Gas prices soar, but aftermarket floats

Just when you thought it was safe to fill up your tank, gas prices have soared again. The national average retail price for gas hit a record high this week, matching the all-time high set on May 24, 2007. Unfortunately, some analysts predict the price of gas will continue to climb throughout the spring months, before finally coming down as high prices curb demand.

For consumers, this means more pain at the pump as well as a concerted effort to pinch pennies and stretch their dollars even further. But does it mean they are willing to defer vehicle maintenance and repair to save a few bucks — thereby hurting the aftermarket's financial prospects for the year? Industry insiders don't think so.

"From what I'm seeing, high gas prices have affected the sales of new vehicles, not the maintenance of older vehicles," says Dan Smith, president of the Capstone Financial Group, in an exclusive interview with Aftermarket Business magazine. "If you're not buying a new vehicle, you have to maintain your vehicle, and that's good for the aftermarket."

According to Smith, the average age of vehicles on the road in America today is increasing. This means that many vehicles are beginning to come out of warranty, and need a fair amount of maintenance work to keep them running safely. There's no two ways about it — older vehicles need to be maintained. And no matter how high gas prices rise, the maintenance work just has to be done.

"The non-discretionary part of this industry, the do-it-for-me part, has been affected drastically in the state of Florida, and in some parts of California," Smith admits. "But generally speaking, non-discretionary spending has not been affected as much as the sales of new vehicles. We feel there's a direct trade-off there."

Of course, certain sectors of the aftermarket have been hit hard by the hike in gas prices, especially the specialty market. But Smith says that sales of specialty products such as performance parts have always ebbed and flowed along with the consumer confidence index. And, there are some areas of the specialty market that are holding their own — particularly appearance and chemical products.

"Those are items that help maintain the car,"says Smith. "But discretionary items, including enthusiast items have certainly been affected, much more than any other items within the aftermarket."

Although new vehicle sales are down across the board, Smith points out that pick up sales have suffered dramatically, due in large part to the price of gas. Sales of smaller cars have fared a bit better, with hybrids gaining market overall, especially in certain areas of the country — like San Francisco, Smith adds.

So, how high will gas prices go? According to a recent article published on CNNMoney.com, some analysts predict $4 a gallon in certain parts of the country, with the national average peaking somewhere between $3.50 and $3.75 a gallon. Which is bad news for the consumer, but not for the aftermarket — no matter how high prices go, consumers just can't get where they're going without their cars.