Since the recession years of 2007-2009, the automotive aftermarket industry has been able to recover and see some growth. New light vehicle registrations have been performing particularly well within the industry.
More than 3 trillion miles were driving in automobiles around the world in 2014, the first positive trend seen in this area since mileage peaked in 2007.
Compared to 1990 levels, people around the world are driving more than 1 trillion more miles every year. That’s a big positive for the automotive aftermarket industry. The following insights will also show what is driving this industry forward now and into the future.
What the Automotive Aftermarket Industry Looks Like
- 4 cylinder engines have gone from a 41% market share in 2008 to a 55% market share in 2014.
- 15.7% of new registrations are for compact CUVs. Traditional compacts make up another 15.1% of registrations.
- The shift in favor of CUV designs has more than doubled since 2011, creating an upcoming need for the aftermarket industry as the initial purchases in this category begin to age.
- Since 2007, the US market has seen a shift from domestic preferences to import cars and light trucks.
- The number of domestic cars has decreased by 26% while imports have increased by 23%. Domestic cars have seen a total sales decrease of 7.9% in this time period.
- For vehicles in operation [VIO] forecasts in the United States, the automotive aftermarket industry is expected to see a total rise in demand of 89%.
- Until recently, new vehicle registrations saw a total drop of 40%, putting pressure on the aftermarket industry.
- In the United States, there are almost 1 billion oil changes performed in any given year.
- According to Hoovers, major product categories for the US industry are transmission and power train components, engines and engine parts, and metal stamping of body parts and trim, each of which accounts for about 15% of industry revenue.
- Other products include electrical and electronic equipment [10%]; seating and interior trim [10%]; brake systems [5%]; and steering and suspension components [5%].
- Statistia reports that the automotive aftermarket parts market in the United States was sized at around $137 billion in 2014.
- US automotive parts exports increased 36.2 percent to $58.1 billion in 2010 compared to $42.7 billion in 2009 according to the US Department of Commerce.
- Imports from China increased 35% from 2009 to $10 billion in 2010.
- Industry analysts reported that over 50 suppliers filed for Chapter 11 protection in 2009 and up to 200 suppliers were liquidated.
- The overall U.S. automotive parts trade deficit in 2010 was $32.8 billion, up 61.3% from 2009 levels.
Increasing vehicle complexities present challenges to the automotive aftermarket industry, but they also present a number of opportunities. Where the “sweet spot of care” may not be shrinking, but shifting to support new vehicles. As technologies evolve, the need for different parts, repairs, and vehicle components to keep a car on the road will also change. This is especially true for new features, such as radar collision, parking camera sensors, and infrared sensors all help to make driving safer. These parts will eventually wear out and need the support of the automotive aftermarket industry.
How the Evolution of the Automobile Could Help the Industry
- The average age of vehicles on the road today continues to climb. The average for all light vehicles is 11.3 years. That’s 1.5 years older than data collected in 2002 and is 14% higher than 2007 data.
- The average age of a light truck on the road today is 11.26 years. This is nearly 2 years older than 2002 data.
- For the 5 years prior to the recession years of 2007-2009, the average age of a vehicle being used only raised by 4% annually.
- This has resulted in a change of driving volume in 2014 of 1.7%. This is the largest change seen globally since 2004 when driving volume rose 2.5%.
- US light vehicle sales hit 16.5 million units in 2014, which was the first year at this volume since 2007.
- If growth patterns stay the same, more than 18 million units are forecast to be sold in 2017.
- This will also affect the age of vehicles on the road. New-to-5-year-old vehicles will grow 41% over the next five years. 6-to-11-year-old vehicles will decline 22%.
- US light VIO are forecast to grow by 5% over the next 5 years, hitting 260 million vehicles by 2018.
- Mark Sengs of IHS Automotive reports that vehicles which are 12+ years in age are expected to grow by 12% in the next 5 years.
- More than 30% of hybrid registrations in the United States occur in Washington, Oregon, and California.
The automotive aftermarket industry is likely going to take a hit in the next 5 years. This is because vehicle owners who have been sticking with their current vehicle are in a potential position to upgrade for the first time in more than a decade. In the next 5 years, this is is why there is an expected decline in older vehicles. Should there be economic uncertainty in 2020-2022 for some reason, however, the trends today indicate that this industry could see explosive growth in 6-10 years. The automotive industry is evolving from the lessons learned from the recession years. Now that evolution is filtering down to the aftermarket.
Globalization and How it Changes Everything
- Looking at total global vehicles in operation, the number broke 1 billion units in 2010. This could be 50% higher by 202.
- In 2014, global new vehicle registrations set a record with more than 75 million units.
- This dictates a need for automotive manufactures to create a global OEM structure so that there can be standardized aftermarket components.
- OEMs are expected to increase by 81% over the next 5 years.
- Fewer vehicle platforms due to standardization will make it easier to acquire aftermarket parts, giving more people around the world access to the aftermarket industry.
- More than $85 billion is spent on research and development around the world for the automotive industry, helping to support $5 trillion in overall output.
- Despite a 43% increase in the demand for materials, just $4.2 billion of investments have been made for 70 new auto parts plants around the world.
- China is driving many of the increases seen in the aftermarket industry, as light vehicle sales are forecast to triple in 2021 compared to 2001 data.
- Global VIO is expected to grow by 27% by 2021.
- Oil import cost exposure is expected to see vehicle fleets nearly double on the forecast horizon.
- Fuel conservation promotion to help struggling economies will also encourage longer vehicle life and a stronger aftermarket industry.
Globalization also has encouraging trends for the automotive aftermarket industry, but patience must be had to reach those trends. New light vehicle sales are going to decrease the aftermarket industry temporarily, especially in 2016-2021 according to most forecast models. From 2021-2026, however, and especially with an emphasis on standardized OEM platforms being available, there is forecast to be an impressive level of growth. This is especially true for the Chinese market, which is expected to match the United States in 2021 for VIO figures.
The Benefits and Challenges of Advancing Technologies
- Gas and electric hybrids represent 3.6% of all new registrations in the US, which is an all-time high.
- Diesel registrations were at 2.9%.
- Fully electric vehicles, which are seeing a rise in ownership rates, represent just 0.3% of total vehicle registrations.
- Since 2011, the registration rates of hybrids has risen by 64%, with 45+ different hybrid models available on the market today.
- Between 2008 and 2013, the number of models with diesel engines increased 21% while the number of hybrid models increased 125%.
- 52 million vehicles in the US use the oil service indicator light as the recommendation for when to change the oil, which is 1 in 5 vehicles that are in operation right now.
- The average recommended interval for all light vehicles now stands at over 7,500 miles.
One of the strongest components of the automotive aftermarket industry is the independent provider. As technologies change, the amount of services they are recommended to provide is decreasing by 50% or more for some vehicles. In the past, the recommended oil service interval was 3,000 miles. Now it’s 7,500 miles for many vehicles. It’s during this service that other repair opportunities tend to present themselves. To adjust to this trend, the aftermarket industry must develop deeper relationships with its customers. It must find ways to engage with them so that their brand stays at the top of the mind. This will help the industry be able to leverage its strengths and stay strong in the forecast down years that may be coming.