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An original equipment manufacturer, or OEM, manufactures products or components that are purchased by another company and retailed under that purchasing company's brand name. OEM refers to the company that originally manufactured the product. When referring to automotive parts, OEM designates a replacement part made by the manufacturer of the original part.
When referring to automotive parts, OEM designates a replacement part made by the manufacturer of the original part. As most cars are originally assembled with parts made by companies other than the one whose badge appears on the vehicle, it may happen that a car company sells OEM spare parts without claiming to have manufactured the part itself.
An automobile part may carry the designation OEM if it is made by the same manufacturer and is the original part used when building and selling the product. The term aftermarket is often used for non-OEM spare parts.
In purchasing parts at national, discount auto parts retailers (e.g., NAPA, Auto Zone, Advance Auto Parts, Pep Boys, etc.), many parts will have OEM prominently displayed but followed by a qualifier such as "meets OEM standards". Such auto parts are not OEM; they are simply claiming to have been manufactured to the same specifications as the OEM parts—specifications that may well be unpublished and unknowable.
OEMs rely on their ability to drive down the cost of production through economies of scale. Also, using an OEM allows the purchasing company to obtain needed components or products without owning and operating a factory.
While the term was used in the early 1960s and 70s in the US to refer to value-added resellers, OEM is currently defined by IBM to refer to "a manufacturer of equipment that may be marketed by another manufacturer". It may derive from a Dutch phrase, "onder eigen merk", which means "under own brand".