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November 22, 2017 12:00 AM

Technology challenges tinge positive aftermarket outlook

Kathy McCarron
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    Tire Business photo by Kathy McCarron
    Bill Long, AASA president and COO, left, and Bill Hanvey, ACA president and CEO, present a positive outlook for the automotive aftermarket during an AAPEX keynote session.

    LAS VEGAS — The organizers of the Automotive Aftermarket Products Expo (AAPEX) have a rosy outlook for the automotive aftermarket industry, despite the looming influence of telematics, connectivity and autonomous vehicle technologies.

    "There's a lot to celebrate. We are a large and stable and growing industry with sound foundational pillars with the infrastructure in place that makes us the preferred choice of repair for consumers every single day," said Bill Hanvey, president and CEO of the Auto Care Association (ACA), which co-sponsors AAPEX with the Automotive Aftermarket Suppliers Association (AASA).

    "Vehicle miles traveled is up, which is increasing the need for maintenance," added Bill Long, AASA president and COO, during his Oct. 31 keynote presentation at AAPEX.

    "Gas prices, although generally up slightly from last year, are favorable, continue to be favorable for our industry. And unemployment is low."

    • This reports appears in the Nov. 20 print edition of Tire Business.

    These factors are stimulating the use of vehicles and freeing up the discretionary income necessary to repair and maintain vehicles on the road, he said.

    Tire Business photo by Kathy McCarron
    Hanvey

    The two executives highlighted other positive statistics about the industry:

    The automotive aftermarket represents more than 535,508 individual businesses in the U.S. that are available to service about 278 million registered vehicles, which averages more than one car per registered driver.

    The average vehicle age is 11.7 years and is growing continually. The fastest-growing vehicle age segment is 15 years or greater, "which is great news for our business," Mr. Hanvey noted.

    "Motorists recognize that their vehicles are engineered to last longer and are therefore demonstrating a willingness to take advantage of the favorable economies of repair vs. the cost of purchasing a new vehicle," he added.

    Auto care industry employment has climbed 2.3 percent. Average hourly wages have increased, and the demand for service technicians and supply technicians continues to rise.

    "The size and scope of our industry continues to climb, projected to be $381 billion this year," Mr. Hanvey said. "To put it in perspective, we are the third largest employer in the U.S., trailing only health care and construction, contributing 4.6 million jobs into the economy. This gets the attention of lawmakers."

    The automotive aftermarket is expected to generate $421 billion in revenue by 2020, double its performance in 2000.

    "Technology is transforming our business and moving at a faster pace more now than ever," Mr. Hanvey said. "This is not a surprise. Technology has always transformed our business. However technicians and distributors and manufacturers have always risen to the occasion in the aftermarket and have created opportunity for our industry at the same time."

    AASA photo

    Long

    Telematics, electrification, connectivity and hybrid power are technologies that are impacting new vehicle design, "and it's clear that data has become more than nice to have. It's an absolute must for our industry to continue to prosper," Mr. Long said.

    By 2020, industry analysts predict there will be more than 250 million connected vehicles, with 94 percent of new vehicles and nearly a third of the entire vehicle population enabled with dynamic two-way communication.

    While in-car technology features continue to be included in new vehicle models, only 32 percent of consumers are willing to pay for features such as WiFi or Onstar, Mr. Hanvey claimed.

    "According to a survey we conducted, 62 percent of consumers have no idea what telematics is or that their vehicle is producing data," he said. "Those same respondents, however, when educated about the issue, will take action to ensure they have the right to choose to whom their vehicles' data is sent."

    These vehicle technologies and connectivity with OEMs creates a couple of issues for the aftermarket, the executives said, including:

    What will happen to aftermarket businesses if motorists no longer possess the right to choose where they want their vehicle repaired?

    Who will be able to repair a car or sell a part if OEM data, tools, training and information are not made available to the aftermarket?

    The answers lie, in part, with working together with OEMs, policymakers and regulators regarding cybersecurity and intellectual property rights, Mr. Long said, while standing up for the aftermarket businesses' rights and informing consumers about theirs.

    Mr. Hanvey said the ACA has strengthened its partnerships in Canada, Mexico, Latin America and Europe to work globally on a telematics solution, as well as hosted legislative summits in Washington.

    "Our industry has to be engaged in the political process…. Every individual in the industry needs to make their voice heard in Washington and at the state level," he said.

    "This is not the time to be on the sidelines. Host a congressperson at your place of business. You provide jobs and tax revenue to those congresspeople in their respective districts. Your voice carries much more weight than ours in Washington.

    "We all need to work diligently on new trade, regulation, taxes and labor laws not only at the federal level but at the state level where many of these issues are playing out and we're earning victories," he continued.

    "If we're not engaging with policymakers to make sure that today's legislation doesn't affect your bottom line tomorrow, we won't be able to make continual progress on these key issues. The bottom line is, get off the sideline, stand up and be heard."

    Another challenge for the aftermarket is the entrance of new business models, distribution models and e-retailing.

    "The OEMs are doing their best to create a cradle-to-grave relationship with their customers, and they are doing as much as they can to drive as much repair business as possible to their dealerships," Mr. Hanvey said.

    "We're seeing the fastest-growing segment of service providers as import specialists. We're seeing new ways that products are being sold. The way that service providers and shops install them.

    "We're utilizing more kits in component sales. First it was just a strut; now it's a strut with a compressed spring on it.

    "First it was just the timing belt; now it's a complete kit that includes the water pump...."

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