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When will the aftermarket sweet spot be back in full swing?

Monday, April 24, 2017 - 07:00
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Utilizing current data and analytics can provide insight on how the aftermarket sweet spot will develop in the coming years. By understanding current trends in auto sales, as well as current vehicles in operation (VIO), aftermarket companies can target their audience and become more successful in the marketplace.

A recent analysis from Experian shows that in Q4 2016, light-duty vehicles on the road hit a record 266 million, up from 265.3 million in Q3 2016. Auto sales have climbed steadily each year from 2009 to 2016 and will eventually lead to huge growth for the aftermarket. But for now, the aftermarket sweet spot – vehicles that are six to 12 years old – is still climbing out of the aftershock of the Great Recession.

Based on current growth patterns in VIO, the aftermarket sweet spot will begin to rebound in 2018 and continue to increase for the next several years. But for now, our analysis shows that the sweet spot has tumbled from 101.5 million in Q4 2012 to 85 million in Q4 2016.

Auto sales volumes fell drastically in the 2009, 2010 and 2011 model years, reaching just 10.5 million, 11.62 million and 12.7 million vehicles, respectively. Currently, those are the last three model years to enter the aftermarket sweet spot. This year will mean another drop in the sweet spot, as the 2005 model year (approximately 13.8 million vehicles) falls out of the sweet spot, replaced by 2012 model year vehicles (approximately 13.6 million units) for what will be another net loss in volume.

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Pickup trucks rule the road

One thing that likely will not change any time soon: Full-size pickup trucks continue to be the most prevalent vehicles on American roads. Currently, this segment accounts for 15.1 percent of VIO, compared with midrange car standard at 11.1 percent. The Ford F-150 and Chevy Silverado full-size pickup trucks remain the two most popular vehicles on the road today. The F-150 accounts for 3.06 percent of all new vehicle registrations in 2016, followed by the Silverado at 2.61 percent.

The full-size pickup segment as a whole dropped to fourth place in 2016 new vehicle registrations, behind nonluxury small CUV/SUV (17.81 percent share), nonluxury midsize sedan (13.89 percent) and nonluxury midsize CUV/SUV (13.22 percent). Still, full-size pickups garnered 12.57 percent of all new vehicle registrations in 2016. Given the segment’s substantial lead in overall VIO share, full-size pickups will remain a substantial opportunity for years to come.

Despite the domination by full-size pickups, engines are downsizing. Four-cylinder engines currently account for 38 percent of VIO, compared with 37.4 percent for six-cylinder engines and 22 percent for V-8s.

Diversified sweet spot

When the sweet spot bounces back, its growth will mirror recent vehicle sales years. The biggest impact on the sweet spot will be the drop in sales from General Motors (GM). Currently, GM accounts for 23 percent of all the vehicles in the sweet spot. However, in the pre–sweet spot years (2012 to 2017), GM accounted for just 17.7 percent of the market. Overall, GM’s sweet spot share will decrease in the future compared with what they have today.

Combined share for GM, Toyota and Ford in the current sweet spot is 54 percent, but their combined pre–sweet spot share is down to 46.7 percent. That means the future sweet spot will be distributed more evenly among a variety of manufacturers. The biggest share gainers from the current sweet spot to the pre–sweet spot years include FCA (12 percent to 12.3 percent), Nissan (6.9 percent to 8.4 percent) and Hyundai (3.1 percent to 4.7 percent).


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