SEMA market adaptability key for growth in 2025

LAS VEGAS — U.S. consumers' quest for identity helped Specialty Equipment Market Association (SEMA) members generate $53 billion in revenue last year.

Despite the unknown economic impact of President Trump's administration and the challenge of adapting to the blooming CUV market, SEMA sees a bright future thanks to a youth revolution.

Consumers who spend discretionary funds on personalizing their vehicle are the bread-and-butter of the "SEMA" market, accounting for around 20% of the total $500 billion made annually in the automotive aftermarket.

Gavin Knapp, SEMA director of market research, said most of the aftermarket is aimed at serving vehicle needs, not consumer wants. Knapp and his team gather and track market data for regular industry reports, and he spoke about the industry during the 2024 SEMA Show in Las Vegas.

Knapp noted the difference between the SEMA Show and AAPEX, which ran concurrently in November, to illustrate his point.

"The SEMA market is the things you want, and the AAPEX market is the place you need to go if you crash your car and want to fix it up just like new. … That's not our market," he said. "But if you want to make it faster, make it higher or lower, fundamentally change it in some way, then you're coming into my market, into the SEMA market."

U.S. consumers spent $52.4 billion accessorizing and modifying their vehicles in 2023, and that was expected to increase to $53.4 billion for 2024, he said.

Last year, about 15.9 million new vehicles were registered in the U.S. (an increase of 300,000 from 2023), and around 13 million vehicles went out of operation. New vehicle owners, particularly pickup truck buyers, do seek to modify their vehicles right away, Knapp said, but the best opportunity is in the used vehicle market — the "new to me" market.

"What people often neglect to think about is there are around 40 million used vehicle transactions throughout the year," he said. "It's an opportunity for somebody to go, 'I have some-thing new to me, how do I make it mine?'"

Knapp reminded the crowd that while true "enthusiasts" drive the aftermarket, they only make up about half of consumers. The other half are cross-over consumers, who want to personalize their vehicle or maybe have the discretionary finds to spend more.

This section of consumer is going to continue to grow, especially among CUV owners.

"We need to do a better job as an industry of recognizing that and attacking that opportunity," Knapp said. "The one good thing I will say is when you see the television ads from the OEMs, they always take their CUV off-road. They always take it down a dirt road, and they have racks with kayaks on the top, etc.

"So, they're advertising for us, they really are, and hopefully that is the way the consumer sees it."

CUVs now make up the largest segment of vehicles on the road.

"If I told you that Volkswagen is a truck company, you'd all laugh," Knapp said. "But Volkswagen is truck company. Three-fourths of their new vehicle sales are light trucks."

The light truck segment includes pickups, SUVs, CUVs and vans.

"Look at the Detroit three. They have almost no traditional cars left," Knapp said. "Ford only has the Mustang — and you could argue it's a CUV."

The complication is the sheer number of models hitting the market. Creating so many specific aftermarket parts can be a challenge. Unlike the pickup truck market, which is dominated by a handful of brands and therefore easier to produce competitive aftermarket parts, nearly every auto maker has more than one CUV.

"It's a tough market, because even though we call them all CUVs, there's 100 different models out there, and not many of them are in huge volume," Knapp said.

"It's a fundamental shift that is absolutely affecting our market. And if you're not looking at this and you're not preparing ahead for this, you're going to run into trouble, because this is not stopping."

Knapp said economic uncertainty with the incoming White House administration and new Congress led to some flattening of the market in the second half of the year.

"You know, a Republican government's probably likely to pull back on some emissions requirements, maybe even block California's EV rules," he said. "So that could be one thing, but if they go full protectionist and start putting up a lot of barriers in terms of tariffs, that could have consequences for us in other ways."

He added that the industry needs to be prepared to navigate these economic shifts.

Understanding the preferences and spending habits of younger consumers is key to growth, Knapp said. The SEMA market has a younger customer base, with more than half of customers being under 40 years old, he said.

SEMA research found that while consumers over the age of 60 spent the most money in the aftermarket in 2023, those aged 25 and younger were the largest percentage to spend money in the aftermarket.

"Definitely, if you are young, you are much more likely to be an accessorizer," Knapp said. "Your rise is great for us."

Knapp said the biggest hurdle to growing youth interest is the price of new and used vehicles right now.

"I personally have a hope that because cars have gotten so expensive, out of control expensive, that we will see some push back from the OEMs, realizing they have to come back and bring in some more entry level vehicles," he said.

Despite that, he said that some pricing should be eased as the car parc grows and the used-vehicle market cools.

Knapp predicted that after a period of flattening in 2022-24, the aftermarket would likely return to a more typical 4-5% annual growth rate going forward.

A positive of 2025, he said, is moving past the insecurity about the economy that surrounded the election.

"The economy is actually pretty good," Knapp said. "We'll get people remembering that things are pretty good, that everybody who wants a job right now has a job, and then we'll move back again to our about 4% to 5% growth rate."