Sometimes it is hard to know what to make of the news. One day there are reports of positive job growth, a recovering stock market and a growing optimism amongst North American consumers. Wait a few days and another report suggests job growth is sluggish, the stock market tanks on some bit of financial news and consumers are a miserable lot, seeing gloom and despair on the horizon. It is enough to make anyone in the aftermarket wonder what exactly is going on.
While the last few years have been difficult ones for the aftermarket parts and service provider industry, recent market studies out of Canada and the United States point to a more positive picture for the industry.
The 2012 Outlook Study from the Automotive Industries Association (AIA) of Canada paints a generally positive picture for the aftermarket. In Canada, people are holding onto their vehicles longer with the average age of light vehicles on the road averaging around 9.26 years. Correspondingly, the number of kilometres on those vehicles is increasing. The study found the number of kilometres driven going up by 0.9 per cent per year and it now sits around 21,995 kilometres.
These figures are mirrored in the United States. The NPD Group’s Car Care Track survey found in 2011 59 per cent of people reported they owned a car that was eight years old or older, up from 51 per cent in 2007. The U.S.-based R.L. Polk & Co. finds similar ownership trends with average vehicle age on the roads being 10 years and up in their studies.
One interesting statistic is while there has been a slow increase in the number of new vehicle purchases over the last several years the rate is much slower than before this current recession. Polk predicts the year-over-year uptick seen at the beginning of this year is not likely to continue into the rest of 2013. In fact, when groups like AIA Canada, Polk and others look at what people are actually purchasing, it is most likely a used vehicle rather than a new one.
When the respected analysis group DesRosiers Automotive Consultants Inc. took an in-depth look at consumer behaviour around vehicle purchases, ownership and maintenance, the majority of the 2,500 light vehicle owners surveyed — 51.2 per cent to be exact — said the vehicle they purchased in 2010 was used. New vehicle sales accounted for only 43.5 per cent. Digging a little more into the data, DesRosiers finds a little over 25 per cent say they don’t have any plans on buying another vehicle to replace the one they already have.
So what does this mean for the aftermarket, both to those who sell parts and those who install them: simply, owners of older vehicles are going to be spending money to keep those vehicles on the road. While some may have postponed work due to economic circumstances, vehicle maintenance and repair cannot be put off forever.
There are several categories of parts sales and service that are likely going to be profit centres for this year. One will be undercar, specifically brakes, shocks and struts.
DesRosiers finds independent repair shops in Canada capture the near majority of full-service brake repair work largely because they are able to capture and then retain a large portion of the older vehicle market. In terms of shocks and struts, independents once again lead the way in capturing this part of the business with nearly 60 per cent of people who owned older vehicles preferring to take the work to an independent service operation. The same is true for work involving electrical and ignition systems and powertrain.
The NPD Group found similar trends for the United States, as the shift to older vehicles is translating into steady, rising sale in application parts, such as shocks and struts. According to The NPD Group, sales of parts for suspension, steering and application electrical grew by six per cent.
One area that should be of particular interest to parts suppliers and installers is how changing demographics will impact the aftermarket. Canada and the United States are experiencing profound demographic shifts with increasing immigration.
The NPD Group put out a study looking at the aftermarket opportunities in the Hispanic market. With the Hispanic population nearly doubling by 2050 in the U.S.
The NPD Group finds for Hispanic vehicle owners, known and respected aftermarket brands are important to them when it comes to making a buying decision.
Hispanic vehicle owner also demand employees at independent shops and front-counter staff at parts suppliers have a high-degree of product knowledge and value developing strong personal relationships with those they do business with.
This translates into long-term business for those parts sellers and installers that provide front-line staff that can speak Spanish and display strong product knowledge.
While there does not seem to be a comparable study of Canada’s changing demographics and its impact on the aftermarket, one expects our changing demographics will most certainly have an impact on the aftermarket.
Parts suppliers and installers who understand what those changes mean will see continuing success in the future.