The automotive aftermarket is on the brink of a period of significant growth due to the rapidly aging vehicle fleet
The average age of vehicles in the United States has reached unprecedented levels, as indicated by a recent report from S&P Global Mobility, which pegged it at 12.5 years. This marks an increase of three months compared to the previous year, a rate of growth not observed in approximately 15 years.
The average age of vehicles in Canada is also at an elevated level, although precise figures have not been officially released. In 2020, AIA Canada reported an average vehicle age of 9.7 years, and it is estimated that this number may have increased to around 10.5 years by now.
Collectively, these factors point to the strong possibility of witnessing a significant expansion in repair and maintenance activities, as aging vehicles are anticipated to accumulate even more mileage than conventionally projected. This insight comes from a recent report by S&P Global Mobility.
Following several years of sluggish progress in the new vehicle sector, consumers have been exploring used alternatives or retaining their older vehicles. Despite inventory restocking, new vehicles continue to bear steep price tags.
A potential counterintuitive shift is on the horizon: the surge in new vehicle supply might actually contribute to the growth of the used vehicle market, resulting in an influx of higher-mileage vehicles requiring service, as noted by S&P.
There is industry speculation that as individuals trade in their older vehicles for new ones, those older cars will likely end up in used car lots. This will provide more choices for those who opt for used vehicles due to financial constraints or personal preference. Consequently, even though they are upgrading their vehicles, it’s probable that aftermarket-focused automobiles will continue to be prevalent on the roads. Notably, the industry is witnessing a growing presence of 12- and 13-year-old vehicles playing significant roles in the business.
Moreover, Todd Campau, the associate director for aftermarket solutions at S&P Global Mobility, highlighted in the report that although there will be a decrease in vehicles aged seven years or less, there will be an uptick in vehicles aged eight years or more.
“With the progression of vehicles featuring greater electronic complexity as they age and contribute to a larger market share, the aftermarket’s significance in sustaining the aging vehicle fleet will become progressively crucial,” Campau remarked. “This is where the genuine potential lies within the aftermarket sector.”
Undoubtedly, vehicles transitioning into the aftermarket sweet spot are presenting more intricate repair challenges. The prevalence of advanced driver assistance systems has grown significantly in the past decade, with S&P highlighting the upward trajectory of adaptive cruise control since 2015, projected to feature in around 70 percent of vehicles in 2023.
“I believe sensors represent the next significant avenue for aftermarket growth,” remarked Campau.
He emphasized that this also underscores the increasing significance of the right-to-repair movement.
“As consumers, the ability to decide on timely and convenient vehicle maintenance options will gain growing significance,” Campau expressed. “Given the scale of the vehicle fleet, collaboration between original equipment (OE) aftersales services and aftermarket service facilities will become essential to ensure the nearly 300 million-vehicle population remains operational with optimal safety and efficiency.”
Additionally, the economic factor comes into play. Despite forecasts indicating a rebound in new vehicle sales over the coming years, the potential effects of inflation and fluctuating interest rates could potentially dampen consumer demand. Instead of supply causing a shortage in sales, dealers might now face the possibility of demand constraints.
According to Campau’s perspective, this dilemma presents automakers with a choice to consider: Should they opt to manufacture additional economy or mid-priced vehicles and variants that cater to consumers who find themselves caught in a cycle of used vehicle transactions, or will they continue to prioritize high-margin vehicles as they did during the pandemic years?
“Will consumers persist in backing that premium model?” queried Campau. “The question is, which party will yield first?”