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Demand to increase 3.2% per annum through 2016
The North American light vehicle aftermarket is projected to grow 3.2 percent annually to $85.5 billion in 2016. Gains will be fueled by the expansion in size and increasing age of the North American light vehicle fleet, which includes a rising number of vehicles in prime aftermarket service age: five to ten years for many components. Additionally, as the regional
economy improves and unemployment rates decrease, average miles driven per vehicle will climb along with travel to and from work.
Continuing improvements in vehicle component durability will prevent sales from rising more rapidly through 2016, as will increased monitoring of vehicle systems by advanced onboard electronics, alerting owners of any performance issues. This will reduce the need to make
major repairs, although these losses will be offset somewhat by the ensuing maintenance work and sales of minor repair parts. Increasing price pressures from aftermarket parts sourced from low labor cost countries will also dampen sales growth in dollar terms.
Electronic products to be fastest growing segment
The fastest growth among the major aftermarket product segments will be registered by electronic products. Suppliers of items such as controls, modules, and sensors will be the beneficiaries of the further development of advanced vehicle systems and the rising amount of electronic content found in light vehicles. Mechanical products — which include automotive filters, brake parts, drivetrain components, engine hard parts, and transmissions — will continue to be the largest aftermarket segment, accounting for 38 percent of all sales in 2016. Demand gains will be tempered by the rising quality of these already highly durable mechanical products.
Aftermarket sales of exterior and structural products are forecast to grow in line with the overall market through 2016, decelerating from the 2006 to 2011 period. Increased demand for higher priced items like performance tires and advanced glass products, including solar control windows and electrochromic mirrors, will help spur this rise. Value gains will be restricted, however, by improved tire quality and moderating raw material costs. Electrical parts are expected to record a similar rise in demand, limited by the long useful life of many products in this segment and stabilizing raw material prices, which will reduce inflationary pressures and market increases in dollar terms.
Professional service providers to dominate sales
Professional service providers account for the vast majority of demand for light vehicle aftermarket parts, representing 85 percent of total sales in 2011. The professional service provider market is expected to see faster growth than the doit- yourself (DIY) market through 2016 due to the increasing complexity of modern vehicle systems and components, which makes it more difficult for DIYers to do some types of maintenance and repair work.
This study analyzes the aftermarket for automotive components used in
light vehicles (passenger cars, light trucks, and vans) in North America, defined
as the United States, Canada, and Mexico. The four major aftermarket product
categories covered are:
- Mechanical — air conditioning components, brake parts and assemblies,cooling system components, drivetrain components, engines and parts,exhaust and emissions system components, filters, fuel syste mcomponents, steering and suspension components, and transmissions and parts
- Exterior & Structural — automotive windows and glass, tires, wiper blades, and other
- Electrical — batteries, charging equipment, ignition systems and parts, lighting equipment, spark plugs, and other
- Electronic — automotive entertainment, controls, modules and sensors, and security systems
Excluded from the scope of the study are chemical products; trim and other decorative items; add-on vehicle accessories such as car seats, trailer hitches, and special body panels; and all automotive equipment originally installed at the factory.
To distinguish between parts that are produced by the original equipment manufacturer (OEM) and those which are made by other companies, many automotive parts suppliers label the former as “OEM parts” or “OEM replacement parts,” while the latter are often referred to as “aftermarket parts.” For the purposes of this report, OEM replacement parts and aftermarket parts (as well as used parts recycled from scrapped vehicles and rebuilt or refurbished parts) are included in the automotive aftermarket, as long as these parts are utilized to repair or upgrade light vehicles in use. In addition, products like security systems, sunroofs, and stereo equipment installed at the dealership before a new vehicle is purchased are considered to be part of the vehicle aftermarket, although similar equipment installed at the automaking factory is regarded as original equipment. The critical distinction for the purposes of this report is where the component is installed, not whether it is labeled as an “OEM part” or an “aftermarket part.”
