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Auto aftermarket sweet spot continues to evolve, Experian says

Thursday, July 30, 2015 - 07:00
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Those who study the game of baseball know that there is a section on the barrel of the bat that is commonly referred to as the “sweet spot.” When a batter is able to hit the ball with that portion of the bat, it is more likely to result in a base hit or a positive outcome.

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Similarly, the automotive aftermarket also has a sweet spot. These are the vehicles that deliver the most opportunity — often viewed as those between six and 12 years old, have recently come off of warranty and are at a time period when more costly repairs are needed to keep the vehicle on the road as long as possible. Just as baseball hitters want to aim for the sweet spot of the bat, aftermarket retailers will want to focus their attention and planning on this segment of vehicles.

However, unlike baseball, the sweet spot in the automotive aftermarket is changing quite a bit.

For one, the sweet spot volume of vehicles has been declining over the last few years to its current volume at 89.4 million vehicles and will continue to decline for the next two years due to the low volumes of new vehicles sold during the Great Recession of 2008.

It’s not just the volume of vehicles that has changed; the make-up of the sweet spot has changed a lot. Three years ago, 60 percent of all vehicles on the road consisted of domestic vehicles within the sweet spot. As of today, this has declined to just more than 52 percent, with the remaining 48 percent composed of import vehicles.

That said, fast forward two years into the future to when the 2004 through 2005 model years will fall out of the sweet spot and will be replaced by the 2011 and 2012 models. In those model years, imports continued to make up the majority of those vehicles on the road at 54.2 percent and 55.5 percent, respectively. That means at some point in 2017 imports will have a higher share of the sweet spot for the first time in history. Moreover, imports also have seen higher shares of the 2013 and 2014 model years, which will result in imports continuing to lead well beyond 2017.

What all this means is that automotive aftermarket professionals need to understand that while the volume of vehicles in the sweet spot will decline, opportunities will increase for import vehicles as their market share grows in the sweet spot. This change will impact part manufacturers and retailers’ mix of the parts needed to repair these vehicles, as well as the skill sets needed by the technicians who replace the parts.

Pickup trucks still dominate the roads

Additionally, when looking at the various vehicle segments on the road, full-size pickup trucks are still the most prevalent segment at 15 percent, followed by the mid-range car at 11.5 percent and the small economy car at 9.2 percent.

However, with the uptick in new vehicle registrations, the cross-over utility vehicle (CUV) has gained a higher share of the vehicles on the road across all three categories: entry level, mid-range and premium. Currently, entry-level CUVs account for 6.1 percent, mid-range account for 3.5 percent and premium account for 2 percent of all vehicles on the road.

Ford F-150 still number one

At the model level, the Ford F-150 remains the most driven vehicle on the road, with nearly 9 million vehicles still in operation. It is followed by the Chevrolet Silverado 1500, which has nearly 8 million vehicles on the road. The remainder of the top 10 includes the Honda Accord, Toyota Camry, Honda Civic, Toyota Corolla, Dodge/Ram 1500, Nissan Altima, Ford Explorer and Honda CR-V. While there are six import models in the top 10 of all vehicles on the road today, domestic vehicles still dominate the market volume with 56.1 percent share, but as mentioned earlier, this will change.

Future sweet spot: import heavy but still led by domestic trucks

As the industry looks to the future, it is clear there is a shift toward import vehicles in the aftermarket sweet spot. However, it is likely that the most prevalent segments will still be full-size domestic trucks, as the Ford F-150, Chevrolet Silverado 1500 and the Ram/Dodge 1500 remain extremely popular.

It’s imperative for aftermarket retailers to keep a finger on the pulse of trends and use the data for the good of their business. The more insight they can gain into what vehicles fall into the sweet spot, the more likely they’ll be able to hit a home run instead of striking out.

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