Bryan Funke is the account group manager at R.L. Polk. The company recently released a report indicating that vehicle scrappage had increased, outpacing new vehicle registrations in the U.S. over the same period.
What are the current trends in vehicle sales?
Right now, if we look at year to date through January and February, it's at about 1.5 million newly registered vehicles. We're expecting to see about 11.5 million new vehicles registered in 2010.
In terms of the percentage of domestic versus imports, we finished last year at 55 percent imports, 45 percent domestic. This year we're seeing 53 percent imports versus 47 percent domestic. It's not that significant, and we'll see if that trend holds. Right now a lot of that has to do with Toyota's issues.
How will the age of the fleet impact the aftermarket and dealerships?
If you look at the increase in vehicle age, it's over ten years old, which is s a pretty significant increase. That's a 21 percent increase over the past 14 years. That, combined with people holding their vehicles longer, is going to be a plus for the independent aftermarket. However, since people are holding onto new vehicles a lot longer, that allows dealers a little bit longer of a touchpoint with original buyers.
How will the shift from more domestic vehicles to more imports impact the aftermarket?
In the short term, it's more of an opportunity for the dealer market. If you look at the traditional aftermarket, it's very focused on domestics. It's hard to find import specialists. On the import and especially luxury side, owners tend to go to dealers more for service, because they want that guarantee. They're not comfortable with going to the independent aftermarket just yet.
We'll see the number of domestic vehicles in the older fleet drop. It seems counterintuitive that scrappage rates would increase when people are holding on to vehicles, but the scappages rates are not that much higher. People are still scrapping 12 to 14 million vehicles per year. But there are fewer new car sales, and the oldest vehicles on the road are domestics. Vehicles in operation (VIO) last year include 62.5 percent domestics, and this year it's expected to be 61 percent. We're starting to shift pretty quickly to closer to a 50/50 split.
So what will the "new normal" be in terms of vehicle sales?
The new normal will be between 11 and 13 million. It might reach 16 million again, but that's what we should figuring capacity around.
Why did sales reach 16 million units when present demand would indicate capacity should be much lower?
Some of this is anecdotal. We're a throwaway society. Personal wealth was up; people were making money hand over fist and buying luxury items. The other part of it is that every manufacturer was battling so much to win market share and rebates were so incredible that it allowed people to buy those vehicles. Mixed with the ease of financing, that allowed it to go out of control. With tightening of credit and personal income being down, we'll come back to status quo number and not go gangbusters like we were over the last few years.
