Fewer sales are impacting the aftermarket and will provide a tailwind through 2030 for service and products
Fort Wayne, Ind.—The new car and light truck market is stuck in low gear. Annual U.S. vehicle sales will average fewer than 15 million from 2020 through 2022, with Lang Marketing projecting that the sales brownout will continue through 2023. Over these four years, new car and light truck sales will total almost 10 million fewer compared to 2016 through 2019, when volume topped 17.1 million per year.”
“Under-powered new vehicle sales will impact the aftermarket in at least five ways and provide a tailwind for aftermarket volume through 2030, especially Internal Combustion Engine (ICE) vehicle products.”
The following are a few insights on the trend from Lang Marketing.
New Vehicle Market Brownout
New car and light truck sales were hit hard by COVID-19, averaging 14.8 million during 2020 and 2021. The new vehicle market remains soft, with fewer than 14.1 million in sales projected for 2022.
Lang Marketing expects the new vehicle market to be sluggish next year, with the four-year annual sales, from 2020 through 2023, averaging below 14.7 million.
This compares to the more than 17.1 million annual average sales from 2016 through 2019. At the current sales pace, nearly 10 million fewer vehicles will be sold from 2020 through 2023 than during the four years previous to COVID-19.
Five Changes Boosting the Aftermarket
Lower new vehicle sales will lead to a number of significant changes: high used vehicle prices, vehicle age growth, more miles on older vehicles, an upward extension of the age boundary of the repair-age sweet spot, and a slowdown in the expansion of the electric vehicle population.
These changes will help to boost aftermarket product volume through 2030.
- Used Vehicle Prices
Low new vehicle sales is increasing the price of used cars and light trucks, since the reduced vehicle volume is primarily caused by a supply shortage rather than anemic consumer demand. This shortage is redirecting new vehicle buyers to the used market. More buyers chasing a limited number of used vehicles increase their costs.
With used vehicles getting high prices, consumers are more likely to repair their older cars and light trucks to keep them in good operating condition. This spells aftermarket product sales growth, especially for ICE vehicles, which comprise virtually all vehicles more than five years old.
2. Higher Vehicle Average Age
The sluggish new vehicle market will increase the average age of vehicles in operation (VIO). With fewer new cars and light trucks taking to the road, older vehicles will be kept in operation longer and their numbers will expand.
This combination of the increasing average age of vehicles and more older vehicles will escalate aftermarket sales since older vehicles require more aftermarket products than newer vehicles.
3. More Miles on Older Vehicles
When consumers keep their vehicles rather than replace them with newer ones, more miles are accumulated by older vehicles.
Older vehicles use more aftermarket products per mile, and rolling their odometers higher will increase aftermarket product use, especially for ICE cars and light trucks.
4. Changes in the Aftermarket Sweet Spot
The reduced new vehicle sales between 2020 and 2023 will drive down the number of cars and light trucks in the repair-age sweet spot (age categories 6 to 10 years old with the highest rates of product replacement) from 2026 through 2030, compared to today’s VIO.
However, this does not mean that fewer repair parts will be sold. Instead, older vehicles will account for a larger number of miles driven and the upper age boundary of the sweet spot will be increased by a year or two.
Since older vehicles use more aftermarket products per mile than newer cars and light trucks, this will benefit the aftermarket.
5. Slower EV Population Growth
Lower new vehicle volume will translate into fewer electric vehicles sold. This will slow the EV population growth.
With EVs at a small share of the total VIO, ICE vehicles will retain their population dominance longer. Aftermarket volume will be bolstered, since ICE cars and light trucks use more aftermarket products than EVs.