For consistency with the remainder of this report, all sales figures for parts by provider are given at the manufacturers’ level and do not include wholesale or retail markups, or installation costs. Furthermore, the sales are included under the source where the part is installed on the vehicle. Thus, an OEM replacement starter that is sold by the automaker to a dealer then resold to a local garage for installation would be included under garages and service stations, with the automotive dealer in this case serving as a distributor of the part.
Historical data for 2001, 2006, and 2011 and forecasts to the years 2016 and 2021 are provided in current US dollars (including inflation) for sales of automotive aftermarket products in North America. Forecasts are also provided by country (US, Canada, and Mexico) and by major aftermarket service performer (garages and service stations, automobile dealerships, specialists, other professionals, and consumers/do-it-yourselfers). A demand model based on consumer repair frequencies was utilized to develop the wholesale revenues used in this report, in order to take into account the large and growing used and rebuilt parts industries. Because the aftermarket data in this study are valued at
the manufacturers’ level, they may understate other sources that value the market at the retail or some intermediate level. The term “demand” — used interchangeably with “sales,” “market,” and “consumption” — is defined as all shipments from North American production sites, plus imports minus exports.
Corporate sales figures and related sales represent estimates based on consultation with multiple sources. Macroeconomic and demographic indicators presented in this study were obtained from The Freedonia Group Consensus Forecasts dated June 2012. Gross Domestic Product (GDP) historical data are derived from the national income and products accounts from the Organisation for Economic Co-Operation and Development (OECD). GDP forecasts are developed from a consensus of public agencies and private firms.
All estimates of gross domestic product and components of GDP are done in terms of constant purchasing power parity in a benchmark year (2010) that is one year before the base year (2011) used in this study. Purchasing power parity GDP estimates for the benchmark year are obtained from the OECD, the World Bank, and the International Monetary Fund. These purchasing power parity GDP estimates for the benchmark year are based on gross domestic product data expressed in the individual countries’ local currency, which are then converted to US dollars by valuing each country’s output at US prices in the benchmark year. This approach values the same physical output at a consistent price for all countries, thereby reducing the distorting influence of different price levels in the different countries. The alternative approach of using exchange rates to convert local currency GDP to US dollars would tend to overvalue the output of countries with high average price levels and undervalue the output of countries with low average price levels, because exchange rate conversions only partially reflect the relative prices for goods and services that are domestically consumed and invested. Furthermore, factors other than relative prices, such as demand and supply in currency markets, interest rates, and capital flows, affect exchange rates.
Once the GDP values for a country are estimated for the benchmark year, we then calculate inflation-adjusted GDP for all other years for that country based on historical and forecast growth rates of GDP expressed in inflationadjusted units of that country’s local currency. This approach ensures that the GDP series for any given country is an accurate index of changes in inflationadjusted GDP for that country. However, it also implicitly assumes that the price structures across countries do not change from those of the benchmark year. Therefore, caution should be used in comparing the relative GDP of countries in years other than the benchmark year. If the ratio of prices across two countries in a given year differs from the ratio of prices across those countries in the benchmark year, then the change in the relative sizes of those two economies as measured will not accurately reflect changes in output.
The benchmark year is chosen to be one year prior to the base year for the study for reasons of data availability. One benefit of that choice is that the ratio of prices across countries in the base year is usually similar to that in the benchmark year. Therefore, the ratio of real GDP between two countries in the base year of 2011 is generally a reasonably accurate representation of the relative sizes of their economies.
Information and data on the automotive aftermarket were obtained from a variety of primary and secondary sources, including trade associations such as the Automotive Aftermarket Industry Association (AAIA) and the Specialty Equipment Market Association (SEMA), government publications, industry participants, online databases, and other Freedonia studies. Primary information was gathered through consultations with personnel of participating companies and other industry specialists. Secondary data and background information were obtained from various trade publications, including Aftermarket Business, AutoInc., Automotive Engineering International, Automotive News, Automotive News Europe, and Ward’s AutoWorld.