Although the industry is considered essential in many global markets during the pandemic, the value chain felt the impact. What do you see being the biggest challenge and/or opportunity for the automotive aftermarket value chain?
While the automotive aftermarket business is often referred to as “resilient” during times of crisis, the industry has certainly faced a number of challenges during the Covid-19 pandemic. And although the industry is considered essential in many global markets, the value chain felt the impact. For example, IMR found that more than 92 percent of U.S. suburban independent repair shops reduced their hours and pay while 53.7 percent of those shops reduced staff. In other countries, though, lockdowns included repair facilities and auto parts stores.
With those challenges in mind, we take a look at the top headwinds and tailwinds the industry will be facing throughout 2020-2021 and the foreseeable future.
Market Conditions: Headwinds
• Sales calls still far from normal, customer visits not taking place
• Repair shops are having difficulty obtaining parts
• Pandemic impact on industry unlike any historical comp
• Baseline scenario assumes 85 percent of pre-pandemic activity during Q3 and back to 90 percent by the start of Q4 2020; optimistic scenario assumes 90 percent in Q3, 100 percent in Q4; pessimistic assumes weak Q2, 75 percent in Q3 and 90 percent in Q4
• Electrification effects could become big, as the average lifetime value of parts for a BEV could be ~33 percent less than for an ICE vehicle
• Cost reduction programs expected to target supply chain
• Global supply chain and logistics network recovering but still faces risks
Market Conditions: Tailwinds
• Miles driven and mobility data returning to pre-pandemic levels
• Technology trends will help drive a significant increase in miles traveled
• Low gas prices support miles driven, consumer spending
• After five weeks of decline, parts purchases by repair shops continuing to strengthen
• Public transportation and air travel likely to be constrained into 2021, providing tailwinds for personal vehicle use
• U.S. new light vehicle sales projected to be down 15 percent
• 0-3 year old vehicles segment to decrease by 2.5 MIO units by the end of 2020 compared to 2019; and by another 2.2 MIO by 2025
• 4-10 year old vehicles segment to increase by 6.4 MIO units; and by almost 17 MIO by 2025
• 1-plus year old vehicles segment to decrease by 1.3 MIO units this year; but to increase by 5.1 MIO by 2025
• Average age of U.S. vehicle is approaching 11.9 years
• In the last 10 years, the global parc of vehicles >5 years old (aftermarket years) has increased by an estimated 380 million
• Parts are getting more complex and costly
• Online auto parts and accessories sales have increased more than 50 percent since the first week of March
According to the recently released 2021 Auto Care Factbook, the Auto Care Association found that despite the downward forecast for the industry’s performance in 2020, the industry continues to be a pillar of the U.S. economy, projected at $380 billion for the year and expected to rebound in 2021, reaching $448.9 billion in 2023.
What do you see being the biggest challenge and/or opportunity for the automotive aftermarket value chain?
Sources: IMR, Inc.; Auto Care Association; Automotive Aftermarket Suppliers Association; IHS Markit; LMC Automotive; Wolk After Sales Experts
Brian L. Wheeler joined Cloyes Gear and Products, Inc., in July 2018 as vice president of business development and marketing. Prior to joining Cloyes, Wheeler served as senior account director at Mort Crim Communications, Inc., a fully integrated marketing and communications agency based in Detroit. He also previously held the position of global marketing and communications manager for Dayco, a global Tier 1 automotive and industrial parts supplier.
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