Aftermarket is “cautiously positive” as demand continues amid pandemic

Dec. 1, 2020
With the aftermarket continuing to be “deemed essential,” the industry anticipates continued stability despite COVID concerns and is seeing miles driven help drive profits.

With the aftermarket continuing to be “deemed essential,” the industry anticipates continued stability despite COVID concerns and is seeing miles driven help drive profits.

The Automotive Aftermarket Suppliers Association leadership presented an industry outlook and  legislative update during a quarterly call today, led by President Paul McCarthy.

“The aftermarket is resilient in tough times,” he said, showcasing only a minor dip in the market’s profitability (Figure 1).

He credited getting the industry deemed essential as having an impact on success. “Vehicles are necessary to get essential workers to their jobs. It speaks to the fundamental structural importance of the aftermarket to our economy,” McCarthy said.

On the supplier side, Q3 2020 presented a challenge in fulfilling orders, given the supply chain and workforce disruptions. But orders are up more than 8 percent (Figure 2) compared to Q2. And same store sales also continue to rise, showing extraordinary demand (Figure 3).

While Q4 may not have the same strength seen in Q3, the industry is cautiously positive. The pandemic is spurring households to hold onto their cars longer, which is boosting the average age of vehicles and aftermarket sales (Figure 4). This also means the aftermarket sweet spot will continue to grow, showing support for the industry over the next 5-10 years (Figure 5).

The car parc continues to increase, along with the need for vehicles as more drivers are moving out of urban areas and into suburbs. Used car valuations also reached all-time high in August, as limited new vehicle supplies impacted their value (Figure 6).

There has also been a large shift to purchasing trucks and crossovers, which is good for aftermarket dollar growth, as maintenance and repair is typically more expensive, McCarthy said.

As for miles driven, the industry saw record-breaking numbers in 2019. Despite COVID, it is down only 14 percent — commuting miles have taken a hit, but road trips are up (Figure 7).

Gas prices will remain low long term, incentivizing miles driven and putting money in consumers’ pockets.

However, despite many positive trends, the pandemic still remains a large concern. As cases continue to spike in the U.S., the industry relies on employment — or stimulus — to sustain spending, especially for lower income customers (Figure 8).

Worker safety — and potential earlier access to vaccines — will also be vital, as maintaining aftermarket and manufacturing workers will help keep the industry running smoothly.  

McCarthy also reinforced the need to drive diversity in our industry. Embracing diversity, equity and inclusion “is key to the future success of our industry. In order for the aftermarket to support growth, we need to welcome the brightest minds to support our mission. We need to welcome the diverse next generation,” he said. “We need to make sure nothing stands in the way of the aftermarket attracting the best talent out there."

Legislative update
After the Right to Repair bill in Massachusetts passed this November, a coalition representing automakers has filed a lawsuit to block the referendum. McCarthy said the move was disappointing, but “not surprising.”

He said the move makes passing a federal repair act — already in the works — all the more important. “We need to protect consumer choice and protect the competitive market,” McCarthy said.

The next major legislative conversation to be had is about electrification, said Ann Wilson, AASA senior vice president of government affairs. There are many things to consider with electrification advancement, including incentives for manufacturing both with OEMs and in the aftermarket, consumer reassurance about the large investment required, worker training, infrastructure and immigration reform as it relates to employment opportunities for manufacturers, among others.

She also stressed the importance of paying attention to the individual states. “States are maxed out and have no money and are cutting programs. Look at what they are cutting. Is it meat that manufacturers need?” she said.

About the Author

Krista McNamara

Krista McNamara is the former Editorial Director for the Vehicle Repair Group at Endeavor Business Media. She oversaw five brands  — Motor Age, PTEN, Professional Distributor, ABRN and Aftermarket Business World. She worked in the automotive aftermarket industry for more than 15 years. 

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