Automotive industry future outlook: The road ahead for the aftermarket
The COVID-19 pandemic has changed the future of the automotive industry. Industry executives and leaders say the automotive aftermarket continues to be resilient despite the crisis.
“What to Expect on the Road Ahead”: the theme of the recent 2020 Virtual AAPEX Experience Keynote on Nov. 3, outlined a positive outlook for the aftermarket. Paul McCarthy, president, Automotive Aftermarket Suppliers Association (AASA) opened the keynote, saying, “Compared to new vehicles, compared to most other retail sectors, the aftermarket sees much more stable demand. We are essential and we’re a great market to be in, rain or shine.” The aftermarket is forecasted to grow 11.7% in 2021 and anticipated to reach a market size of $341 billion in 2023.
A look at the future of the automotive industry: Parts revenue is growing
Automobile parts revenue reached an all-time high in the summer of 2020. When it comes to parts, the automotive industry is traditionally recession-resistant. We see that continuing during the coronavirus pandemic. Personal consumption of automotive parts in August 2020 reached $50.303 billion, an all-time record.
“Personal consumption”, which includes retail revenue only (no B2B revenue) also includes revenue through top automotive aftermarket retailers as well as eCommerce. Personal consumption accounts for all specialty automotive products, performance automotive parts, and automotive accessories, as well as OEM replacement automotive parts.
Personal consumption of automotive parts is anticipated to return to the recent growth trajectory in 2023.
More personal income spent on automotive parts
Consumers are willing to spend more of their income on automotive parts than in recent years. During the pandemic, consumers are spending more personal income and discretionary income on automotive parts and accessories. There has been a slight downward trend in the percentage of personal income spent on automotive parts since 2013, when it peaked at 0.309%. In August 2020, consumers spent 0.291%, marking a return to 2016-2017 levels.
Consumers are buying more automotive parts in brick and mortar stores
Consumer spending in automotive aftermarket retailers returned to 2018-2019 levels. Automotive parts consumers had not been spending much of their personal income in automotive parts stores until the summer of 2020.
Following the Great Recession, consumers spent a higher percentage of personal income in 2010 and 2011, with a peak in August 2011 and then a long slow decline from 2012-2018. In 2019, auto parts store revenue leveled off to match 2018 and dropped significantly in April. By summer it returned to 2018-2019 levels as consumers cautiously returned to retail shopping.
Consumers are spending more on automotive parts at the household level
Personal consumption of automotive parts & accessories at the household level is at an all-time high. Households have increased their monthly spending on automotive parts since the Great Recession, a promising trend for automobile industry future revenue.
Why this is shaping the future of the automotive industry: sales of new trucks
New car and light truck revenue is up after a big dip as well. Even with the economy suffering in the pandemic, consumers are still buying light trucks and SUVs. In fact, consumers set an all-time record in August 2020.
For every $1 in revenue generated from new cars, there is $5 in revenue generated from new light trucks and SUVs. This shapes the future of the auto industry because new trucks drive more accessory sales than new cars.
Sales of new light trucks and SUVs are projected to remain strong unless affected by a sudden spike in oil and gas prices.
Sales of used vehicles also shapes the future of the aftermarket
Consumers are buying a lot of used vehicles. For every $1 in revenue generated from used cars, there is $2.70 in revenue from used light trucks and SUVs. Not only do sales of used cars and trucks generate accessory sales, but obviously used vehicles need parts in general. They need OEM replacement parts, maintenance parts, service repair parts, and parts to improve appearance.
Consumers haven’t yet fully returned to public transportation and ride sharing
Consumers aren’t back to normal spending levels using public transportation, or ride sharing like Uber or Lyft. Revenue from public transportation, including the airline industry and intra city mass transit, is still down during the pandemic. Revenue from ride sharing like Uber and Lyft is also still down.
Obviously, this has a lot to do with people working from home. Unfortunately, it also has a lot to do with people who are unemployed. But this also shows more reliance on personal vehicles for transportation and vacations.
Conclusion: United States automotive industry statistics and automobile industry future
Tom Greco, president and CEO, Advance Auto Parts, identified trends in the aftermarket that may have a mid-term impact for the foreseeable future, including that more people are repairing and maintaining their vehicles and more DIY, as well as the decline in people using mass transportation. “People will continue to order online and vehicle ownership is increasing in importance with people having more time to work on their cars,” said Greco.
We’ve seen that economic trends during this pandemic can shift quickly. We live in uncertain times right now. We can’t reliably predict with certainty what 2021 will bring. At least for now the automotive industry looks strong.
3 steps to boost your social media engagement during the coronavirus pandemic
People today use online channels to connect with each other more than ever, and social media is one of the best ways to encourage customer engagement – especially with the pandemic still affecting many business operations. B2B companies that successfully engage with their customers can see a 50% increase in revenue, and 72% of Americans use at least one site to stay connected with friends and engage with content.
