In Recession, Opportunity

Not everybody suffers during a recession and the current mild Canadian version of the U. S. disaster will be no exception. For the aftermarket, the huge pool of vehicles bought during the record sales years are coming off warranty and their owners are likely to defer the new vehicle purchase, at least until the economy stabilizes. Up-sell maintenance service that promises longer vehicle life, like synthetic lubricants and premium brakes, are cost justified to many consumers. And lower fuel prices (for now) remove much of the savings from switching to a new, fuel-efficient replacement vehicle. Those low fuel prices may have another side effect for the repair aftermarket: they may buy time.

The time I’m thinking of refers to the hybrid and electric technologies. For all the media hype, hybrids have not yet sold in numbers that make them a serious issue in the aftermarket, but high fuel prices and a strong “green” appeal, plus an explosion of hybrid offerings from GM and Ford (as well as more “import” models), had set the stage for hybrids to break through in a big way. This had implications for repair facilities, as a major spike in hybrids would effectively put a four-or five-year deadline on shops to get training up to speed on electric drive systems.

The operative word is “had” because the combination of high relative prices for hybrid models, a slumping economy, the Detroit automakers in financial trouble and low relative fuel prices will stretch out mass consumer acceptance of hybrids for a year or two, at least. This gives shops more time to train and aftermarket parts suppliers and schools a chance to spool up as well. Great, right? Well, not so fast. When the economy does bounce back, we could be ready for a “perfect storm” of lower unemployment, pent-up new vehicle demand, high fuel prices, and an explosion of hybrid vehicles and the overlapping introduction of electric cars with on-board internal combustion engine charging.

In this scenario, we could have good repair demand for 2009-2010, followed by high older vehicle scrappage and a decline in repair in favour of maintenance, followed by the first appearance of electric drive systems in significant numbers. For general repair shops, this means that the mix of repair/maintenance as well as the actual type of wear to expect in aging hybrids is a major unknown. Volume tire/brake/ride control operations will be affected to a much lesser degree as these systems won’t change significantly, with two possible exceptions: replacement tire availability and brake wear. If hybrid models continue to use specially-sized, low-rolling resistance tires, there may be few replacement options, locking out some branded dealers. The other wheel-end issue, brakes, may be affected by the regenerative braking systems that partially recharge the hybrids’ batteries: this energy recovery may reduce brake wear, stretching out the replacement cycle. There are a lot of unknowns. For now, however, it’s about cost control, customer retention and savvy merchandising to stay alive until the electric revolution emerges.

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It’s about cost control, customer retention and savvy merchandising to stay alive until the electric revolution emerges.