fbpx

AASA: Present and Future Predictions for the Aftermarket

Autosphere » Mechanical » AASA: Present and Future Predictions for the Aftermarket
Paul McCarthy, President, AASA addresses members of the media during a virtual press conference on December 1. Photo: AAPEX

Despite challenges, longer-term prospects look favourable says the association.

On December 1, the Automotive Aftermarket Suppliers Association (AASA) scheduled a media conference to provide an update on the industry sector and some legislative developments related to the changing of Presidential administrations in the U.S.

Paul McCarthy, President, AASA outlined three major factors that remain front and centre for the aftermarket at present.

These are:

  • The Federal bill follow up to Massachusetts’ Right to Repair legislation
  • Outlook for some key drivers for the industry as well as the influence of miles driven
  • Diversity within the aftermarket industry and the important role it plays

McCarthy noted that following the verdict on Right to Repair in Massachusetts, which declared that consumers have the right to choose who has data access to their vehicle to perform the repairs, OEMs have moved forward with an initiative to restrict data access at the federal level.

“It is disappointing but perhaps not surprising that automakers have jumped to litigation,” said McCarthy, “But the aftermarket remains willing to engage in helpful dialogue with automakers which could provide a way forward.”

All the more important

He noted that this development makes the concept of a federal repair act all the more important and AASA, in partnership with the Auto Care Association addressed this issue during the recent AAPEX virtual convention and Expo.

“This bill is principles based,” said McCarthy. “It is balanced, it is reasonable—and the bill to quote that letter [that Auto Care Association President Bill Hanvey and I] sent out, provides a long-term national solution protecting aftermarket access to vehicle repair and maintenance data.”

McCarthy noted that the federal repair act bill addresses concerns that aftermarket service providers share with the OEMs, including the need to protect and respect Intellectual Property (IP) rights, as well as safeguarding cybersecurity, protecting resale values and ensuring that vehicles are properly and safely maintained.

With support from AASA, the Auto Care Association, as well as the collision repair industry, the federal repair act represents a very significant step in not only protecting consumer choice when it comes to vehicle servicing and maintenance but also ensuring healthy competition and a level playing field for both OEMs and their dealer and service networks, as well as the aftermarket.

“These are very fundamental values—things that we can be proud as an industry to stand up for—and things we must win as an industry and for consumers,” said McCarthy.

Key trends

Shifting the focus to market drivers and influencers, McCarthy said there were some key trends to consider.

One of them is strong market demand for parts and servicing. “If you had told us a year ago that we would see this kind of quarterly same store sales growth, it would have been unexpected.” He noted that among the “big four” auto parts networks (AutoZone, O’Reilly Auto Parts, Advance and Genuine Parts Company) in the U.S., there has been up to 20 percent growth in parts sales in some cases.

Another factor is that, with the aftermarket being declared an essential service during the early stages of the pandemic (following extensive consultation between aftermarket industry stakeholders and the federal government in Washington), the importance of the aftermarket to the overall economy in helping supplies get through and essential and front-line workers to get to their jobs really came into focus.

McCarthy noted that there’s no question that as an industry, the automotive aftermarket is extremely resilient, yet given some of the unique challenges COVID-19 has presented, tackling some of those issues has become critically important.

A current issue is supply chain disruptions and as a result, the challenge to fulfill parts orders, which in turn impacts vehicle servicing and maintenance. It is likely that this trend will continue for the next several months, but there are other factors that will likely strengthen the aftermarket’s position in the months and years ahead. 

Uncertainty still an issue

McCarthy said that current uncertainty regarding the economic outlook as well as how any additional government stimulus plays out will be major factors in how the industry progresses over the coming months but looking to the longer term, conditions are favourable.

The growing average age of the vehicle park, increasing demand for vehicles due to the protection they provide from community spread of the virus—plus with more consumers re-evaluating their budgets and choosing to keep existing vehicles instead of purchasing new ones— all play into the hands of the aftermarket. Additionally, the trends we’ve seen this year of more and more people eschewing big city living for the suburbs and more rural areas, also means more citizens will require the use of a vehicle as well.

