In many ways, it has been some of the best of times for the automotive aftermarket. But, as one leader pointed out and quoted Charles Dickens, it has been the worst of times as well.
A black swan event is one that is described as a rare event but with a big impact. The automotive aftermarket has been hit with several black swans in a short period of time, described Paul McCarthy, president and chief operating officer of the Automotive Aftermarket Suppliers Association. These events have shaken the foundation of the industry, he told attendees of the recent AASA 2022 Global Summit.
“Just think of some of the things we’ve gone through. We had the rules of trade, [which] were totally upended for us. And there was the pandemic. And there was supply chain disruption. Then we had inflation. We have a worker shortage. And all of this is happening at the same time we’re also having this incredible ongoing technology transformation. That is changing our channels; it’s changing our very products,” he said.
Take, for example, a global pandemic the magnitude of COVID-19. That happens about every 100 years. Then there’s the supply chain disruption which is happening at a level not seen since the Second World War. Inflation of this level hasn’t been seen in the U.S. in 40 years, and 30 years in Canada. Issues of this scale around worker shortages last happened more than 70 years ago. Major shifts in office work last happened 140 years ago. There hadn’t been a major European ground war in more than 75 years, until recently when Russia invaded Ukraine.
On that last point, geopolitical risk is the latest event to potentially disrupt the aftermarket. China and Taiwan, Iran and nuclear weapons have been longstanding situations. But new to the mix is the invasion of Ukraine by Russia.
“So we talked about black swans being these unusual events — big impact, rarely happen — it seems like we have a flock of black swans we have to deal with,” McCarthy said.
As a result, the pace of change is accelerating. That’s what member CEOs are seeing. “And one of the big topics at our recent board meeting, from our board members, is that when you look out 5,10, 15 years in the aftermarket, the number of inflection points — the number of things that could change how you do business — it seems to be at an unprecedented level,” he added.
“It seems like what we do know is that, at some point, there’s going to be some disruption that’s going to come along and affect our business.”
One thing is for certain: Nothing is certain. There’s always going to be some sort of disruptor hanging over the industry. Speaking specifically to geopolitical risk, McCarthy pointed to the fact that unpredictability rules the day right now.
“It seems like what we do know is that, at some point, there’s going to be some disruption that’s going to come along and affect our business,” he said.
And, of course, you can’t predict what it’s going to be.
“You don’t know what it would be, but [we’re] going to be hit by item after item after item; a curveball every four to six months that sort of changes how we have to do is this,” McCarthy said.
“So we are living in this age of uncertainty.”
Image credit: Depositphotos.com
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