Tuesday, April 02 2019
By Adam Robinson, Director of Marketing & Digital Marketing Consultant at Cerasis
The automotive industry and automotive aftermarket industry has recovered, and as new light vehicle registrations continue to grow, it is important for the aftermarket to be aware of emerging trends happening on the roads today that will affect repair opportunities for years to come. Here are some quick insights into the trends driving the automotive aftermarket industry.
One: The Average Age of Vehicles Continues to Climb—At Least for Now
The increasing age of the vehicle population has been a positive aftermarket trend for a long time, and the trend has accelerated greatly over the past six years. Today, it stands at a record-high 11.3 years for passenger cars and light trucks combined, representing a 14 percent increase since 2007. For the five years prior to the recession, average age rose only four percent.
Some wonder why pickup trucks tend to lag behind cars in average age. Light trucks are more likely to accumulate wear and tear than are passenger cars. Individual owners use them for towing, transporting heavy loads, and off-road fun. Many more pickups are also used in commercial situations and get exposed to high levels of use and abuse.
Over the next several years, however, the rise in average age will slow down again. The market will begin to feel the impact of the 40 percent drop in new registrations when the industry bottomed out at 10.3 million units in 2009. We see average age reaching nearly 11.4 years by 2015, and then the rate of growth will taper off. The acceleration in average age will slow to levels not seen since before the recession. Average age will not reach 11.5 years until 2018—as the vehicle population adjusts to the low number of 2008–12 model year vehicles.
New to five-year-old vehicles will grow 41 percent over the next five years. Six to 11-year-old vehicles will decline 22 percent.
While not an encouraging trend for the aftermarket, there are definite positive signs. The overall vehicle population continues to grow. We see the U.S. light vehicles in operation (VIO) growing by five percent over the next five years—hitting 260 million vehicles by 2018. Vehicles are also lasting longer. Over the next five years, vehicles 12 years and older will increase nearly 12 percent. Vehicle quality continues to improve, people are keeping their vehicles longer, and the scrappage rate continues to decline.
The aftermarket must be aware of the potential impact to the type of repairs it will see over the coming years. In general, 6 to 11-year-old vehicles represent more do-it-for-me (DIFM) type repairs. Older vehicles may drive more do-it-yourself (DIY) and routine maintenance, but also require larger powertrain and suspension repairs.
Two: OEM Globalization is Quickly Becoming the New Norm
This rate of growth translates into expanded global production and a need for OEMs to manage costs. They are accelerating the use of global platforms and looking to produce more units per platform. Among the top-12 global manufacturers, the number of platforms will drop from 212 in 2012 to 147 by 2020. As a result, the number of vehicles produced per platform will grow. Across the same 12 OEMs, it will increase 81 percent. OEMs have also been introducing modular architecture. By standardizing the architecture of the engine compartment, underbodies, and driver cockpit, manufacturers achieve greater flexibility and can utilize standardized components.
Fewer platforms, more vehicles per platform, and the increasing use of modular architecture will lead to the use of similar components and the ability to market the same aftermarket product in various regions around the world—a major opportunity for the global aftermarket supplier.
Three: OEM Technology Advances Continue to Provide the Automotive Aftermarket Industry Both Challenges and Opportunity
OEMs continue to increase the interval between recommended oil changes.
They are using technology—the oil service indicator light—to replace standard recommended maintenance intervals.
While most vehicles on the road have some type of oil service indicator light, the issue is how often OEMs are using the light as the only means of recommended service. Today, 52 million vehicles in the U.S. use the oil service indicator light as the recommendation for when to change the oil. This represents 21 percent of the total VIO and has grown at a compounded annual rate of 14 percent over the past five years. New powertrain technology and the growing use of synthetic oils have extended oil change intervals as well. The average recommended interval for all light vehicles now stands at over 7,500 miles.
What does this mean to the independent aftermarket? Most repair opportunities are discovered during routine maintenance. Oil changes are, by far, the most common service opportunity for vehicles of all ages. This lengthening of intervals has the potential to affect repair opportunities in two ways.
By recognizing these trends early, the aftermarket can innovate and develop ways to communicate with the driver in much the same way the OEMs are planning.
