Morgan Stanley’s Jonathan Steinmetz gives GAAS attendees the outlook from Wall Street
by Amy Antenora
DETROIT — Morgan Stanley’s lead auto analyst Jonathan Steinmetz opened his presentation Wednesday morning at GAAS by taking a look at the current and projected state of the new vehicle market.
“The new vehicle market is affecting what will happen in the aftermarket down the line,” said Steinmetz. “It’s still rough out there.”
In the long term, changes in the OE market will continue to affect the aftermarket in the future, Steinmetz predicts.
While the vehicle mix is weakening, demand has been very close to trend line, he said. There were an estimated 16.6 million vehicles produced this year, slightly below last year’s 17 million units. And, the Big Three continue to lose market share.
Based on this data, Steinmetz said he expects to see a relatively stable and steady aftermarket demand projected for about the next five years.
In the retail and commercial sectors, DIFM appears poised to capitalize most, but DIY should also benefit, said Steinmetz. He said he sees growth in both areas but more so on the DIFM side. In addition, SKU count continues to rise, which bodes well for bigger companies.
On the service side, dealerships continue to strive for a bigger share of the repair and service market. Steinmetz noted that dealers have 34.5 percent of the service marketshare, with specialists following closely behind.
“Vehicle reliability is improving at the same time that sales are going down, a bad trend from an aftermarket perspective because you’ve got fewer cars that operate better,” said Steinmetz.
In the near term, the vehicle parc continues to increase, as does miles driven, which is good for service and parts, but Steinmetz said he is seeing a slowing in that number and rising gas prices will also continue to put pressure on this.
“Wall Street views the aftermarket as a stable group with slow growth,” said Steinmetz. “
Josh Meyer of Bosch asks Steinmetz about private equity.
Steinmetz concluded his presentation by opening up the floor to Q&A. Audience members asked questions about the efficiency of independent service dealers versus franchises; if the private equity trend will continue and what their exit strategy is; and the increasing interest from foreign buyers in buying U.S. brands.
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