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Aftermarket sweet spot poised for five-year growth spurt

Thursday, November 8, 2018 - 08:00
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Healthy automotive sales over the past several years are starting to pay off for the aftermarket industry in a big way. Following a five-year drop, the aftermarket sweet spot is looking at a five-year growth spurt.

The aftermarket sweet spot – vehicles between 6 and 12 years old that have fallen out of the general OEM warranties for repairs – peaked at 104 million vehicles in Q1 2011. This has since shrunk thanks to the economic downturn in 2008 and 2009, according to data from Experian. As model years from 2009 to 2011 cycled in, the sweet spot kept dropping, bottoming out at 83.2 million vehicles in Q4 2017. In Q2 2018, the Sweet Spot began creeping back at 84.2 million vehicles.

While the economic downturn dragged the aftermarket sweet spot down, the leanest years have almost completely cycled through. The auto industry experienced healthy sales from 2013 to 2017. And those vehicles will enter the aftermarket sweet spot over the next five years. 

New vehicle registration volumes in each of the past five years have ranged from 15.3 million in 2013 to 17.2 million in 2016. New vehicle registration volumes cooled off in 2017 at 17 million, but that’s still more than enough to grow the sweet spot when the 2011 models, which had a peak volume of just 12.7 million, fall out. That means growth for the sweet spot and opportunity for aftermarket companies.

But opportunity is just that — opportunity. Aftermarket companies still need to take advantage of it. By using the power of data to understand geographic trends, as well as which makes and models will be in demand, these companies will be better positioned to make more informed decisions and serve the aftermarket. 

Import brands sales growth alters sweet spot landscape
The biggest change in the aftermarket sweet spot in the past several years is the continued growth of import brands. These brands passed domestic manufacturers for share of vehicles in operation (VIO) in the 2009 model year, currently with 56.8 percent to 43.2 percent share. Imports continued that dominance through the 2017 model year, where their share is 56.5 percent. Overall, import brands cover 53.2 percent of all sweet spot vehicles today.

That means import brands will likely extend their aftermarket sweet spot market share dominance at least another five years.

We’ve also seen significant shifts in market share for General Motors, which accounted for 23.2 percent of all vehicles in operation in Q2 2018. But that number is going to drop steadily in the next several years, as GM market share of new vehicle sales ranged from 15.9 percent in 2014 to 17.4 percent in 2017. That means its share of the aftermarket sweet spot will drop accordingly as these model years cycle in.

Opportunities abound for aftermarket companies paying attention to trends
Certainly, aftermarket companies are looking to make up for lost sales as the sweet spot expands in the next several years. And there will be no shortage of opportunity.

But these companies need to keep a close eye on these trends and leverage data to help them make better decisions on inventory. Trends to watch will include the continued market dominance of pickups and SUVs, the continued growth of the crossover segment and the decline of passenger cars. Understanding the data behind the trends over the next five years will help determine which companies can take advantage of everything the aftermarket sweet spot has to offer. 

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