Cars and light trucks at least 14 years old represent one of the fastest-growing VIO segments
Fort Wayne, Ind.—The longer cars and light trucks stay on the road, the better it is for the aftermarket. Older vehicles use more aftermarket products per mile than newer ones. Vehicles remain in operation longer for two primary reasons: greater car and light truck longevity and moderate vehicle scrappage rates, states Lang Marketing in its latest report.
Lang projects that vehicle longevity will continue and scrappage will remain moderate over the next several years. These factors will help to increase the number of older cars and light trucks on U.S. roads and their use (mileage), increasing aftermarket product growth.
The following are a few takeaways from the report.
Longer Vehicle Life
Cars and light trucks in the U.S. stay on the road much longer than they did just a few decades ago due to the use of more durable materials in their construction and improved manufacturing techniques. These advancements will continue, increasing the average age of vehicles and the population of older vehicles in operation.
Used Car Prices Climb
The increase of used car prices, up nearly 50% over the past three years, adds to vehicle longevity by increasing the threshold value at which they are scrapped. The record-high values of used vehicles encourage owners to keep them in a state of good repair, extending their life on the road.
Lower Vehicle Sales
Despite the increasing average age of vehicles and the growing number of older cars and light trucks in operation, vehicle scrappage in the U.S. has remained moderate. Lower new car and light truck production and sales have put downward pressure on vehicle scrappage.
Ten-Year Scrappage Perspective
Scrappage has remained relativity modest over the last 10 years despite the recovery of new car and light truck sales following the economic downturn of 2008, with record-high sales from 2015 through 2019. Over the past three years, scrappage upticked moderately, but remained below historic levels, leaving more older vehicles on the road.
Vehicles Last Longer
Cars and light trucks produced over the past 10 years are likely to remain in operation over two additional years compared to cars and light trucks coming off assembly lines between 1980 and 1999. This is reflected in the increasing average age of cars and light trucks and the growing number of older vehicles in operation, particularly those topping 14 years.
Impact of Vehicle Longevity and Low Scrappage
Vehicle longevity and low scrappage will have a number of significant consequences for the aftermarket, including — but not limited to — average vehicle age, vehicle age mix, foreign and domestic nameplates on the road, and the extended presence of Internal Combustion Engine (ICE) vehicles for many years.
Higher Average Age
As vehicles stay on the road longer (the result of higher longevity and lower scrappage), their average age increases. Over the past 10 years, nearly 1.5 years have been added to the average age of cars and light trucks in the U.S., more than double the rate of historical vehicle age growth.
Lower new vehicle sales over the past three years (down an average of nearly 3 million per year from the record-high annual sales of the previous five years) have also contributed to average age growth.
The age mix of cars and light trucks in operation has more impact on aftermarket product use than the average age. Cars and light trucks at least 14 years old represent one of the fastest-growing VIO segments.
These vehicles use more aftermarket products than newer cars and light trucks per mile traveled. They are being driven more miles than vehicles in this age group were several decades ago, further boosting aftermarket product use.
Domestic Nameplate Mix
The survival of older vehicles (the majority of which are domestic nameplates) will help to slow the share growth of foreign nameplates in the U.S. As a result, the decline of domestic nameplate aftermarket product sales will be slowed despite the increasing number of foreign nameplates on U.S. roads.
ICE Vehicle Population Dominant
Greater vehicle longevity and reduced scrappage mean that ICE vehicles (which represent more than 99% of cars and light trucks over 5 years old) will remain in operation for decades, even if electric vehicles greatly expand their new car and light truck market share.
Older vehicles use more aftermarket products per mile than newer models, and many older vehicles will experience additional cycles of product usage over their extended life. As ICE vehicles remain on the road for an extended number of years, aftermarket product volume will benefit from their greater consumption of aftermarket products compared to EVs.