Good times ahead? No, they’re already here for the automotive aftermarket.
If the numbers from the United States are a template for the rest of the world, the automotive aftermarket industry is doing quite well. Actually, that may be underselling it if you were to hear Paul McCarthy tell it.
“Welcome to the boom. This has been a truly unprecedented boom that we’ve seen in the U.S.,” said the president and chief operating officer of the Automotive Aftermarket Suppliers Association.
He showed a graph of growth among the “big four” parts retailers in the U.S. — Advanced Auto Parts, AutoZone, O’Reilley and GPC, which owns the NAPA brand — where all showed positive year-over-year financial performance. All peaked in the third quarter with growth at least 23 per cent higher than the same time last year.
The numbers were stunning, even to McCarthy, who spoke at the AASA Global Summit in Coral Gables, Florida.
“If pre-COVID I was telling you these are the kind of growth rates we’d see the next couple of years, none of you would have believed me. I wouldn’t have believed me. These guys wouldn’t believe,” he said during his presentation 2022 Aftermarket Outlook: North America and Beyond.
In Canada, Uni-Select reported a sales increase of 9.6 per cent in 2021 compared to 2020, backed by organic growth that was driven by “increased demand and continued market recovery from the COVID-19 pandemic.” Its Canadian Automotive Group, which includes the Bumper to Bumper and Auto Parts Plus banners, saw an increase of 11.4 per cent last year.
The aftermarket is generally seen as one that can be relied upon for reliable growth, McCarthy noted. It’s what makes the industry attractive to investors. Growth is predictable, typically coming in at or above 3 per cent. It generates an attractive amount of cash.
“We’re kind of a predictable cash-generating machine,” he said. “That’s not what we see here. This is a boom.”
He borrowed a line from Charles Dickens to describe the aftermarket: It was the best of times. It was the worst of times. Depending on where you sit in this industry, either end of the spectrum could apply to you.
“There’s no doubt that the last two years have been extraordinarily challenging from a supplier perspective. From a market perspective, this is quite literally probably the best of times from a pace of growth [perspective] that we’ve ever seen in the U.S. in at least the last 60 years,” McCarthy said. “So, literally, the best of times.”
Recently, DesRosiers Automotive Consultants reported results after surveying members of the Automotive Aftermarket Retailers of Ontario (AARO). It found that more than half of shops reported sales increases in 2021. Additionally, more than three in five said they have a positive outlook moving forward.