Better data analysis enables aftermarket businesses to make more informed decisions.
For the automotive aftermarket, the COVID-19 pandemic resulted in some major changes.
Not only were service centre showrooms closed in many cases, with customers having to drop off and collect their vehicles, staff were also required to follow new safety protocols.
Yet perhaps an even bigger impact on the industry was the reduction in vehicle miles travelled (VMT).
Today, even as the economy gradually opens up, VMT levels are still not where they were, pre-pandemic.
This new situation presents some challenges but also opportunities for the aftermarket, something Todd Campau, Associate Director, Aftermarket Solutions, IHS Markit, discussed during a special webinar organized by the Auto Care Association in the U.S.
Vehicle Miles Travelled has a direct impact on vehicle maintenance and as a result, service shop revenues, which in turn impacts other businesses in the automotive aftermarket supply chain.
Traditionally, Campau notes that VMT wasn’t as much of a focus for the industry as vehicle age. Though in most cases, vehicles wear more from usage than time.
Campau pointed to data from IHS Markit, that illustrated the correlation between VMT and the size of business revenue in the aftermarket.
In 2020, with many people staying at home and not driving as the result of the pandemic and government instigated lockdowns, VMT declined significantly, and so did revenues. That said, Campau was quick to acknowledge that VMT is not the only influencing factor when it comes to determining revenues in the aftermarket.
Others include Vehicles in Operation (VIO), average vehicle age, and new vehicle costs, which given the ramp-up in technology and safety features over the last decade, including the proliferation of ADAS, has significantly altered the automotive aftermarket landscape.
The average age of vehicles on the road in North America continues to increase year after year. Currently, according to IHS Markit, it’s around 12.1 years in the U.S. (9.71* in Canada).
Additionally, newer vehicles are more complex, meaning they are more costly and often more time-consuming to repair, which has also resulted in higher revenues for aftermarket shops over the last few years.
As a result, even though VMT declined significantly in 2020, Campau notes that these other factors helped reduce the decline in aftermarket revenues.
“All these factors,” he said, “are important when it comes to managing your aftermarket portfolio.”
Going forward, Campau said he sees some positive developments for the aftermarket.
In 2021, the number of vehicles in operation has continued to increase, as pandemic restrictions eased, plus the ongoing global semiconductor shortage—which has hampered sales of new vehicles—has continued to push up the average age of cars and trucks on the road.
Campau did acknowledge when it comes to VMT data there are some challenges.
Namely that data is collected at a national level, meaning it can be hard to dive down into specific regions, certainly in the U.S.
Secondly, it’s reported around 50 days after the measurements were taken, so it is not real-time, plus the data tends only to be collected from vehicles that travel on major thoroughfares, so cars and trucks driving on smaller and more rural roads are not included.
Plus, the data doesn’t distinguish between vehicle types, so this does present some additional issues.
Nevertheless, progress is being made.
Campau alluded to more accurate (and timely) data that’s available to Auto Care members via its TrendLens Interactive Data solution that includes Arity VMT data.
Because data generated through this medium comes via cell phone towers and telematics, Campau said it is not only more reliable and robust but also more agnostic and provides more detailed information down to specific trip details.
For aftermarket service providers, as well as parts distributors and manufacturers, such data is important as it provides them with a better understanding of what is happening related to VMT.
As a result, they can make better, more informed decisions related to strategic and tactical planning, as well as inventory and category management.
Campau illustrated this by selecting eight different types of vehicles and noting the miles travelled during the year. A good example was a Ford Transit versus a BMW 328i.
The Transit covered significantly more miles, meaning its maintenance requirements were greater during the year.
“Being able to see that level of detail,” said Campau, “really helps an aftermarket organization to tune their focus on what parts should be in what places, to try to make the sale at the right moment.”
The data not only allows breakdown by vehicle type and distance travelled, but also illustrates how different vehicles are operated in different regions of the country, for example, Campau took a look at Arizona and New York.
Data showed that on average, a third more miles are being covered in Arizona each year than New York, though some vehicles cover greater or less distance depending on the jurisdiction.
Additionally, measuring the actual miles driven by each vehicle over the year, against average lifetime miles for that particular type of vehicle, allows aftermarket businesses and professionals to better predict maintenance and service needs for that particular make and model.
Also, when you combine VMT with VIO, it can provide powerful insights into which vehicles are coming off warranty and when—allowing the aftermarket to better predict the types of vehicles they will be servicing, the costs associated with that and also the parts inventory and labour required to perform these tasks.
So, whether vehicle miles travelled continue to increase over the next few years or remain at current levels, greater data insight will allow aftermarket businesses to be better prepared and pivot accordingly, no matter what happens to the economy or the automotive sector.
*Most recent data is from 2018 for Canadian statistics