SEMA eyes rebound in specialty equipment market sales

DIAMOND BAR, Calif. — Demand for specialty-equipment automotive parts is expected to "normalize" in 2023, after cooling somewhat this past year, and ramp back up to 3% to 4% annual growth thereafter, according to new research from the Specialty Equipment Market Association (SEMA)

The value of the specialty-equipment parts market grew about 2% in 2022 over 2021 to $51.8 billion, SEMA said, noting that 90% of industry companies said they were "moderately" or "severely" impacted by supply-chain issues over the last year.

In general, the automotive aftermarket continues to be impacted by shifts in the industry and overall economy, SEMA said in its "SEMA Future Trends 2023" report. To stay competitive, businesses need to know where the market is headed.

Inflation also was a key factor, hitting record levels last year, but the impact has peaked and is starting to lower. By year-end, inflation should normalize back to around 2% per year, SEMA said, and costs for producers are expected to ease up as well.

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Consumer spending in early 2023 remains strong, SEMA said, but disposable income is tightening as post-pandemic stimulus has dried up and costs for consumers rise. As costs return to normal and the economy slows, how consumers change their spending will be important to monitor, SEMA cautions.

Despite all the uncertainty over the past year, SEMA said the U.S. economy entered 2023 with momentum. The second half of 2022 showed resiliency, with real GDP up 3.2% at an annualized rate for the third quarter and projected to finish above 3% for the fourth quarter. Unemployment sank to 3.5% in December, its lowest level since the start of the pandemic and matching levels that haven't been seen since before the oil crisis in the 1970s.

At the same time, though, consumer confidence is at a low ebb thanks to uncertainty caused by high interest rates, fears of a potential recession, persistently high prices and geopolitical issues, including the political division in U.S. society and mistrust in both the government and media.

In terms of vehicle sales, SEMA said its unlikely both new and used light-vehicle sales in the U.S. will return to pre-pandemic levels until 2025, due to ongoing supply-chain issues, high prices and rising interest rates. Prices are likely to stabilize over the next year or two, but it will take time before sales levels normalize.

In 2022, sales of both new and used vehicles dropped by double digits, SEMA's figures show, and both are expected to rebound this year.

New-vehicle sales slumped to 13.7 million units in 2022, roughly 1.2 million units below 2021 levels. Sales could recover all that this year to reach 14.9 million units.

At the same time, the average price of a new vehicles hit a record high of $49,507 in December. Prices should soften over the next year, as supply-chain issues ease and sales soften.

More specific to the specialty equipment sector, off-road products and accessories have become a significant segment and are growing, SEMA said, noting that 62% of pickup owners buy off-road parts or take their vehicles off-road.

Around 80% use their pickup for outdoor recreation uses, lending credence to growing interest in the "overlanding" phenomenon — a practice that combines remote travel, off-roading and camping.

The SEMA Future Trends 2023 report is avaialble free at sema.org/research. SEMA will host a webinar on the report at 2 p.m. EST Feb. 2.