Aftermarket should plan for more import brands and entry-level vehicles

At a meeting for Ontario auto recyclers, industry expert Dennis DesRosiers presented information on older vehicles and vehicle scrappage rates that has implications for auto repair and maintenance facilities.

DesRosiers is president of DesRosiers Automotive Consultants Inc., a consulting and market research firm that specializes in the automotive sector.

His advice: “You’d better learn how to deal with import nameplates.”

One difference between GM, Ford and DaimlerChrysler and the import nameplates is longevity of vehicle platforms. As an extreme example, DesRosiers notes the Blazer and Jimmy platform did not change significantly for 22 years. However, the current trend is that the number of vehicles on platforms three to four years old is growing, as is the five- to eight-year category.

The result “is that repairers and recyclers have less time to get up to speed on their product knowledge,” DesRosiers adds.

As well, the market share of domestic manufacturers has been shrinking. Consumers now buy more import-branded cars and light trucks than GM, Ford and DaimlerChrysler branded vehicles.

“So you will see more import nameplates, and more of a mix of materials and technologies,” DesRosiers concludes.

A record number of different types of vehicles are coming to the market now, he adds. There were 61 new models this year. During the late 1980s and 1990s the average was about 30 new models per year.

“That means, strategically, recyclers should be thinking, ‘Yes, it is worth the investment.’ The industry is going to get more complex, so you should take a more sophisticated approach to your business.”

Another change in the market has been the migration away from mid-size vehicles and family sedans. There’s been strong growth in the entry level category, and some in the large/luxury/sport segment.

“The consumer has embraced the entry level in Canada. They’ve abandoned the middle, that is (the) mid-size and family sedans,” DesRosiers explains. In 2006, 50 per cent of vehicle purchases by Canadian consumers were entry-level vehicles.

At the other end of the spectrum, “The number of light trucks headed your way is gigantic,” warns DesRosiers. Since 1997, the mix of cars/light trucks in total new vehicle sales is almost 50/50.

The ratio of vehicles per driving age population has been stable in Canada for about 30 years, hovering around 70 per cent; in the U.S., that figure is 102 per cent. That 30 per cent difference, says DesRosiers, tends to be low income owners and very old vehicles. So vehicles come off the road 30,000 to 50,000 km earlier in Canada.

DesRosiers noted that recycling “is influential in all the value chains of the automotive market.” He describes the industry as a funnel, with the 18.8 million vehicles on the road (in the body of the funnel) remaining fairly constant, so to get new vehicles coming in the top, the industry needs that 1.2 million units of scrappage each year. “You recyclers are absolutely critical to the GMs, Fords (and) Hondas of the market.”

The “Green” agenda plays into your business as well, he notes, because older vehicles are generally the target. You can play into this if you plan and invest and strategically think about it, he adds.

DesRosiers forecasts scrappage steady at 1.2 million for the next few years, but growing to 1.5 million by 2015. That’s about 20 per cent growth in the next four to five years. And all indications are that the growth will be “in import brands and smaller vehicles.”

“So you’d better learn how to deal with all the issues tied to import nameplates.”