‘Boom times’ for the automotive aftermarket

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The automotive aftermarket is primed for “boom times” thanks to a rapidly aging car parc.

Average vehicle age in the U.S. has never been so high — S&P Global Mobility recently reported it at 12.5 years. That’s up three months from the year before, which is a pace not seen in about 15 years.

Canadian vehicle average age is also at a high, though no official numbers have been reported. AIA Canada last reported average vehicle age of 9.7 years in 2020 — it is believed that number may be at about 10.5 years now.

All of this adds up to the likelihood of seeing “robust growth in repair and maintenance work, as older cars will see even more miles driven than traditionally expected,” according to a recent report from S&P Global Mobility.

After multiple years of slow movement on the new vehicle side of things, consumers have been looking at used options or hanging on to their older ones. Even as inventories replenish, high price tags are still being attached to new vehicles.

“Now, there could be a counterintuitive shift: Surging new-vehicle supply could further boost expansion of the used-vehicle fleet, bringing more high-mileage vehicles into service bays,” S&P observed.

Industry speculation is that with people trading in their older cars for new ones, those older cars will find their way to used lots. Those who can’t afford new or prefer the used route will have more options — so even though they’re replacing their vehicle, chances are an aftermarket sweet spot automobile will remain on the road. The industry is seeing more 12- and 13-year-old vehicles becoming bigger parts of the business.

Electronic sophistication

Fruthermore, Todd Campau, associate director for aftermarket solutions for S&P Global Mobility, noted in the report that while there will be a decline in vehicles aged seven years or less, those aged eight or more will increase.

“As vehicles with more electronic sophistication continue to age and increase in overall share, the aftermarket’s role in maintaining the aging vehicle fleet will become increasingly critical,” Campau said. “That’s where the real opportunity is in the aftermarket space.”

Indeed, vehicles moving into the aftermarket sweet spot are becoming trickier fixes. Advanced driver assistance systems rose in prominence over the last decade — S&P pointed to adaptive cruise control being on an upward trend since 2015 and will likely be on about 70 per cent of 2023 vehicles.

“I think sensors are where the next big opportunity is for the aftermarket,” Campau said.

That further drives the importance of right to repair, he added.

“For consumers, the option to have the choice to maintain their vehicle in a timely fashion where convenient will be increasingly important,” Campau said. “The volume of the vehicle fleet will make cooperation between OE aftersales service and aftermarket service shops a requirement to keep the nearly 300 million-vehicle population working as safely and efficiently as possible.”

The economy

And there’s also the issue of the economy. While predictions point to a recovery of new vehicle sales in the next few years, inflation and interest rates could temper demand. Rather than supply being an issue for lack of sales, demand could now constrict dealers.

From Campau’s point of view, this leaves automakers with a decision to make: Do they build more economy or mid-priced vehicles and trims that consumers stuck in a revolving door of used vehicle purchases can afford, or will they do as they did in the pandemic years and focus on high-margin vehicles?

“Will the consumers continue to support that premium model?” Campau said. “The question is, who’s going to blink first?”