Many engine builders share that opinion.

“Perhaps what troubles me most is the perception that the OE can achieve something in racing that the aftermarket cannot,” he said. “That’s not only wrong, but I also find it insulting. I believe in the aftermarket. I think our group is far more capable than some sanctioning bodies are giving it credit for.”

Dakota Engines owner Jim Beyer echoed Fredrickson’s sentiments.

“I’m not a fan of crate motors,” he said. “I understand [that racers] can buy such motors for around $5,400, put the motor in and go racing, but what they don’t tell you on a crate motor is that they want you to buy a certain header to get some power, a certain carburetor and certain fuel to make these crate engines run better and get more power and performance. The fuel is quite expensive; it’s $12 per gallon or more, depending on where you buy it.”

A large portion of Beyer’s customers are racers and performance-car builders in the tri-state area of Montana, South Dakota and Minnesota. The company dates to the early ’80s, and Beyer has seen many changes in the marketplace over the years.

“When we first started way back when, you could build a pretty fair modified engine for around $2,500 to $3,000,” he explained. “By today’s standards, you’re looking at anywhere from $12,000 to $20,000 for a very good modified engine, so the cost has gone up considerably. The knowledge needed has also changed considerably—there’s so much new stuff out on the market now such as camshafts and items like that. There’s just a lot of better stuff than there used to be years ago.

“Right where we’re located is a lot of Wissota racing, so we do a lot of those types of builds—a lot of A mods, some late-model stuff, a lot of street cars with stock components that you have to use. We do all kinds of builds. We also have people in this area who are into mud runners and truck pullers, so we do quite a few of those. The LS crate engine has affected our business a little bit. We have some customers who have bought crate engines where otherwise they might have bought an IMC motor from us.”

Impacting the Small Guy?

Beyer sees the LS crate engine taking more of a bite out of the smaller engine builder trying to eke out a living. He also sees an impact on broader manufacturers of aftermarket parts who face sales drops to traditional engine builders. However, he mostly objects to the LS for its impact on the local racer.

The design table at Ed Pink Engines. The trick to survival for smaller engine builders may be the cultivation of a wider, more upscale street customer base while broadening their reputations and custom motor repertoire.
The design table at Ed Pink Engines. The trick to survival for smaller engine builders may be the cultivation of a wider, more upscale street customer base while broadening their reputations and custom motor repertoire.

“If I have a customer who breaks down Friday night and needs some engine work, he can call me on the cell and I’ll meet him at the shop that night and see if I can get the engine back together—whatever it needs to get him back racing Saturday. With a crate [OE manufacturer], that’s not going to happen,” he explained.

Looking toward the future, Beyer foresees bigger trouble ahead for traditional engine builders as more and more sanctioning bodies mandate crate engines.

“There’s no doubt the crate engine is going to hurt us, and it’s going to hurt other engine builders more than us,” he said. “It depends upon where they’re located. I understand that the sanctioning bodies want to get the racing cheaper for the racer, but there are other ways they could have done this.”

For one, he said, sanctioning bodies could’ve mandated restrictor plates and given weight breaks.

“It wouldn’t hurt the engine builder, and it would’ve been cheaper,” he said. “You can buy a restrictor plate or have one made for around $125 to $130. It works in NASCAR—they have a restrictor plate when you go to the big track.”

In the long run, said Beyer, crate engines can also cost a racer more than advertised, since sanctioning bodies often will not allow their rebuilding.

“Right now, they’ve got them at a very appealing price, but I can’t see that it’s going to stay that way forever,” he observed. “If something wears out, you have to buy a new [engine]. These other ones, we can freshen them up. Granted, it’s probably going to cost you around $3,000 to $4,000 to freshen them, depending upon how you took care of them. Some people take care of their stuff and don’t need that much. Other people are a little lax in repairs, oil and maintenance, and it costs a little more.”

Back at Speedway Illustrated, Fredrickson agreed with Beyer’s analysis, adding that there was always a trickle-down market for parts in racing before mandated crate engines. At that time, more experienced and successful racers often sold their older or salvaged parts to lower-level racers, helping the broader aftermarket.

“If a crate engine is inserted anywhere in that chain, the wheels come off,” Fredrickson said. “If I can’t sell my old stuff, I can’t buy your new stuff.”

In any event, faced with the growing demand for LS engines, Beyer is working harder than ever to forge close relationships with his customers to maintain a competitive edge.

