Industry trends driving after-sales service opportunities

There is never a lack of economic data to study. Perhaps the real trick is to find the data that might be important to your share of the automotive aftermarket and keep tabs on it. Here are some examples.

There’s a problem writing about economics for a magazine. This article is written during the last week of July – and all data presented is the most up-to-date for this week. Economic data comes with a lag, which also impacts the freshness of the data. So by the time you read this between mid and late August, we may have updated data.

E-commerce

The US Department of Commerce houses the US Bureau of the Census. In addition to their main task of counting the number of people, they also track other important economic indicators. One of these important indicators is retail sales. They look at retail sales in several ways, one of which is their quarterly e-commerce estimate as a percentage of retail sales. As you can see in Chart 1, e-commerce sales grew steadily for about two decades, rising from 0.8% in the first quarter of 2000 to 11% in the fourth quarter of 2019. Then the Covid-19 lockdowns saw e-commerce zoom to 16.4% of retail sales in the second quarter of 2020. Since then, the percentage has fallen to 14.3% of sales. Although it has fallen, it is still well above the long-term trendline, which is the dotted line in Chart 1.

While the second quarter of 2022 ended on June 30, it usually takes the Census Bureau at least six to seven weeks to complete its new estimate. Second quarter figures are due out on August 19, so they may be available by the time you read this article. You can find them at censum.gov/retail/index.html#ecommerce.

What is the impact of e-commerce on the secondary market? In the Class 1-3 delivery vehicle fleets we see performing the last mile of delivery. The trend in Chart 1 can help predict the amount of maintenance, parts, and tires needed, as well as future demand for EV delivery vehicles.

RFIDs against car dealerships

We can combine data from a number of sources to understand the split between auto dealerships and independent repair shops in their fight for the auto repair dollar. One set of numbers comes from the AASA/ACA Joint Channel Forecast. In 2023, according to their forecast, independents will hold 71.1% of the automotive parts and maintenance sales market, while dealerships will hold 28.9%. This is the same ratio they have for 2022, and also what they are forecasting for 2024.

A second set of numbers comes from NADA. In the 2021 NADA Data report, they report that dealer service sales were $54.6 billion while parts sales were $74.5 billion. They also estimate that the average dealership has 15 technicians, including their body shops.

If you are an IRF (independent repair shop) or an aftermarket manufacturer/supplier, looking at these numbers will help you understand the competition.

Gasoline prices and kilometers traveled

Vehicle miles traveled, or VMT, has become a closely watched economic indicator. As we move from a locked-down work-from-home environment to something close to pre-pandemic “normal”, TMV should return to pre-pandemic levels. There are a few things to look out for when looking at VMT. One of them is seasonality, and another is timeliness.

There are strong seasonal variations in TMV from month to month. For example, the VMT in March will generally be higher than the VMT in February, both due to the length of the month and the fact that March is the start of the “spring break” season, with more travel d ‘approval.

One way to account for seasonality is to compare the same months from different years. For example, in February 2022, the VMT increased by 1.7% compared to February 2019. In March 2022, it increased by 1.8% compared to March 2019. These two months give the impression that the decline of the VMT was finally reversed. Figure 2 shows not only the sharp increase from March 2020, the first month of lockdown, but also the growth in the pre-pandemic years.

One way to account for seasonality is to compare the same months from different years. For example, in February 2022, the VMT increased by 1.7% compared to February 2019. In March 2022, it increased by 1.8% compared to March 2019. These two months give the impression that the decline of the VMT was finally reversed. Chart 2 not only shows the sharp increase from March 2020, the first month of lockdown, but also the growth in the pre-pandemic years.

This recovery in MTV came to a halt in April, as MTV was down 3.8% from April 2019, while May was down 0.6% from 2019. The main The reason for this reversal is of course shown in Chart 3, which is the average US price of a gallon of gasoline. This chart measures the weekly average, as calculated by the Energy Information Administration, which is part of the US Department of Energy. It shows that the price of gasoline has steadily increased since the start of 2021. The sharp increase since the start of the Russian invasion of Ukraine seems to have reduced a lot of discretionary driving, as evidenced by the impact on VMT.

Government VMT reports come from the US Department of Transportation’s Office of Highway Policy Information. You can find them on fhwa.dot.gov/policyinformation/travel_monitoring/tvt.cfm. Monthly reports are usually delivered with a six or seven week lag. Thus, at the end of July, our most recent data is from May. Gasoline price reports come from the US Department of Energy’s Energy Information Administration (EIA). Their reports are eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_m.htm. Their reports are only a week late. Since the number of miles traveled plays a definite role in the scheduled maintenance of vehicle owners and the price of gas affects VMT, these are two key variables for the aftermarket.

Diesel prices

We looked at gasoline prices on the previous page. The EIA also publishes weekly diesel fuel price reports. Chart 4 shows the price of a gallon of diesel fuel over the same period as our gasoline chart. Far more than trucking company executives need to worry about that price. Almost all of the goods we consume are delivered by boat, train or truck and these are almost always fueled by diesel. Although we appear to have fallen from the peak, we are still up 58% from a year ago at this time. AMN

Alejandro L. Myatt