Global economy affects car sales, aftermarket

he beginning of January is inaugurated by indulging in that most sacred of traditions, predicting what will happen in the newly ushered annus novus.

For the last two years, most predictions have been tinged with a sense of annus horribilis than Dryden’s Annus Mirabilis. This year seems not too different, with headlines dominated by the continuing debt crisis in Europe and on-going economic sluggishness in North America. Then there is the looming presidential election in the United States that looks to set new lows in empty punditry and fatuous policy rhetoric, proving Cicero’s opinion, Nihil est incertius vulgo, nihil obscurius voluntate hominum, nihil fallacius ratione tota comitiorum. (Nothing is more unpredictable than the mob, nothing more obscure than public opinion, nothing more deceptive than the whole political system).

So where is the bright-side, you may be asking, as well as when I will stop quoting Latin? It is with automotive sales and the aftermarket.

Several forecasts have come out that bode well for the industry. Polk, a U.S.-based provider of automotive data market trends, finds 2012 will likely see increased automotive sales in most markets around the globe. In the United States, the automotive market will experience single-digit growth, with a 7.3 per cent likely increase in sales for light vehicles, to 13.7 million vehicles being sold. Not a spectacular number, well short of pre-recession levels; still, it is growth nonetheless. If the numbers remain true for the year, it suggests people are slowly starting to open their wallets again.

For the aftermarket, this is good news. If people are beginning to spend money once more, one sector that will likely see an increase is automotive repair and maintenance. The AIA’s recent aftermarket demand study finds vehicles between four and 12 years old are being ‘under serviced’ by an average of $225 every time a vehicle visits a service shop. During the recession, vehicle owners scaled back or postponed outright maintenance work. The AIA study suggests if vehicle owners did all the maintenance work recommended, and did so diligently, that aftermarket in Canada would grow to $30.4 billion. The study even points to several key categories where aftermarket parts suppliers and installers can find substantial profits, such as brakes, coolant, shocks and struts, wheel alignments and oxygen sensors.

However, if gasoline prices spike, problems persist in Europe, the North American recovery remains anemic or retreats into stagnation or recession once more, vehicle owners will hold back on that work. The challenge for the aftermarket will be to capture this market potential, one that will depend as much on global economic trends as it will on reaching out to vehicle owners to spend money on postponed maintenance work.