“We sponsor the local track, a lot of local racing and a lot of local drivers,” he said. “There are so many customers that we can’t give them a huge discount, but we do give them 5% or 10% off or sometimes a little more to help them out through the course of the year because they’re having bad luck or something. An OEM is not going to do that for you. We try to build a relationship and treat everyone not as a customer but as a good friend. We try to keep things kind of like a family.”

At Ed Pink Engines in Van Nuys, California, General Manager Frank Honsowetz also expressed strong feelings about LS crate engines.

“For sure, they’re affecting [the custom engine market],” he said. “There are some attractive packages. But if you want to have a very streetable, very drivable, big-output 572 Chevy that you want to be a 10:1 ratio compression running on pump gas but still want more than 700 hp, you’re not going to buy a crate engine.”

While conceding that a custom-built engine is “considerably more expensive,” Honsowetz noted that “if you want something different, it’s going to cost more.”

While larger, long-established engine builders, such as Ed Pink Engines, seem insulated from the trend, increasing mandates for LS crate engines by racing sanctioning bodies have some smaller builders fearing a squeeze on business.
While larger, long-established engine builders, such as Ed Pink Engines, seem insulated from the trend, increasing mandates for LS crate engines by racing sanctioning bodies have some smaller builders fearing a squeeze on business.

 
 

In fact, the desire for “something different” continues to drive demand for Ed Pink engines even while smaller independent builders may be struggling against a growing onslaught of LS crate units. Established in 1960, the engine builder has garnered one of the best reputations in the industry for a wide range of powerplants.

“We don’t really have a specialty,” Honsowetz said. “We do a variety of projects—everything from design and engineering to production of prototype race engines to rebuilding a whole variety of race engines to vintage engines, some exotic collector car engines and some high-end hot-rod engines. We have everything here right now from a variable-compression Department of Energy research engine project that we’re doing machining on to a ’21 Duesenberg engine that’s going to Pebble Beach.”

Honsowetz readily admits that Ed Pink Engines may be more insulated from the growing crate-engine trend because of the company’s size, longevity, reputation and broad customer base. Still, he also believes that crate-engine economics will fail to add up for racers over time.

“If you have a spec engine formula, somebody will spend the money to make theirs better, and that raises the costs for everyone involved,” he said. “At the same time, they’ll run their engines harder, and the parts may not be as good as professional building shops will put into engines. I understand what track owners are trying to achieve, but I don’t think it really works as well as they think it does for them. Everything is cyclical. Eventually, you’ll see that the popularity of spec crate engines will probably go away, at least in the higher tiers of motorsports.”

In the end, Ed Pink Engines intends to continue doing what it has always done in the way of specialty engine building, regardless of LS crate engine trends.

“I believe we produce a modest number of engines for high-end hot-rod owners who have some discretionary money and want something better than a crate engine and want an Ed Pink engine,” Honsowetz said. “I think there’s a segment that absolutely wants an Ed Pink engine. I think there’s a segment that wants something truly unique that can’t be done by the average hot rod shop when it comes to engines. For that you have to go to a specialty engine shop.”

Another Perspective

Of course, not every aftermarket engine outfit shares a negative perspective on LS crate engines. Established in 2000, Mahle Motorsports has positioned itself as a leading supplier of forged racing pistons and rings while also offering a number of crate-engine programs.

A Ford 408 engine by Blueprint Engines. Just one of the broad varieties of crate engines available from the engine builder.
A Ford 408 engine by Blueprint Engines. Just one of the broad varieties of crate engines available from the engine builder.

“They do well for us and the customers whom we supply,” said Mahle Sales and Marketing Manager Trey McFarland. “In terms of the LS category, our customer base is a little more well-read, understands what it’s looking for and will pay a little more for a quality part. The parts are a little more costly, but not hugely so.”

In fact, McFarland said, the LS market has become one of the company’s fastest-growing segments.

“The motor has been around over a decade now and has gone through a number
of iterations,” he observed. “We’ve had interests ranging from street performance to marine to off-road use. Motors are being transplanted into [many] different vehicles, and the scope of the engine is far-reaching.”

Despite this, McFarland noted that many still ironically view the LS as a relatively new engine, with many parts distributors seeing the segment as a niche market. Nevertheless, he emphasized that the buyer demographic “runs the gamut” from guys doing just a piston change to street rodders, drifters, performance racers and off-roaders running full-blown modified versions for their respective needs.

