Auto Service World
News   January 25, 2023   by Adam Malik

Aftermarket to remain busy as vehicle fleet grows

But how is VIO growing these days and why is the aftermarket key to this increase?

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Fewer new cars are being sold, yet the number of vehicles in operation is growing. At first glance, that can be a tough concept to grasp but analysis shows this is indeed the case — and the automotive aftermarket will benefit.

In Canada, AIA Canada’s latest Outlook study forecasted 26.6 million VIO in 2022. That number is expected to reach 29.6 million in 2028. Growth is also expected in the U.S. How can this happen if the fleet isn’t being adequately replenished?

The key has been the reduced scrappage rate — people are not scrapping their vehicles at the typical pre-pandemic rate. That means more people are keeping those vehicles — and having them repaired — all while new vehicles enter the fleet, even at a reduced rate.

Lang Marketing also highlighted the fact that vehicle scrappage was well below historical rates in a recent Aftermarket iReport. This trend is “leaving more older vehicles on the road,” it observed.

Furthermore, there was concern over what people would do with their vehicles as work-from-home and hybrid options became entrenched in society. Would they need or want vehicles if they weren’t commuting every day?

“The resounding answer over the past year-and-a-half, two years has been, yes, people still want their vehicles,” observed Todd Campau, automotive aftermarket practice lead at S&P Global Mobility.

Speaking at AAPEX 2022, he noted that even as auto sales are on track to be among the worst seen in years, the total car parc is going in the opposite direction.

“The answer is, simply put, less vehicles are coming off the road each year,” he said during his 5 Trends impacting the North American Aftermarket presentation.

The U.S. is seeing a 4.2 per cent scrappage rate — the lowest in the last 20 years. And this year could finish out at an even lower rate, indicating people are keeping their cars running.

There are a few factors at play here. Used vehicle values are at levels never seen before, even if there has been some reduction. New vehicles are still difficult to come by. And when they are available, they’re at high prices.

“In doing so it’s created a situation where the ‘do I repair a vehicle or do I scrap a vehicle’ decision metrics for that is changing,” Campau said. “We’re seeing more vehicles being repaired, being sold and staying in the fleet for a longer time.”

So sellers are finding a market for used buyers. And with the high cost of new vehicles, consumers are opting for new-to-them used vehicles at a more affordable price.

“We’re starting to see some rationality come back to us vehicle values, but it’s going to take some time,” Campau predicted. “And it’s probably not going to completely normalize until the new vehicle sales normalizes in the next couple of years.”

With that, the average age of vehicles in the U.S. has now grown to 12.2 years. And will get even higher.

“It makes sense that it would go higher when we’re seeing low new vehicle sales and we’re seeing the vehicle fleet grow — the only way that fleet grows is with vehicles staying on the road longer,” Campau said.

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