A challenging year with a complex landscape of opportunities and obstacles is what the current automotive industry as a whole is looking forward to in a challenging year, leading industry experts said.
At the recent MEMA Aftermarket Suppliers Vision Conference in Chicago, the 3 Dragons: Aftermarket Outlook session, a representative from Wall Street, an economic expert and an aftermarket analyst gave their insights into what they see happening over the next year in the sector.
Simeon Gutman, managing partner at Morgan Stanley, offered a nuanced view of the automotive sector’s prospects.
“The auto parts sector is well-positioned for 2025,” he explained, highlighting several promising indicators. Vehicle sales remain robust, with positive trends in miles driven and new car pricing. The shift to light trucks and favourable gas prices provides additional optimism.
However, significant headwinds threaten to disrupt the industry’s momentum. Gutman raised concerns about low-income consumers, noting pressure on lower-income consumers with spending slowdowns across various retail channels.
Todd Campau, associate director of aftermarket solutions at S&P Global Mobility, echoed these concerns, particularly focusing on trade policy uncertainties like the future of the USMCA trade agreement and existing networks built across North America.
“The biggest concern is that we’ve built this integrated supply chain between U.S., Canada and Mexico,” Campau warned. “And that could be destroyed depending on how impactful Liberation Day is.”
Campau referred to the day the Trump Administration announced sweeping new reciprocal tariffs on a wide range of imported goods, which was the same day this conference took place.
The potential for tariffs creates a perfect storm of economic challenges, creating a precarious situation.
“No automotive producer is going to produce a 2 or 3 per cent margin vehicle into multi-thousand-dollar headwinds,” said Kristin Dziczek, a policy advisor at the Federal Reserve Bank of Chicago.
The tariff situation presents a particularly complex challenge. Experts suggest that tariffs could potentially increase vehicle prices by thousands of dollars, with some estimates indicating a 10 per cent price increase could be a breaking point for consumers. The integrated North American supply chain, carefully built over decades, now faces potential dismantling.
Despite these challenges, the industry shows remarkable resilience. The vehicle fleet remains healthy. Consumers continue to prioritize vehicle ownership, with many choosing to maintain existing vehicles rather than purchase new ones in the face of rising prices.
“Consumers still think it’s a pretty bad time to buy a car,” Dziczek said.
Uncertainty is generally bad for business but it’s not terrible when it comes to how consumers behave. They look at the price of a new vehicle and the cost to repair their current one — and they will continue to be more likely to choose the latter.
“You might have to find a way to repair the vehicle because you need the vehicle, but you’re probably not going to invest in a large expenditure at this time,” Campau said.
Image credit: Depositphotos.com
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