Social media has become an integral part in the lives of many marketers and buyers. Here are 3 steps to increase your organization’s social media engagement.
1. Analyze your engagement
Third-party software like Hootsuite or platform-provided insights can help to determine your current engagement level. Note how many likes, comments and shares your posts typically get, as well as how often the links you provide are clicked.
Pay attention to the posts that perform better than others and note key differences to establish a strategy for the most engagement.
2. Inspire interactions
Keep your social media engagement goals in mind as you plan what content to publish. If you want to increase shares and likes, you should focus on popular content like infographics, which are liked and shared three times more often than any other content on social media. If you are looking for more clicks to your website, post links to your articles, case studies or other content. Linking to gated content should be used if your goal is lead generation.
Share customer testimonials and start conversations with your followers. Asking questions and posting polls will encourage audience members to share their opinion, which you can also use to plan your future marketing strategies.
3. Get involved in the conversation
Engage in conversations that are already happening. Reply to comments, mentions and direct messages quickly. Forty percent of customers expect a response within an hour, and 79% expect one within a day. Prepare answers to common questions or comments to respond more efficiently.
Scroll through your company hashtags to see what people are saying about you and respond to any posts that are about you. Don’t ignore posts that are negative. Responding to negative reviews the right way can have a positive impact.
When face-to-face interactions have become more difficult during the coronavirus pandemic, engaging with your customers on social media can spur business growth no matter your industry, especially since 71% of customers who have had a positive experience with your brand on social media are more likely to recommend you to someone else. Make sure your posts inspire interactions from your audience, and don’t be afraid to jump into a conversation about your brand for the best social media engagement.
READ MORE HERE: randallreilly.com
Auto care industry trends: Opportunities & challenges for 2021
With the economic crisis of the last year, businesses have had to sharpen and modify their operations to remain operational.
Recent trends in vehicle miles traveled are encouraging but perhaps offset by other statistics that loom as indicators of another rough patch for the U.S. economy and the aftermarket. In this article, we share results of a survey of the impact of COVID-19 at companies across the aftermarket, then touch on “best practices” that shop owners have implemented while navigating the pandemic.
The Good News: Mileage is Back to Pre-Pandemic Levels
As of late June, vehicle travel has steadily ascended to pre-pandemic levels—since mid-April, passenger vehicle travel has gradually climbed back up to “normal” levels as states and municipalities have re-opened.
The Not-So-Good News: COVID-19 Incidence Rising
After flattening from April to early June, COVID-19 incidence rose sharply over the summer. By January 2021, U.S. cases have surpassed 20 million.
Based on the changing dynamics of disease spread in each state, several have recently paused their efforts to re-open, or even reversed course to limit activity.
Of concern is the rise in COVID-19 cases in younger generations as individuals have engaged in more activities outside their home. As the pandemic has progressed, individuals have become gradually more comfortable with engaging in “typical” activities like dining out, traveling for leisure, and going to a shopping mall, but still hesitant to attend movies, work out at a gym, or travel abroad.
Alongside the public’s willingness to engage in individual activities is the acceptance of risk at an organizational/societal level. Market research firm Ipsos finds that Americans are eager to get back to work despite the continued risks associated with the virus: 53% of U.S. adults agree with businesses reopening even if COVID-19 isn’t fully contained, versus 43% who disagree.
While individuals are gradually venturing out more, the increase in cases is leading to mandates to restrict business activity. This is likely going to reduce vehicle activity and negatively impact the national economy.
Pandemic Impact on Industry
Auto Care has been surveying association members since early April to gauge the pandemic’s impact on the industry. Based on 220 responses, while outlook for the next 12 months leans somewhat negative (55% are “somewhat” or “extremely negative”), sentiment has brightened more recently. One-third of auto care organizations participating in May have a “somewhat” or “extremely positive” outlook, versus one-quarter of organizations participating in April.
Larger companies are slightly more pessimistic (59% are “somewhat” or “extremely negative” versus 53% for companies with 1-500 employees), and manufacturing companies even more so: 67% are “extremely negative” (6%) or “somewhat negative” (61%).
Interestingly, larger companies are more likely to have reduced staff: 56% of auto care companies with 501+ employees have laid off or temporarily furloughed workers, versus 33% of auto care organizations with one to 500 employees.
Of companies that have reduced staff count, about half have reduced staff by 20% or less, and larger companies are more likely to have reduced staff by more than 50%: Several factors are likely at play: smaller companies are more likely to be family-owned, and the decision to lay off staff may be more difficult because of close/family relations. Further, smaller companies may be required to maintain pre-pandemic employment levels to secure government assistance, and larger companies are more likely to be publicly traded, with swift calls to action to demonstrate fiscal stewardship.
