Fewer vehicles on the road translates to diminished service and repair needs and parts sales
Evergreen, Colo.—As the coronavirus continues to spread, its effects are being registered in the automotive aftermarket industry as miles-driven drops, affecting service and repair shops and their supply channels. Aftermarket Matters Weekly reached out to industry leaders for their perspectives on this fast-moving, ever-evolving concern and what it means for the aftermarket in the near term.
“I’m sure there will be some impact in miles-driven, however we know that when vehicles have mechanical failures they need to get fixed or people can’t get to work, etc.,” said Bill Long, president and CEO, Motor & Equipment Manufacturers Association (MEMA). “Many suppliers have restricted travel for their employees through mid-May. Supply chains are indeed being affected.”
David Overbeeke, president and CEO of Brake Parts Inc. (BPI), who said he travels frequently, reported he hadn’t experienced any indication of fewer miles-traveled until this Monday, when he was driving to the airport and traffic was uncharacteristically low. The airport was also quieter than normal for a Monday morning, he added, as well as his flight, which is typically full but was only two-thirds occupied.
“I think the options of working from home are starting to kick in. The coronavirus is going to impact miles-traveled — it’s that simple.”— David Overbeeke, BPI
“I think the options of working from home are starting to kick in,” Overbeeke said. “In virus hotspots — Seattle and L.A., for example — people are clearly avoiding restaurants and malls. The coronavirus is going to impact miles-traveled — it’s that simple.”
The more important question, he added, is how long is that going to continue? “Nobody knows the answer to that. There’s some big macro issues involved and we’re going to have to see how it all plays out.”
Larry Pavey, president of Federated Auto Parts, agreed there is no doubt that the coronavirus will have an impact on miles-driven due to reduced work/activities.
“The amount is yet to be determined and is a concern for our industry,” he said. “Following a mild winter and large population of vehicles under warranty, it will be one more negative impact.”
Impact of China supply disruption
The U.S. will start feeling a supply pinch from China toward the end of March and into April and May, said Overbeeke, who has manufacturing conducted in China.
“There’s no one who can tell you differently. There are more than a 100 factories over there that I’m aware of who are in the same boat or worse.”
Overbeeke shared that BPI has 3,000 workers in China who were supposed to return back to work on Feb. 3, from holiday.
“The Chinese government issued an edict that they wait until Feb. 10 [because of the virus]. However, Chinese restrictions on travel between cities and towns prevented us from starting back up until Feb. 17 — two weeks late,” he said.
The following week, approximately 30 percent of BPI’s employees arrived for work. Now, however, BPI is up to 95 percent of its workforce in China.
“But we lost two-thirds or more of a full month’s production,” Overbeeke added.
The primary concern now is getting product delivered, though the bulk of production hasn’t shipped. Typically, at this time of year, product from February’s manufacturing begins to arrive from March 15 to March 25.
“Like many manufacturers, we knew there was a Chinese holiday, so we stocked up beforehand as we always do,” he said, though no one anticipated the ramifications of the coronavirus.
But those reserves will begin to become strained as the end of the month nears. “April and May are peak months for automotive goods purchases, and the industry is going to experience fill-rate issues — no doubt about it.”
Overbeeke added that supply-demand concerns might be diminished due to the lack of miles-driven.
“Demand might just match supply, but it’ll be down from traditional levels.”