Aftermarket auto parts: The landscape of 2021

The automotive aftermarket in 2021.

As world markets emerge from – or wrestle with – COVID-19 lockdowns, the aftermarket auto parts business finds itself in an altered landscape. The years-long trend toward more reliable new vehicles, and thus diminished demand for new parts, continues. Yet some recently and sharply changed attitudes toward private vehicle use, and accelerating growth in new kinds of vehicle, point to new avenues of opportunity.

The Bad News - Challenges of Automotive Aftermarket

Vehicles are getting more reliable all the time as auto manufacturers constantly improve their products. That means they do not need to be repaired as often as they used to, and that in turn means that for any given vehicle, on average there is less demand for replacement parts as the existing components last longer. This trend will only continue in 2021 and for the foreseeable future.

Technological advances in the automotive sector also reduce demand for replacement auto parts for another reason – they're too complex to fix in your garage at home. Vehicle owners find it increasingly difficult to repair and maintain their vehicles for themselves, as the proportion of systems accessible to the non-professional steadily wanes. Vehicle owners are increasingly locked into the car makers' proprietary sale and maintenance ecosystem, or must turn to the relatively small set of repair shops that have the training and tools to handle advanced electronic systems as found in today's road vehicles.

Research group Linchpin notes that shares in major American auto parts stores like O'Reilly Automotive have fallen about 22 percent. "Industry experts say the higher quality components being produced today last longer and warrant less frequent need for automobile repairs and industry demand may continue to be soft in 2021 and beyond," said Linchpin in its October 2020 report on the state of the auto repair industry heading into 2021.

The Good News - Increased Usage of Car

But while demand on a per-vehicle basis continues to dwindle, other factors are in play. Crucially, the automotive industry has seen a major shift in consumer attitudes as a result of the coronavirus pandemic.

More than 40 percent of respondents to a Cars.com survey said they're using ride-sharing services less often since the COVID-19 outbreak in the US Of these people, 93 percent said they're using their personal cars more often.

Cars.com's survey found that the pandemic was causing nearly 20 percent of the respondents to consider buying a new car, whether they owned one already or not. More than 40 percent were considering buying a private vehicle because they no longer want to use public transportation, and 28 percent were concerned about the contamination risks of other people's cars.

Similarly, a study by Ipsos in early 2020 showed that consumer attitudes in China toward vehicle ownership, public transport, and mobility solutions like app-based ride-hailing have also shifted in the wake of the pandemic. Private vehicle usage almost doubled after the outbreak, while public transport usage declined by more than 50 percent. Taxis and ride-hailing services have also seen a considerable decline in the country.

What this all adds up to is a counterweight to the increased longevity of modern vehicles. Each individual car is able to clock up many more miles before it needs new parts, but with increased usage, they will hit those mileage marks much more quickly, and a rise in vehicle purchases means more customers for parts too.

Outlook of Automotive Aftermarket Parts Industry

Worldwide, the automotive aftermarket parts industry is forecast to achieve $723 billion in sales by 2021, according to Linchpin, with the US accounting for $296 billion.

In a positive trend for the aftermarket industry, the average age of vehicles continues to climb – more years on the road translate into more demand for parts. Passenger cars and light trucks in the US, for example, now have an average age of 11.3 years. The older vehicles become, the more parts it requires to remain on the road, and there has been a 14 percent increase in the age of automobiles for the past six years.

Opportunities Car Aftermarket Parts Business

E-commerce has forced major players in the aftermarket parts business to compete with wily newcomers – physical footprint is no longer the dominant factor it once was, as businesses don't need to have a physical address for the customer to visit. Customers are looking online for precisely what they need and getting it shipped to them. This is allowing niche providers to thrive, and for dealers to shrug off the shackles of location. Customers can be anywhere in the world, and anyone who wants to set up a shop operating from their own home can take advantage of global supply chains through online platforms.

New developments in engines are a key contested ground for the future of aftermarket parts. Internal combustion engines dominate and will continue to do so for years to come – but they are declining, slowly but demonstrably, and opportunity is waiting for parts dealers ready to provide for the demand created by other power plants. Electric and diesel vehicles are both growing, though electric vehicles (EVs) appear to be the future. Hybrid registrations in the US increased by 64 percent in 2020, while BEVs, PHEVs and HEVS made up one in four of all new cars registered in Europe in September 2020, according to automotive business intelligence firm JATO Dynamics. With EVs on the cusp of significant growth in many markets around the world, in 2021 the smart buyer will be looking to position themselves to take advantage of that growth.