The aftermarket certainly has what it takes to not only adjust to these coming trends, but take advantage of them as well. This industry has always proven its ability to react and innovate in the face of change. Leverage those strengths to their fullest, and the automotive aftermarket industry will continue its legacy of success.
Issues Facing Automotive Aftermarket Industry in 2020
Full service automotive aftermarket suppliers have seen low-cost country competition, incredible concentration among our customers, eroding margins and a shift of power downstream to the channels – as have manufacturers in many other industries in the post-Walmart era. Many aftermarket manufacturers have not responded effectively to these shifts and need to find new ways to create value in order to be able to deal with changed channel partners as peers. The alternative is a decline in relevance and returns for aftermarket suppliers, analogous to the devastation seen among OE suppliers in the last decade.
As the Aftermarket Outlook 2020 study found, aftermarket suppliers face many issues in the next decade. The graphic below captures just some of the many dynamics and change agents at play in the aftermarket industry. These include:
The Aftermarket Outlook 2020 study covers each of the issues in more detail. However, as the study progressed, three key trends “popped” as the most important ones facing manufacturer executives:
As AASA and Booz & Co. discussed these findings at the 2011 AASA VisCon with aftermarket executives, it became clear that there was a single overarching issue that tied the other issues together of most importance to manufacturers: the lack of a level playing field across the aftermarket value chain.
A Winning Aftermarket Aftermarket Industry Model
Those in the Automotive aftermarket industry will know they’ve arrived when they experience:
Achieving these objectives is not only necessary, but possible for the automotive aftermarket industry.
Bio: Adam Robinson oversees the overall marketing strategy for Cerasis including website development, social media and content marketing, trade show marketing, email campaigns, and webinar marketing. Mr. Robinson works with the business development department to create messaging that attracts the right decision makers, gaining inbound leads and increasing brand awareness - all while shortening sales cycles, the time it takes to gain sales appointments and set proper sales and execution expectations.
Monday, April 01 2019
By Mike Consol, Editor, Real Assets Adviser
By disrupting the way employees commute to work, autonomous vehicles are expected to fundamentally reshape the U.S. office market by 2030, according to a report from CBRE. Most significant, the primacy of commercial real estate’s traditional decision drivers—geographic location and access to talent—may decrease as the importance placed on the workplace experience and building amenities grows.
Based on extensive and proprietary research, including interviews with leading experts in the autonomous-vehicle space, CBRE’s report predicts autonomous vehicles could account for between 11 percent and 27 percent of vehicle miles traveled by 2030. Factors considered in CBRE’s analysis include the rate at which the cost per mile for self-driving cars decreases compared with personal cars, the time it takes to develop software capable of navigating both inclement weather and complex urban roadway layouts, and advances in vehicle manufacturing capacity.
Thursday, March 22 2018
By Dawn Baetsen, president of D.E. Baetsen & Associates LLC
The race for automotive market share is intense, while the race for mobility dominance is inspiring and spectacular. The mobility culture disrupts the automotive industry in every aspect. We are at a crossroads where the world needs efficient, safety-first movement by land as we travel increasingly more miles to transport people, goods, and services. The automotive industry is finding the paths where it can make a difference as new vehicle sales growth narrows. OEMs seeking to survive are leaping to further identify with, and reside in, the mobility economy where service revenues will be critical for survival. The genesis of the mobility economy evolves and transportation’s emerging alternatives away from personal ownership to mobility as a service (MaaS), rises demand for drivetrain fueling alternatives and movement to autonomous vehicles impact the industry and how it will operate in the future. Countless new, competing entrants bringing innovative technologies or providing service alternatives to traditional automobile ownership challenge the conventional industry business model.
Friday, March 24 2017
By Dawn Baetsen, president of D.E. Baetsen & Associates LLC
The automotive industry enjoyed another year of growth; yet, the industry may face its most arduous task of effectively fusing rapidly-changing technology while providing product that satisfies the consumer experience, is built with the highest standards of safety and security, meets government standards, and is built to last while maintaining affordability for consumers. Government is in the driver’s seat regarding taxation, regulation, and protectionist policies all having tremendous long term effects on the industry. Relaxed regulatory standards and reduced corporate taxes encourage the industry; however, trade agreements and border taxes will have an impact and will increase the cost of automobiles. On the minds of all automotive executives is the effects of emerging political risks in the major markets of North America, the European Union, China, and Brazil. Social and economic disorder follows and regional market economies will significantly impact the global industry now and in the future. Despite overarching macro-economic risks, the industry is focused on the consumer driving markets while a new culture of vehicle access versus vehicle ownership emerges.
