Fuel For Thought: Top 5 Global Automotive Aftermarket Trends

Republished By Plato

Followers: 0

Automotive Monthly Newsletter &
Podcast:

It’s fall again, which only means one thing…attention is turned
to the aftermarket! S&P Global Mobility participated in two
events recently—Automechanika Frankfurt, a five-day event on
the Frankfurt exhibition grounds in September, self-heralded as the
world’s leading trade fair for the automotive service industry, and
AAPEX in Las Vegas on 1-3 November, with total visitor numbers
expected to be over 160,000 for AAPEX and SEMA combined.

On the opening day of AAPEX, our resident expert Todd Campau
presented our insights into the emerging top-five aftermarket
trends we can see within the automotive industry.

Top-five aftermarket trends

Cars getting older, aftermarket stakeholders remain
cool about it.
Augmented by the lack of new car supply, as well the concerns over
economic stability and the constrained new car supply, vehicles are
being kept longer and therefore the rates of car parc scrappage are
falling. With these historically low levels of scrappage, even with
the softer new car sales, the trend is showing that the vehicles in
operation (VIO) are continuing to rise. The executives we
interviewed at both shows did not seem too concerned about this as
the effect will not be perceived before five or six years.
Meanwhile, for their cousins in the aftersales segment, which
typically depend on the 1-4-year-old segment vehicles, the feedback
we gathered was quite the opposite.

The aging fleet, with vehicles being retained longer, the average
age has now risen from just over 11 years in 2012 to 12.2 years in
2022. The most significant growth sector of the fleet is among the
6-13-year-old vehicles, a cohort that was already poised for
significant growth in volume prior to the current economic climate,
and is showing the most annual miles traveled, marking it an
aftermarket sweet spot. These more-traveled vehicles may be on
their second or third owner and likely to already be a prime
aftermarket customer.
Mileage has returned but is different
Annual miles traveled has returned and even exceeded prior pandemic
totals, but the composition of the miles traveled have changed as
we have emerged from the pandemic. Insights derived from congestion
data have indicated that rush hours have not returned to
pre-pandemic levels in all locales, while in many locales
congestion throughout the day has displayed a slight uptick as
drivers are spreading trips throughout the day.

The aggregated effect of the changing vehicle miles traveled is
expected to add about 1 percentage point to the overall VMT for
2022, increasing to 3.5 trillion miles for passenger cars and light
trucks, which will fall within the range of typical year-on-year
VMT change prior to the pandemic. That said, the regional change is
expected to vary greatly year on year, ranging from a 1.2% decline
in Mississippi to a 5.4% increase in New York. Likewise, demand for
aftermarket maintenance and repair opportunities based on miles
traveled is expected to see varied growth from region to
region.
Digitization of the workshop as connectivity
rises
With vehicle connectivity now enabled with longer serviceable
connections, we expect that one-third of the VIO will be connected
by 2024 and 5G connectivity will be the dominate service for new
vehicles in 2027. By the end of the decade, it is expected that
over one-third of the VIO will be connected, and 95% of them will
be capable of receiving manufacturer-driven software with
over-the-air (OTA) updates.

From Automechanika, and the conversation with diagnostic providers,
OTA updates were expected to lead to fewer warranty visits and
could reduce revenue opportunities for OEMs. Focus has been on
successfully developing relationships with OEMs and securing access
to their secure gateways to enable the aftermarket’s ability to
complete all repairs. This has given many providers the ability to
offer this level of connectivity on a subscription or
pay-per-repair basis and also offer technical repair solutions and
guidance.
Autonomy opportunities
Increased adoption of automatic driver assist systems
(ADAS) will continue to penetrate the vehicle fleet at pace. As an
example, in 2022, more than 60% of new models have adaptive cruise
control compared with about 15% just five years ago. As a share of
VIO, the significance of vehicles enabled with adaptive cruise
control has risen from 0% in 2015 to 12% in 2022.

To the body repair industry, as the technology continues to
penetrate the VIO, it could influence the rates of collision and
the increased adoption of cosmetic and smart repair service
offerings.

The main opportunities that were presented at AAPEX and
Automechanika were that ADAS systems are a focal point as they were
vulnerable to the effects from poor roads conditions and wheel
impacts. The importance of ADAS provides an opportunity to service
offerings around calibration and safety checks, as well as the
associated need to ensure that wheel alignment was checked and
adjusted to ensure all ADAS systems remained operational and safe.
These services offered a significant revenue and upsell
opportunity.
Transition to electrification
With VIO of 1.4 million electric vehicles (EVs) in the US
currently, a conservative estimate puts that total to be close to
17 million VIO by 2030 as new models will increase from 26 in 2021
to more than 250 in 2030. Conservative and aggressive outlooks lead
to overall share of the vehicle fleet of less than 15% in
2030—even as EVs show significant growth in new registrations,
transformation of the fleet will take years.

More states in the US are proposing regulations to restrict new
registrations to either zero- or low-emission vehicles, and similar
trends are following in Europe, which is creating additional
influencing factors as to why we have seen customers choosing to
adopt EVs sooner. However, recent surveys show continued reticence
in consumer acceptance. In 2021, 81% of those surveyed would have
considered purchasing a battery-electric vehicle (BEV); however, in
2022, only 58% shared that view. The reason for this change seems
to be skepticism toward EV technology, pricing, charging
infrastructure, and battery technology being barriers. Pragmatism
is strongly encouraged in developing and implementing an EV
strategy because while the transition will take time, preparation
will be key to a successful future.

Of the new vehicle registrations in 2022 in the US, the light truck
sector dominated the electric segment, representing 60% of all EVs
registered.

Although there will be challenges, the future of the aftermarket
still presents an aging car parc with increased repair
opportunities. This aging is likely to continue as the economic
influences have a destructive effect on new car sales while the
constraints on new car supply are likely to continue through 2024.
Although BEV growth is good, the proportion against total VIO
indicates there is still caution, with many waiting to gain
confidence in the technology and infrastructure before switching to
fully electric.