Industry growth two years away from impacting aftermarket, Experian says

Feb. 17, 2016
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.

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).

Domestics lose VIO share

General Motors and Ford are still the top manufacturers for VIO. General Motors currently has 25 percent of the vehicles on the road, while Ford has 18.1 percent. However, VIO share for both companies dropped from Q3 2014, when GM had 25.7 percent and Ford had 18.4 percent of all VIO. Fiat Chrysler Automobiles stayed flat at 12.4 percent.

Domestic VIO share continues to be eroded by Asian manufacturers. Toyota is third in overall VIO share at 13.1 percent in Q3 2015, up from 12.8 percent in Q3 2014. Honda also experienced VIO growth, jumping from 8.8 percent to 9 percent.

Nissan, which currently is sixth in overall VIO share, jumped from 6 percent in Q3 2014 to 6.2 percent in Q3 2015.

Kia and Hyundai also are experiencing strong VIO growth. Hyundai currently is in seventh place at 2.6 percent, up from 2.5 percent in Q3 2014. Kia is tied for ninth place at 1.8 percent, up from 1.7 percent in Q3 2014.

German manufacturers remained flat. Volkswagen is in eighth place at 2.4 percent, followed by BMW, which is tied with Kia in ninth place at 1.8 percent. Daimler is in 13th place at 1.6 percent.

Pickup trucks, CUVs are big gainers

Full-size pickup trucks are still the most prevalent vehicle in operation today, with 15.1 percent of the vehicles on the road, followed by standard midrange cars at 11.5 percent and small economy cars at 9.2 percent. Both the full-size pickup truck and the standard midrange car segments gained share, while the small economy car segment was flat.

All types of crossover utility vehicles (CUVs) gained VIO share in Q3 2015, as consumers likely seek a combination of functionality, fuel economy and style. Entry-level CUV share is up to 6.4 percent, making it the fifth most prevalent segment. Midrange CUV share is up to 3.7 percent, while premium CUV share is up to 2.1 percent.

Data is key to success while sweet spot stays small

Given that the aftermarket sweet spot will contract in the next two years, it’s more important than ever for aftermarket planners to understand the various data trends impacting their business. Knowing how share is shifting among manufacturers and product segments can help maximize the planning process, and help companies stay afloat until the wait is over – and then bask in the afterglow of a booming market. 

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