Similarly, larger companies are more likely to have closed a facility: 56% of auto care organizations with 501+ employees have temporarily closed one or more facilities, versus 16% of companies with one to 500 employees. We contend that larger companies are more likely to have multiple facilities and may need to close a facility for disinfection/deep cleaning in the event of an employee testing positive for COVID-19, and/or adjust production schedules based on shifts in product demand.
About half of the industry is experiencing supply chain disruptions and impact on business performance has been considerable, with five out of six larger companies experiencing a high level of impact compared to half of smaller companies.
Industry Response and Agility
With the economic upheaval fresh in our memory, shop owners and businesses have had to sharpen and modify their operations to manage cash flow, personnel and other vital aspects of their businesses in order to remain operational. Members have shared with us the challenges of staffing appropriately, particularly as business began regaining momentum in May/June. Keeping lines of communication open with your technicians is critical—being able to “staff back up,” particularly after a subsequent wave of COVID-19 cases in a state leads to tightened restrictions on activities, is essential to meet customer needs. Transparency with staff regarding anticipated reduction in hours and corresponding timelines for “ramping back up” go a long way in preserving employee loyalty.
With the possibility of increased restrictions in areas of the country with rising caseloads, auto industry managers and owners would do well to be prepared for another potential decrease in miles driven and corresponding consumer spend in the aftermarket. As many have done, being creative with offering innovative, customer-focused services may make the difference between businesses surviving in our “new normal” or being forced to shutter.
READ MORE HERE: tirereview.com
Top 5 tech trends that will transform the automotive industry in 2021
With the accelerated digitization of the world, the automotive industry is gearing up for an enormous change in 2021.
The automotive industry has long been a place where the industrial and tech sectors disrupt to make innovative solutions. The industry is adopting technologies such as Artificial Intelligence (AI) and big data & analytics that have been around for a while, and newer technologies such as the Internet of Things (IoT) and blockchain are also finding numerous applications in the automotive sector. With the accelerated digitization of the world, the automotive industry is gearing up to an enormous change in 2021. The sector has seen unprecedented twists and turns in the past ten years. They’ve turned sleeker, safer and capable of higher speeds. Ultimately, the auto industry is gradually moving towards the future age, wherein automakers will find themselves generating more revenue and users will find themselves enjoying innovative driving solutions. While 2020 was a slow year with not as many people buying cars during the Covid-19 pandemic period, the industry is starting to rebound and gives an array of hope to everyone.
AI-based autonomous vehicle
AI-based, autonomous vehicles are the frontrunners in the automotive industry. Artificial intelligence is already enabling smart travel methods through self-driving cars. These cars do not require drivers and rely on sensors and software for navigation control, and are aimed to reduce the need for human drivers and make everyday transport easy. Studies reflect that there are around 1,400 self-driving cars on the US roads today. Even though it is not a big number, the change of mind in people to go for or trust autonomous vehicles is drastically increasing. However, the Covid-19 pandemic was a big hit which temporarily staggered the improvement of self-driving vehicles. With the autonomous vehicle industry estimated to be worth US $556 million by 2026, investments are expected to continue to pour in, especially as further applications are explored.
Digital marketing and dealing
The futuristic view of selling vehicles online came to effect during the coronavirus pandemic. Even when in-person visiting to dealership stores and test driving was a mandatory part of buying a car, the lockdown protocols that limited the move switched its track to online medium. Vehicle buyers are able to compare different car models unlike going on with the dealer’s suggestion. Modern dealerships are trying to normalise online car buying by offering provisions starting from virtual tours to secure checkout, online financial options and return policies. So far, 81% of the buyers are not okay with buying new or old cars online. However, this is expected to change in 2021.
The increase in fossil fuel rate and the harm to the environment caused by their use has changed the automotive industry outlook to electric vehicles (EVs). Cars contribute to 15% of carbon emissions, which deplete precious fossil fuel reserves and causes potential irreversible environmental damage. Electric cars are addressing these challenges by leveraging a higher level of energy efficiency and reduced fuel usage. In August 2020, there were over 1.6 million electric vehicles on the US road, which is exponentially higher than the expected 1.4 million by 2024.
Blockchain has been likened to the second generation of the internet. It has the ability to transform an organization’s processes, like sharing vehicle data over a secure network for connectivity and shared mobility solutions such as ride-hailing, urban transportation and deliveries. Blockchain is used in the verification process to improve efficiency across supply chain and back-office works. It can be utilized in management and incentives to improve vehicle information and usage data across the industry.
The automotive industry is always facing a demand for new vehicles and spare products. The thirst for newer, better performing vehicles, as well as the need to optimize production and streamline supply chains and logistics, is also spiking. One technology that is helping to meet these challenges is 3D printing. 3D printing technology is being explored across all areas of automotive production. Aside from its extensive use for rapid prototyping, the technology is also being used to produce tooling and end parts.
READ MORE HERE: analyticsinsight.net