After graduating from college and landing my first job, I tucked away a few dollars from each paycheck and put it toward a down payment on a house. It was tough not being able to utilize my full paycheck at such a young age, and I had to find ways to stretch my money. However, the gratification I got when I opened the door to my first house – albeit delayed – was well worth the wait and sacrifice.
Similarly, while the automotive industry is thriving and continuing to grow, the aftermarket is in for a bit of a wait before it can reap the benefits.
In the third quarter of 2015, the number of vehicles on the road grew at a rapid clip, which is a pleasant sign for everyone connected to the automotive industry. The automotive aftermarket, however, will not feel the impact immediately, as the aftermarket sweet spot – defined as vehicles between six and 12 years old – will continue to contract for the next two years.
With a dwindling sweet spot for the near future, it is critical for the aftermarket industry to gain deeper insight into the market and uncover new areas of opportunity to remain successful.
More vehicles on the road, but aftermarket sweet spot contracts
The total number of vehicles in operation (VIO) was up by 2.8 percent, increasing from 250.9 million in Q3 2014 to 257 million in Q3 2015. The growth was driven by approximately 17 million new vehicle sales from the beginning of Q4 2014 to the end of Q3 2015, combined with 10.9 million vehicle disposals during the same period.
While the overall growth bodes well for the industry, the aftermarket sweet spot dropped to 88.6 million vehicles in Q3 2015. This was driven by poor sales for model years 2009 and 2010, which have only 8.9 million and 10.7 million vehicles in operation today. In contrast, the two most recent model years to fall out of the aftermarket sweet spot – 2002 and 2003 – each have more than 12 million vehicles in operation.
The aftermarket sweet spot will not see growth again for two more years. Model years 2004 and 2005 still have 13.6 million and 14.1 million vehicles in operation. As they drop out over the next two years, they will be replaced by model years 2011 and 2012, which have 11.9 million and 13.4 million vehicles in operation today. Growth will return when the model year 2006 vehicles (currently at 13.9 million) drop off and are replaced by model year 2013 vehicles (currently at 15.1 million).