Vehicle Longevity Fuelling Parts Sales

Given the fact that vehicles are lasting longer, more and more consumers are opting to hold onto them longer. And as a result of this new attitude, they are assigning a greater value to these older vehicles. This is translating into a significant increase in spending on maintenance and needed repairs.
According to the Automotive Industries Association of Canada’s newly published 2014 Outlook Study, which is conducted annually by DesRosiers Automotive Consultants, the new vehicle market set an all-time sales record in Canada in 2013, having sold 1.74 million light vehicles across the country. Although dealerships were the most popular choice for automotive maintenance of these new vehicles, holding a 36.6% share of the service and repair market, this success will ripple through to the aftermarket as these vehicles age in the next decade.
According to data gathered by DesRosiers, total Canadian light vehicle aftermarket retail sales amounted to $19.1 billion in 2013 (excluding collision repairs). The automotive parts market made up $10.9 billion, or 57.1%, of total sales, while labour constituted the rest with $8.2 billion in sales. Of the $10.9 billion in parts sales, $8.1 billion (74.7%) came from the DIFM channel and $2.8 billion (25.3%) came from the DIY channel.
The aftermarket is forecast to grow in the coming years, which is good news for jobbers. This growth will be driven by a variety of factors, chief among them increased vehicle longevity, an expanding vehicle fleet, and the aging of the record number of vehicles sold between 2010 and 2014. By 2017, aftermarket share is expected to exceed $21 billion.
“This is an exciting time for the Canadian aftermarket industry, as we sit on the cusp of significant growth,” says AIA Canada president and CEO Marc Brazeau.
Taking a closer look at the 1.74 million new vehicles sold in 2013, 764,382 of them were passenger cars while 978,730 were light trucks, a breakdown that is consistent with existing trends. Indeed, passenger car sales have been in a downward trend since the recession in 2009, losing their majority share of the market in 2010 (45.3% passenger car versus 54.7% light truck). On the back of a huge 19.0% growth in 2010, the light truck segment has overtaken passenger cars in new vehicle sales. The 978,730 light truck sales in 2013 represent a 4.0% increase from 2012’s 915,880 sales. Much of the growth in the light truck segment is due to the proliferation of compact sport utility vehicles, which accounted for more sales in 2013 (315,141) than large pickups (299,226). Considering the passenger car perspective, while the compact segment (391,402 units sold in 2013) is still the most popular for Canadian new vehicle sales, the intermediate category has been on a downward trend.
Used vehicle sales decreased by 2.5% in 2013, having moved only 2.80 million units. Sales of used vehicles in Canada peaked in 2011 with a total of 3.03 million units, and have since dropped as a result of the spike in new vehicle sales. In total, used vehicle sales represented 61.6% of all vehicle sales in 2013.
New vehicle sales trends can greatly affect the composition and age structure of the Canadian vehicle fleet over an extended period of time, because the peaks and troughs in new vehicle sales have a ripple effect on the aging fleet. The strong new-vehicle sales period spanning 2010 to 2014 has had a significant effect on the current vehicle fleet and will impact the aftermarket in the upcoming decade, just as depressed sales during the recessionary period from 2009 to 2011 are beginning to affect the aftermarket now.
The strength of the early-2000-to-2006 sales period is evident in the growth of the 6-7-year-old and 8-12-year-old age groups, which had the highest annual average growth rates in 2013 at 2.8% and 4.7% respectively. The 12-plus-year-old and 4-5-year-old vehicle groups followed with 1.7% and 0.6% average annual growth rates. Growth in the older vehicle age brackets has positive implications for the aftermarket, as these out-of-warranty vehicles are the ones that will require aftermarket service and repairs.
The natural progression follows with these vehicles eventually being scrapped or reaching an age where maintenance expenses will outweigh the benefits of owning the vehicle. Looking forward, the influx of vehicles in the 2000-to-2006 period will move into the 12-plus-year-old segment at a rate of 2.3% into 2017. The 4-5-year-old bracket is expected to have the highest annual average growth rate at 2.7%, followed by the 1-3-year-old age bracket (2.2%) and the 8-12-year-old segment (1.3%). The 6-7-year-old age group is expected to see a small decline (-0.5%) in the next five years.
The slight decline in new vehicle sales during the economic downturn resulted in a 0.2% decline of the 1-3-year-old segment in the five-year period leading up to 2012. This low point will create a ripple effect that will see the lower-than-average numbers move through the various age brackets. Similarly, the recent upswing in new vehicle sales will result in positive annual average growth rates of the 1-3-year-old vehicle segment (2.2%) and the 4-5-year-old segment (2.7%) in the next five years. Since many of the 1-3-year-old vehicles and some 4-5-year-old vehicles are currently under warranty, the growth opportunities for the traditional aftermarket are relatively limited at this time. The OES dealer channel, on the other hand, will certainly benefit from the recent growth in new vehicle sales when these vehicles outlive their warranties.
Looking more closely at type and nameplate structure, the portion of light trucks relative to passenger cars has increased in recent years. In 2008, light trucks accounted for only 43.4% of the entire vehicle fleet in Canada; however, in 2012 they accounted for 47.0% of the fleet and in 2015 they are expected to make up 51.3% of the market. The growth of the compact sport utility and crossover segments has been one of the most significant contributors to this shift.
While the popularity of import nameplate vehicles has increased in the past four-year period, from 39.5% of Canadian vehicles in 2008 to 45.8% in 2012, it is forecasted that Detroit Three vehicles will regain popularity in 2015 and 2016. The growth of the large pickup truck segment is one of the underlying factors for the expected growth of Detroit Three-nameplate vehicles in the near future, since these manufacturers are all major players in the light truck segment.
The aftermarket segment for vehicles between one and three years of age had the smallest value in 2013, with only $1.83 billion in sales. This is in line with existing trends, given that a greater proportion of new vehicle owners visit their dealership for maintenance and repairs rather than the aftermarket. The 4-to-5-year-old vehicle segment had the second-smallest value with $2.44 billion in sales, which can be explained by the small number of vehicles in this age group due to a lack of new vehicle purchases during the economic downturn in 2009. The surge in new vehicle sales following the downturn is expected to cause a ripple of increased sales through the various age segments in the coming years.
Of more significance to jobbers are the older 6-7, 8-11, 12-14, and 15-and-older segments, which show the greatest sales growth. The 6-7-year-old age group, which accounted for 15.0% of total aftermarket sales in 2013, reached $2.92 billion in sales, but even this segment pales in comparison to the $5.42 billion associated with 8-11-year-old vehicles. This group accounts for the greatest share of aftermarket sales and is followed by the 12-14-year-old age segment with $3.13 billion in sales.
Vehicles 15 years of age or older accounted for $3.40 billion in aftermarket sales in 2013. As vehicle technology continues to improve, consumers are able to drive their vehicles longer. These older vehicles, however, require more maintenance and repairs, so it is foreseen that the aftermarket value for older vehicle segments will conti
nue to grow in coming years.