Auto Service World
News   March 11, 2022   by Adam Malik

Is inflation good or bad for the aftermarket?


A debate of sorts broke out during a recent conference over whether or not inflation was a good or bad thing for the automotive aftermarket.

To kick off the Global Summit hosted by the Automotive Aftermarket Suppliers Association and the Overseas Automotive Council, AASA president and chief operating officer Paul McCarthy argued that increased inflation was helping propel the industry.

“Inflation has also been very nice for us,” he said during his opening presentation, 2022 Aftermarket Outlook: North America and Beyond.

He presented a graph that showed the Consumer Price Index for motor vehicle parts and equipment spiking from the third quarter onwards in 2021.

“And inflation has been very good for aftermarket revenue. It also points out one of the underlying strengths of our marketing, which is that elasticity of demand,” he said.

McCarthy explained that while other products may see a volume decline as price goes up, that doesn’t happen with motor vehicle parts.

Tom Cook of Blue Tiger International, at the AASA 2022 Global Summit

“When you need your vehicle repaired, you need it to be repaired,” he said. “You need to go to work. You need to get your kids to practice or to school. And that price elasticity is one of the fundamental appeals of our industry.”

But as the day moved on, several speakers pointed out they disagreed with McCarthy’s views.

One was Tom Cook, managing director of Blue Tiger International, a supply chain management consultancy.

The aftermarket is resilient and sustainable, he said. These are key components of any successful industry. But if companies can’t supply products on time and at a competitive price, that impacts profitability and growth.

Furthermore, while inflation is up, so, too, are costs related to running your business.

“I would take issue with [the suggestion that inflation is positive] to some extent because the cost to get where we are and running our supply chain is significantly more expensive, not only in terms of what we have to pay to move something but of the human cost that’s involved in each company,” Cook said.

Carlos Straetger of Super Repuestos at the AASA 2022 Global Summit

Another was Carlos Straetger, supply chain manager of Super Repuestos, a distributor in Central America.

He pointed out that if left unchecked, inflation will affect the average consumer enough that they may end up choosing cheaper parts for repairs. If cheap enough, those won’t be long-lasting solutions. Furthermore, those cheaper brands could gain a foothold in terms of brand awareness and take market share from better quality lines.

“And it’s not something that anyone of us want. So we need to act together in this and more than ever before, I think in my opinion,” Staetger said.

Alexander Gruzdev of Gruzdev-Analyze at the AASA 2022 Global Summit

Finally, Alexander Gruzdev, CEO of Russia-based consultancy Gruzdev-Analyze, also noted that inflation is bad for everyone involved. Maybe it’s a positive from an American point of view, but not in Eastern Europe, he said.

“Drivers today just have less money. When income does not increase as much as the price is, you have less money,” he said.

“You need to spend more money on your groceries, you need to spend more money on gasoline or petrol or diesel, doesn’t matter. So you have less money to spend on parts. So this is destructive to see.”

 

Image credit: Depositphotos.com


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