AASA Finds Optimism in Aftermarket Outlook
As 2020 drew to a close, the Automotive Aftermarket Suppliers Association (AASA) shared its reflections and updates on the performance of the aftermarket industry in a recent media conference call.
Highlighted challenges included the industry’s ongoing battle to keep up with demand for aftermarket parts and the potential risks that could stem from additional waves of COVID-19 cases, including further workforce and labor disruptions and the economic impact of additional restrictions or shut downs.
Yet the association’s overall outlook for the industry is optimistic for the future, citing promising signs for overall industry recovery in the long-tem. For additional insights, Ratchet+Wrench checked in with AASA president and COO Paul McCarthy.
After a year of unexpected shifts, what are some of the biggest challenges impacting suppliers and the industry as a whole today?
The biggest challenge and something we didn't expect coming into last year was the degree of volatility and uncertainty the aftermarket experienced.
Typically, one of the great things about the aftermarket is its stability. It can be relatively predictable because it’s so central and essential to people's lifestyles. People need their cars and if you need transportation, you're going to have to have an aftermarket to support that. Obviously 2020 was anything but typical.
Sales were down in the spring but the figures we saw later from year over year same store sales are something you’d never expect to see in the aftermarket. A lot of people were stuck at home with a bit of time on their hands and were looking to work on auto projects or they stopped commuting and let their cars sit, so sales on things like appearance items and batteries were unbelievable, but we’re really seeing high demand across nearly every parts category. Of the suppliers we surveyed, 1 in 5 respondents saw double digit growth in new orders for Q3.
That demand is great to see but it’s created a lot of volatility for the suppliers that are trying to keep up with all of the disruption we’ve seen in sourcing and the supply chain and our workforce. Manufacturers have been catching up more each week, but with each COVID spike, there is that chance of another lag with potential workforce issues, quarantines, etc. that could become a factor.
Despite industry-wide anxiety about miles driven, AASA is optimistic about growth in that metric. Why?
Miles driven was the topic of the year and we shared a lot of that anxiety, but the more we looked at this issue for the long-term, the more we thought these fears may be overwrought.
We do have a large number of people who aren’t commuting and, with the ability to do so much remotely these days, we’re likely to never see those commuting numbers return to their peak. But in a typical year, commuting only makes up 25 to 30 percent of miles driven. If you look at the drivers of that remaining 70 to 75 percent, that accounts for everything else we’re driving for—road trips, connecting with friends and family, events and activities, etc. That’s a huge sector, a full three quarters of the picture, that has the potential to grow as we adjust to a post-COVID world and adjust to new boundaries.
We’re also starting to see big changes in how people approach their homebuying and travel habits that could boost miles driven in relation to other market shares.
Before COVID-19, there was concern about urbanization and people commuting less if they lived in more densely populated areas and we’re starting to see that shift in reverse.
When you have a big, life-changing event like this, it can change the collective mindset and create trends with legs. COVID-19’s been compared to the Great Depression in that it’s a moment that’s shifting mindsets and the habits and decisions we’re making day to day.
Coming out of this, we’re finding that people want more space, especially if their jobs can be done partially or fully done from home. More and more people are moving to the suburbs or more widespread, less densely populated areas—places like Utah or Wyoming or Montana where you need a car or multiple cars to get around—and we’re seeing that reflected in the housing prices.
There’s also an increased desire for protection that we expect to persist coming out of this. Cars have become individual safety zones—the ultimate PPP as The New York Times called it—which has only increased demand for vehicles, especially used vehicles.
With these changes we’re expecting to see miles driven pick up share gains that were previously going to public transport and air travel, which of course will boost demand for auto repair and maintenance.
Going into last year, I don’t think anyone would have opted to reduce demand for what makes up a quarter of those miles driven if given the choice. But to see structural increases in the factors that make up the other three quarters of the pie—I think many in the industry would take that trade.
What shifts and trends is AASA on the lookout for in 2021?
Certainly in the first and second quarters we’re going to continue to see disruption and volatility when it comes to demand, and we’re cautiously optimistic that demand will continue to hold better than expected. The questions we’re really looking at are “Will we continue to see that level of demand?” and “Just how much disruption will come out of what are hopefully the last stages of the pandemic?”
We’re also trying to look for early warning signs of a post-vaccine bounce back. There’s a concept of pent-up demand and right now we have pent up everything. We’ve all been restrained for an awfully long time now in one form or another and we’re expecting people will be itching to get back out on the road and just be somewhere else. So, it’s very possible that at the shop level, we could see an increase in customers coming in looking to prepare their vehicles to get back on the road. The magnitude of that potential bounce back and the trickle down we could see from that is something we’ll be watching for.