Back-to-back information-filled presentations returned to the AAIA Town Hall sold-out meeting Wednesday morning in the Venetian Ballroom, as three well-known and respected industry experts offered the latest financial, industry and consumer trends, insight and analysis.
Valuable industry facts, figures and projections were provided by Mario Gabelli, chairman and CEO, GAMCO Investors, Inc.; Tim Rogers, president, Polk (primary sponsor of the event); and David Portalatin, executive director of industry analysis, The NPD Group, for the 14-annual Town Hall’s more than 1,000 attendees. They were introduced by Kathleen Schmatz, AAIA president and CEO.
First up was Rogers who presentation “5 Trends in 5 Minutes” recapped the major factors affecting the aftermarket this year. He stressed the importance of recognizing that while each trend presents challenges, they can be turned into opportunities, as the aftermarket has the advantage of a long and trusted relationship with its customers.
1. Light vehicle sales are recovering steadily and are on pace to hit 12.7 million units for 2011, about 10% over the prior year, but down slightly from Polk’s initial projections. Light vehicle sales are expected to continue to recover, reaching nearly 16 million units by 2015.
2. There are more light vehicles in the “Aftermarket sweet spot than there are for the OEMs. The number of vehicles 11 years and older – our bread and butter – have increased by 13 million units.
“Even as new vehicle sales come back, there are simply fewer cars and light trucks on the road likely to be repaired in the OEM channel, so the aftermarket stands to gain over $3 billion in Do It For Me service business over the next 3 to 4 years,” Rogers said.
3. Vehicle mix is changing quickly; imports hit milestone. Because of the drop in new vehicle sales from the highs of five and six years ago, the vehicle population continues to age fairly rapidly, up 10% over the last five years. “The U.S. hit a major milestone in 2010 – for the first time ever, and it continues this year – import cars actually overtook domestic cars as a percentage of the VIO,” explained Rogers.
4. No end in sight to the parts proliferation challenge with 80,000 unique OEM part numbers introduced each year (in 2010, 24% were completely new). Despite new car sales being nearly 25% below 2006 levels this year, the new model changes are once again north of 200 – with 2012 on track to increase yet again.
5. OEM dealers are an awakening giant (even with 15% fewer dealerships) especially with their focus on service loyalty. Dealer profits hit a 24-year high as reported by NADA. “Certainly, the surge in used vehicle prices helped, but much of it came from increasing their parts and service operations and keeping their service bays full,” Rogers added.
Portalatin discussed how the consumer mindset has emerged, from one of deferring in 2008, to renewing in 2009 and rethinking in 2010, underscoring the fact that consumers are “the most powerful economic force on the globe” and that success is eminent if you position your company to engage with customers to satisfy their buying wants and needs.
Nearly 1/3 of needed vehicle maintenance was deferred in 2008, and when consumers were no longer able to defer they renewed spending in 2009, with 28% indicating they would have schedule maintenance due in 12 mos.
Other key points included:
– Consumers plan to keep their current car for just over five years (only 12% “plan to” or “might” purchase a new vehicle this year);
– Car Care Attitudes – 58% plan no major spending on vehicle repair, reminiscent of deferred maintenance in 2008, and 62% will choose a professional for repairs, which is good news for the aftermarket. Although, 25% of consumers will perform repairs on their vehicles in 2012 vs. 22% this year.
– Many consumers want quality and value – which doesn’t always mean low prices, as they seek to leverage purchase deals to get the most for their money. The consumer mindset is such that they “purchase the product with the highest quality, that lasts longest, even if it costs a little more,” Portalatin commented.
In closing, even though consumers today are driving 64 billion fewer miles per year since 2007, miles driven remains an important driver of aftermarket, along with consumer confidence, retail prices and consumer loans.
Last up was Gabelli whose candid presentation revolved around embracing change, leveraging globalization and the free market system, the advantages of technological advancements in our industry and the concept of “creative destruction” — whereby ingenuity paves the way for new and better opportunities and business success.
In providing a 40-year look back at the aftermarket, Gabelli talked about the impact of the U.S. and world population, vehicles on the road, the world economy, the trade deficit, and energy consumption and resources — noting that the U.S. population of 300 million consumes 25% of the world’s energy.
In providing some words of wisdom to the group and taking a look ahead, Gabelli said there are a lot of smart people in this country, but we need to get back to the basics. He referenced Wayne Gretzky’s motto: “Don’t go where the puck is; go where the puck is going to be,” and Paul McCartney’s lyrics: Keep Doing What You Love.”
