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CUVs help change the focus of the aftermarket sweet spot, Experian says

Friday, January 27, 2017 - 09:00
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While four-cylinder vehicles have gained popularity in new car sales year after year, it takes time to see trends unfold in the larger population of vehicles in operation (VIO). After all, with 265.3 million light-duty vehicles on the road and approximately 17 million new vehicles sold annually, new models barely make a dent in overall VIO.

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However, the day of the four-cylinder engine has finally arrived. An analysis from Experian shows that for the first time ever, four-cylinder engines have overtaken every other cylinder engine type on American roads. Today, 37.6 percent of all VIO are powered by a four-cylinder engine, as compared to a six- or eight-cylinder engine, which account for 37.5 percent and 22 percent of VIO, respectively.

Improvements in engine technology and the need for increased fuel economy are driving the trend. Today’s four-cylinder engines average 188.1 horsepower, making them just as powerful as eight-cylinder engines from 20 years ago, which averaged 188 horsepower.

The combined improvements in power and fuel economy have paved the way for significant four-cylinder growth, which will continue to widen their share of VIO for years to come. In 2016, for example, four-cylinder engines accounted for 54.2 percent of all engines in new vehicles sold. In fact, four-cylinder engines have had more than 50 percent market share each year since 2012, while the share for six-cylinder engines dropped from 32.5 percent in 2012 to 29.7 percent in 2016. During the same period, V8 share dropped from 16.1 percent to 12.1 percent.

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CUVs gaining share quickly in the aftermarket sweet spot

The rise in popularity of four-cylinders and crossover utility vehicles (CUVs) is also changing the landscape of the aftermarket sweet spot (vehicles that are between six and 12 years old, have recently come off warranty, and are at a time period when more costly repairs are needed).

While the majority of vehicles in today’s sweet spot are midrange cars, expect to see a different mixture of vehicle types in the near future as more CUVs enter the sweet spot and make a strong presence in the overall market. CUV share for the current aftermarket sweet spot is at 16.1 percent, as compared with midrange cars and pickup trucks, 25.3 percent and 16.5 percent respectively. However, pre–sweet spot (vehicles five years old or newer) share for CUVs is 22.8 percent, as compared with midrange cars and pickup trucks, 23.4 percent and 13.5 percent respectively.

Aftermarket sweet spot grows

Over the last five years, the total VIO count has steadily increased, but the sweet spot volumes gradually decreased each year. Currently, there are 85.7 million total vehicles in the aftermarket sweet spot, down from a high of 102.3 million in Q3 2012. The aftermarket sweet spot will experience one more year of contraction as the 2012 model year vehicles enter the sweet spot and 2005 model year vehicles drop out.

Model year 2013 was the first post-recession year when sales recovered enough for the sweet spot to grow. In 2018, when the 2013 vehicles enter the sweet spot and 2006 model year vehicles drop out, expect to see the sweet spot grow for the first time in five years thanks to the increase in new vehicle sales that occurred since the great recession.

Businesses that adapt to the ever-changing sweet spot will be in a prime position to enhance revenue opportunities over their competitors.

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