There is no doubt in the minds of a number of automotive aftermarket leaders that the industry is going to get bigger as we transition farther away from the pandemic.
Why? Because of the key role the industry took in the midst of the global COVID-19 pandemic and the performance seen over the last nearly two years, said executives during the Buyer’s Panel keynote session at AAPEX 2021.
“These last two years have been a challenge. You’ve seen what our industry has been able to do and the performance of our industry overall,” said Gregory Johnson, chief executive officer and co-president at O’Reilly Auto Parts. “A lot of the key indexes and drivers for our industry — obviously, miles driven, vehicle age, and those things — are now starting to turn again. Miles driven, it’s improving; I think that will continue.”
People are driving again. They’re taking road trips for vacations or visiting family, Johnson added. Those are just some of the good signs of a prosperous industry going forward.
“I think we continue to see that improve,” he said. “With the lack of new vehicles entering the car parc this year, I think you’re going to see [average age of vehicles increase]. All those are very positive for our industry. And I’m just very, very optimistic about the future of the industry as a whole.
Corey Bartlett, president and CEO of Automotive Parts Headquarters agreed. Furthermore, the aftermarket attracted millions of new people — four million, specifically, according to The NPD Group — during the pandemic.
These were “people that were inspired by the pandemic to buy a [utility task vehicle], buy a boat, by an RV, by all the trailers to haul those things,” Bartlett said. “And so expansion and maybe a little diversification of customers that are coming to see us because, all of a sudden, they’re more excited about and dependent on some of the vehicles for fun, that they weren’t enjoying previously.”
Tom Greco, president and CEO of Advance Auto Parts called these new behaviours picked up by consumers “sticky,” meaning those new customers will spend their money in this industry for years to come.
“People took on projects on their vehicle or in their own that they haven’t been doing. And we believe some of those behaviours are going to be sticky.”
“People took on projects on their vehicle or in their own that they haven’t been doing. And we believe some of those behaviours are going to be sticky,” he said.
The big challenge, noted Bill Rhodes, president and CEO of AutoZone, will be ensuring the supply chain can keep up. At the start of the pandemic, aftermarket business dropped 25 per cent, he noted. Then, it not only regained that ground but went up 25 per cent above previous benchmarks.
“Our supply chain wasn’t built for 25% growth overnight, sustained for 20 months,” he observed.
So it will “be a long journey” to get the industry caught up and able to serve consumers at a level they demand.
“In some respects, we played a game of whack a mole for the last 18 months,” Rhodes said. “I suspect it’s going to continue to be that way for an extended period of time. And it is imperative that we get our teams together [to face the next 18-20 months of challenges].”