The professional auto service provider market is expected to continue growing at a faster rate than the do-it-yourself (DIY) market in the U.S. through 2016.
That's because of the increasingly complex nature of modern vehicle systems and components, according to a new study of the North American automotive aftermarket compiled by Freedonia Group Inc.
The difference in growth prospects between the DIY and do-it-for-me (DIFM) markets has been steep- ening over the past couple decades as technology continues to complicate the process of repair and other services, according to Lee Steinbock, an industry analyst at Cleveland-based Freedonia. This is a contributing factor to how growth is estimated in the aftermarkets' segments.
“Of the four aftermarket segments—mechanical, exterior and structural, electrical and electronic—the electronic segment is set to see the greatest growth moving forward,” Mr. Steinbock told Tire Business. “This segment includes the controls, modules and sensors product category, which is set to grow as the vast majority of passenger cars and light trucks entering the North American vehicle parc make use of electronic controls, modules and sensors as opposed to mechanical actuation.”
Mr. Steinbock added that government mandates, such as the U.S. requirement that all new light vehicles have electronic stability control systems, is one reason why this market segment is set to grow the most.
The second fastest growing aftermarket segment will be exterior and structural products, with replacement tires leading the way on sales, according to the study.
The driving force of replacement tires in the market has placed tire company heavyweights—such as Goodyear, Bridgestone Americas, Michelin North America Inc., Cooper Tire & Rubber Co. and Continental Tire the Americas L.L.C.—as some of the top suppliers in the North American automotive aftermarket in 2011, Freedonia reported. These firms accounted for more than two-thirds of all replacement consumer tire sales.
“Tires are the largest single product category in 2011 and moving forward,” Mr. Steinbock said. “It's really causing the market to grow.”
Tire dealers represented the largest share of specialist shop sales in North America in 2011, Freedonia said, installing 70 percent of all aftermarket tires by value. Capital improvement costs, for equipment to mount, balance and align new tires, favor this sector over others because there is a higher return on the investments.
Mechanical products, such as automotive filters, brake parts, drivetrain components, engine hard parts and transmissions, are projected to still be the largest aftermarket segment, accounting for 38 percent of all sales in 2016.
Mr. Steinbock explained that unlike some of the other segments, tires are not an optional aftermarket product. To work correctly, all vehicles need properly performing tires.
He also noted that the number of vehicles—especially light vehicles that the study reported on—in use is increasing. Thus the number of tires needed is increasing as well because tires need to be changed every six years or so.
“We see tire dealers gaining tire sales share in the future. The primary reason for this is the capital requirements for purchasing equipment to mount, balance and align new tires favors specialists (tire dealers in particular) because they recognize higher returns on their investment,” Mr. Steinbock said.
With that said, specialist shops need to create other services to compete with mass merchandisers like Wal-Mart Stores Inc. that have tire centers in their stores. Freedonia reported that this, coupled with competition with other tire dealers and other specialists that focus on mufflers and brakes, has caused independent tire dealers to branch out into other markets and often offer basic vehicle maintenance services as well.
“Many of the companies included in the ‘Other' section (of the report) also offer these services, but they tend to have fewer service bays and less expertise,” Mr. Steinbock added.
According to the study, more than three-quarters of the tires sold in 2011 were through independent tire dealerships that carry a variety of brands.
With the branching out of these specialists, it is no surprise that the specialist service segment is the largest and fastest growing in the DIFM portion of the market. Freedonia forecasts sales to grow 4.3 percent per year to $28.1 billion in 2016.
Overall, Freedonia projects the value of the North American light vehicle aftermarket will grow 3.2 percent annually to $85.5 billion in 2016. The research firm notes that continuing improvements in vehicle component durability and electronic components notifying customers when issues occur will prevent sales from rising more quickly through 2016. These factors will reduce the number of major repairs needed.
Although the independent repair sector is pursuing “Right to Repair” initiatives for access to vehicle makers' OE repair information, Mr. Steinbock said he does not see it being a major factor in the exterior and structural product segment. He said that although there has been some support, there has not been much movement per se.
He added that even if there was a significant advancement in Right to Repair, this particular segment would not be affected significantly because the technology for changing tires is more easily available to all shops, even smaller, independent ones. In diagnostics, however, smaller shops may not have access to that information, so it is more relevant in other segments outside of exterior and structure, Mr. Steinbock said.
The report, titled “Automotive Aftermarket in North America,” is 410 pages and costs $5,100. It can be ordered by contacting Corinne Gangloff at 440-684-9600 or emailing her at [email protected]