Have you ever driven on a long, flat highway where you can see rain clouds in the distance and you know you are in for some bumpy weather ahead? That must be how the automotive aftermarket has felt for the past few years.
When the bottom fell out of the new vehicle sales market in 2009, the low sales volume was a dark cloud brewing on the horizon. It was just a matter of time before those vehicles would enter the automotive aftermarket sweet spot.
Now that cloud on the horizon is here. The automotive aftermarket sweet spot — those vehicles between six and 12 years old that are out of warranty but still worth fixing — now includes vehicles manufactured for model years between 2003 and 2009.
There were only slightly more than 9 million 2009 model-year vehicles on the road in Q1 2014, and they replaced a rather robust volume of 2002 model years, which still included a little more than 13 million vehicles on the road. This contributed to an overall drop in the aftermarket sweet spot from 101.4 million last year to 93.7 million today. That’s a 7.5 percent drop in only one year.
Unfortunately, it won’t get any better over the next three years. For model years 2010 to 2012, there were a combined 36.5 million vehicles in operation in Q1 2014. Those years will replace model years 2003 to 2005, which currently have 42.2 million vehicles in operation.
Along with common vehicle scrappage, this means the aftermarket sweet spot could fall below 85 million by 2017. That would equate to an overall 16.2 percent drop in vehicles in the aftermarket sweet spot in only four years.
However, new vehicle sales have ticked up over the past couple of years, which could benefit the automotive aftermarket around 2018. The 2013 model year had 15.2 million vehicles in operation in Q1 2014 and would replace the 2006 model year, which currently has 14.3 million vehicles in operation.
Overall, vehicles in operation remained flat year over year at 247.4 million vehicles, despite a 5.5 percent jump in new vehicle sales (14.6 million versus 15.4 million). In the 12 months from Q1 2013 to Q1 2014, new vehicle sales and vehicles scrapped were equal at 15.4 million.
The average age of vehicles in operation today is 11.2 years old, flattening over the past few years thanks to improving overall new vehicle sales.
From a vehicle category standpoint, full-size pickup trucks were the most prevalent vehicle on the road in Q1 2014, with 14.9 percent share of vehicles in operation. Rounding out the top five are:
· Midrange car, standard — 11.7 percent
· Small-car, economy — 9.2 percent
· Midrange car, lower — 8.3 percent
· SUV, lower midrange — 5.6 percent
One category moving up one spot was entry-level CUV at 5.5 percent market share, leaping over minivan at 5.4 percent.
Manufacturer vehicles in operation share showed little change. At 26.1 percent, General Motors continues to have the largest share of vehicles in operation in Q1 2014, followed by Ford at 18.6 percent. Toyota, which edged past Chrysler last year, is still in third with 12.7 percent share and continues to increase its lead slightly over Chrysler, which stayed in fourth at 12.4 percent share.
One interesting trend was the sudden rise in turbocharged and supercharged vehicles. These vehicles have averaged 3.4 percent market share per year from 2000 to 2010. However, between 2011 and 2014 model years, the market share nearly doubled to 6.5 percent. Why did this occur?
As consumers looked for more efficient vehicles, the volume of four-cylinder engines started to increase in share for 2009. However, consumers’ appetites for performance comparable to that of V-6 and V-8 engines along with fuel efficiency have been driving higher aspirated vehicle share.
Identifying trends such as increased turbochargers could be one of the main factors in weathering the coming storm in the automotive aftermarket. By constantly reviewing data for manufacturer and vehicle share trends, regional trends and engine/equipment trends, aftermarket companies can keep an eye on the overall market. Given that aftermarket companies will be competing for a shrinking pie over the next several years, these analytic insights can be the key to garnering every bit of available profit.
Editor’s note: Marty Miller is senior product manager at Experian Automotive.
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