S&P Global’s Todd Campau speaks during the ‘3 Dragons’ session with Bret Jordan of Jeffries and Liz Clark of the International Trade Administration at the MEMA Aftermarket Suppliers Vision Conference last month in ChicagoHot economy or not, people still need to use their vehicles for various needs, so concerns about people parking their cars shouldn’t be very high, according to industry experts.
People generally don’t stop using their vehicles in down economies, said Bret Jordan, CEO of Jefferies, a consulting firm that works in the automotive aftermarket. This was true during the Great Recession in the late 2000s and continues to be true today.
Not only is this good news for the automotive aftermarket in terms of the need for service in an economy where purse strings are tightening and inflation and interest rates are high, but the age of the vehicles will also continue to increase.
“The lack of new vehicle sales in recent years is driving up the average age of vehicles,” Jordan observed during the 3 Dragons: An Economist’s, Wall Street Analyst’s and Stock Market Analyst’s View session at MEMA’s Lodging Market Vendors Association vision conference in April. “And that when combined with vehicle utilization drives underlying repair and maintenance spending.”
Todd Campau, associate director of aftermarket solutions at S&P Global, noted the challenges in the new vehicle segment. Supply challenges first led to expectations that new sales would pick up last year after a disappointing performance in the COVID years of 2020 and 2021. Then came the economic challenges.
“We saw a bit of a pullback, obviously, because of the pandemic [and] the supply chain,” he said as part of the panel. “And now it’s shifting to a pullback because of the demand for new vehicles that has to do with interest rates and inflation and things like that “.
In the US, expectations are that new sales will be less than 15 million units, well below pre-pandemic sales numbers in the 15.5-17 million range. In Canada, DesRosiers put the seasonally adjusted annual rate at just 1.475 million in April. Before the pandemic, the numbers pushed—and even crossed—two million units in Canada.
“So we’ve definitely seen a lot less new vehicles coming into the fleet over the last four or five years than the previous four or five years,” observed Campau.
“The main thing that continues to drive VIO right now is the fact that people are staying on the road longer; they are forced to remain in service a little longer,” he added. “This means more repair opportunities for all of your organizations, which is great news for the aftermarket.”
Campau has also pointed out that the vehicles with the best gas consumption are the ones that accumulate the most use of the road. These are the vehicles that will need more frequent maintenance.
“Electric vehicles, from battery to hybrids, are at the top tier of mileage accumulation, along with internal combustion engine vehicles that get top-notch gas mileage,” he said. “These are the people who are most insulated from rising gas prices.”