“What is happening,” said McCarthy,” is that the car is the ultimate in PPE (personal protection equipment), so the new normal could see less white-collar commuting, while around the world we are seeing this structural shift, from mass transport to personal driving, with people leaving densely populated areas to those where life requires more driving.”

Additionally, other trends, such as growing consumer preference for pickups and SUVs at the expense of passenger cars, will also see the average of cost of repairs rise as traditionally, pickups and SUVs are more expensive to maintain than cars.

With fuel prices set to remain relatively low for the foreseeable future as well, this is another trend that plays favorably toward the automotive aftermarket. And while overall miles driven is down and not expected to return to pre-pandemic levels, other factors such as a growing number of older vehicles, greater demand for vehicle ownership, higher repair costs and stable fuel prices, are likely to offset the reduction in distance travelled.

The importance of diversity

When it comes to diversity in the industry, McCarthy reiterated some key points that were shared at a recent AAPEX town hall meeting—namely the importance of diversity, equity and inclusion. “This is key to ensuring the future success of our industry,” said McCarthy. “We know we are facing tough competition and challenges and in order for the aftermarket to support our growth and remain vibrant, we need to welcome the brightest minds—people with a wide variety of backgrounds— to support our mission.”

Moving onto the legislative front, Ann Wilson, Head of Government Advocacy for AASA and MEMA Senior Vice President of Government Affairs, said that already, 2021 is shaping up to be a very big year, both at the U.S. federal and state levels.

She focused on the three priorities for President Elect Joe Biden and how they are likely to impact the aftermarket.

Firstly, the announcement of a COVID-19 relief package to help with the continuation of the small business PPP loan program. “This is really important for service operations for many of our manufacturers and for a lot of individuals in the aftermarket overall,” said Wilson.

She noted that another prime consideration is the definition of essential workers, essential businesses and essential manufacturing. “How do we assure that they can still continue to stay open and that their best practices and operations they have put in place continue as we move forward. Also–how do we make sure these essential operations continue to provide jobs and the motor vehicle parts we need and depend on?”

Ensuring that people employed in the aftermarket are able to get access to vaccines and that work environments are protected and safe is also critical moving forward.

“One of the things Paul and I continue to hear from our members, is that we continue to have folks who are very concerned about having to return to work,” said Wilson.

Infrastructure and electrification

The second priority revolves around the Transportation and Reauthorization bill–the money the federal government raises to provide local governments with the funds to repair and maintain infrastructure such as roads and bridges. “What you have to remember is that this is not just a funding mechanism to build roads and highways but also a way that we, as a nation, address safety implications. It is going to be the way the Biden Administration moves forward on fuel efficiency and electrification.”

Regarding vehicle electrification, Wilson acknowledged there are many challenges regarding this, ranging from how industries such as the aftermarket will be able to pivot should widespread EV adoption take place and also how to address charging infrastructure challenges and issues such as range anxiety among consumers, which are still very real. She also noted that the aftermarket will also not support another cash for clunkers program like the one the Obama Administration enacted a decade ago, since it removes valuable vehicles from the road, increases parts prices and transportation costs and restricts mobility for many consumers.

The third and final priority involves immigration reform and how that will impact the automotive aftermarket. Traditionally, programs such as the H1B skilled worker program have proven hugely beneficial for parts manufacturers, allowing them to fill positions with highly qualified workers from overseas when there isn’t enough talent readily available at home.

State concerns

Wilson also said it was important to pay attention to things at a state level as well, since many states in the U.S. have maxed out their budgets and because constitutionally they are required to maintain balanced budgets, spending could be cut back—an important consideration for parts manufacturers that operate in those states.

The session concluded with a look at some of the upcoming meetings and events from AASA, including a possible shift back to physical meetings in the latter half of 2021, provide the environmental conditions are favorable.

There was also an announcement of two landmark studies that AASA will be rolling out during the course of 2021 that look at data access and also the potential impact of electrification on the automotive aftermarket.

Popular Posts

Calendar

march

10janAll Day31marASE Winter Testing Registration Now Available

april

12aprAll Day10mayMastering The Art of Diagnosis Level Two

22apr(apr 22)8:30 am24(apr 24)5:30 pmNAFA Institute and Expo 2024

23aprAll Day24AIA Canada National Conference 2024