“That’s why, again, if a parts distributor were to let everyone know he has the parts, he could have people coming from multiple directions looking for the components,” McFarland said. “Trying to nail down a single niche that’s looking for LS parts is getting harder to do because the engine is finding its way into everything.”

Executive Summary
  • In recent years, more and more racing sanctioning bodies have called for the use of LS crate engines to level the racing playing field.
  • An increasing number of traditional engine builders believe that this growing trend will hurt the custom engine business, if it hasn’t already.
  • SEMA News interviews with engine shops suggest that, for now, the trend is limited to racing and budget customers in a younger demographic.
  • Engine builders with a broad base of street customers, including older demographics with higher incomes, will likely weather the trend.

As for mandating LS packages in racing, McFarland doesn’t believe it’s necessarily a bad thing, depending upon application.

“Anything you can do to make racing more affordable is a positive, but it seems to erode once you get into it,” he asserted. “An LS-based motor is a great motor. You can drag race them. You can make some good strong horsepower out of them. But you put them into a road-racing or a circle-track application and start pushing them for long periods of time at maximum power and torque, and there are some things that need to be addressed. Once you start putting some of those components in place, the costs start coming up. The engines tend to start using themselves up. What you’ve got left is not a lot to start over—you pretty much have to start with a new motor.”

Meanwhile, in Kearney, Nebraska, Blueprint Engines has been building and supplying performance engines for more than 30 years while selling them exclusively under the Blueprint label for the last
two decades.

“We provide GM, Ford and Chrysler crate engines, from our smallest 262 all the way up to 632ci engines,” said Blueprint Engines President Shawn Sterling. “We also offer blocks, block casting and completed cylinder heads.”

Sources
   

Blueprint Engines
404 W. 8th St.
Kearney, NE 68845
800-483-4263
www.blueprintengines.com

Dakota Engines
2809 Hwy. 281
Jamestown ND 58401
701-252-2344
www.dakotaenginebuilders.com

Ed Pink Engines
14612 Raymer St.
Van Nuys, CA 91405
818-785-6740
www.edpink.com

Mahle Motorsports
270 Rutledge Rd., Unit C
Fletcher, NC 28732
888-255-1942
www.mahlemotorsports.com

Speedway Illustrated
107 Elm St.
Salisbury, MA 01952
978-465-9099
www.speedwayillustrated.com

   
   

Sterling said that the company has a broad customer base, including racers and other direct customers, engine builders who dress out the company’s crate engines and big catalog companies, resellers
and retailers.

“We have not seen LS engines hurt our business in any sense,” he said. “For example, in terms of the small-block Chevy, we have not seen a decrease there at all. We have seen growth. We launched our LS platform two to two and a half years ago, and we’ve just seen steady growth. It hasn’t been a detriment at all. I think it’s reaching a different segment of the market, probably the younger part. In the future, I think it will continue to grow, but I don’t know that it will be a detriment to the small-block Chevy.”

Blueprint owner Norris Marshall sees a generational aspect to LS sales as well.

“We could study a lot of human behavior, but I think people gravitate toward what the hot car was in their youth, so we sell a lot of small-block Chevrolet-variant engines to people who are well-heeled and can afford to scan their credit card and buy an engine and get their ’69–’70 Camaro or the like rebuilt,” Marshall said. “Certainly, if you look at social media and forums around the LS, it is a younger generation that has latched onto it.

“When I look at the people involved with the LS engines and the shops that have the notoriety, they’re guys that just specialize in LS engines. The run-of-the-mill guy who has been making his bread and butter off small- and big-block Chevys didn’t realize that there was some kid with a tuning program around the corner who became the LS expert and has graduated now into doing engines, having a dyno. It’s really been interesting for me to watch that, but it’s not only a different generation of customer; it’s a different generation of service provider.”

Meanwhile, Sterling has reservations about the theory that LS crate engines adversely affect the entire aftermarket parts chain.

“The parts are being sold with the engine, so I think they’re still being sold,” he said. “Instead of the engine builder buying the parts from various manufacturers and assembling the engine there, we’re buying the parts from the manufacturers and assembling the engines.”

As in any segment that is experiencing change, the powertrain marketplace is likely to see some ups and downs, some winners and some losers. Especially if sanctioning bodies continue to mandate crate engines, smaller, traditional engine builders may need to adjust to growing competition by cultivating a wider, more upscale base and providing superior customer service while broadening their engine-building repertoire.

 

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