The three major markets for automakers grew during 2016 with China sales growing by 15 percent or to 24 million units. The United States grew by 0.2 percent or 17.9 million units, while Europe posted an 7 percent increase to 15 million units. The Japanese market for a second consecutive year declined -1.5 percent largely due to a sluggish economy while emerging markets of Brazil and Russia continued to fall off -21 and -11 percent, respectively, as reported by Euler Hermes Economic Research. India’s demonetization policy took a toll on vehicle purchases declining 50 percent during 2016. Most automotive research groups suggest maintaining a global presence is critical to sustaining growth as shifts to a mobility culture, particularly in urban areas, will impact light vehicle demand for size and type depending on the market and regional demographic nuances.
Tuesday, March 15 2016
By Dawn Baetsen, president of D.E. Baetsen & Associates LLC
The automotive industry is in a revolution that will change the traditional business model and industry structure as we know it. Despite global economic unrest, low oil prices, and stock market contraction, the automotive market is speeding forward, designing and producing cars that appeal to the masses, which are safer and increasingly safer for the environment. This movement is not without flaws as tensions intensified between automakers and government with unprecedented recalls and the fallout of “dieselgate.”
The automotive industry enjoyed a 6th straight year of growth in 2015, despite unruly economies and governmental stress. The major markets of North America, Asia/China and Western Europe fueled 2015 global sales growth for light trucks and cars. Scotiabank reports purchases in North America rose above 20 million units. The United States auto industry alone accounted for a sales record in excess of 17.4 million units contributing to the longest streak of annual gains since the 1920s and demonstrating an impressive come back. The Asian markets posted sales in excess of 33 million with China, the world’s largest automotive market posting sales of 19.75 units. Western Europe posted 5.6 percent growth in sales predominantly from Germany. India also saw an increase in sales by over six percent. Two of the BRIC markets, Russia and Brazil, experienced weakening economies resulting in declining sales. Russia in particular experienced nearly a 40 percent decline in sales. Brazil also had a decline in sales which is expected to persist into 2016.
The Global Automotive Industry - Driven by Flexibility, Geographic Transition, and the Global Economy
Thursday, March 19 2015
By Dr. C. R. (Buzz) Canup, President, Canup & Associates
The final sales and production numbers are in for the global automotive industry for CY 2014, and, for the most part, the numbers look very good. As a matter of fact, many of the automotive brands reached record breaking levels for both production and sales on both a regional and a global basis. Looking back for a moment to the crisis of CY 2009, the automotive industry has made a remarkable recovery. In CY 2009, the world was in the middle of the worst recession in history. Every business and industry was being impacted. Every country was being impacted. Hundreds of thousands of workers lost their jobs. Thousands of businesses closed their doors, many to never open again.
The automotive industry went through an unbelievable transition during and after the Great Recession. Ford sold off almost all of its portfolio of companies, including Jaguar, Land Rover, and Volvo, and down-sized or stopped production at many of its plants. General Motors down-sized its portfolio of brand names eliminating Oldsmobile and Pontiac, selling Saab, and closing the Hummer manufacturing plant and name plate. General Motors and Ford had both initiated plans to spin off their parts manufacturing companies of Delphi and Visteon respectively prior to the recession, and both continued with those plans. Daimler-Benz shed itself of the Chrysler acquisition. Thirty-percent of Chrysler was almost immediately acquired by Fiat with no upfront cash transactions (subsequently 100 percent of Chrysler was acquired by Fiat in 2014, and the merger has become known as Fiat Chrysler Automotive or FCA). Additional domestic assembly plants had production levels decreased with associated layoffs for both full-time and contract employees. Toyota delayed the completion and opening of its new assembly plant in Tupelo, MS.