The end of a vehicle’s warranty marks the beginning of a lucrative opportunity for all automotive parts, tire, and service providers.
The automotive service market is at an inflection point. Cars and trucks are staying on the road longer as owners opt to keep them instead of selling or trading them in. And when they do replace their cars, buyers are increasingly turning to used vehicles.
As cars and trucks rack up more years of service, owning the full vehicle parts, tire and service lifecycle—from the time the warranty expires to when the vehicle is scrapped—has become an increasingly lucrative opportunity for auto service providers. These auto service providers also include franchise dealers, who covet a larger share of the growing aftermarket/aftersales category.
The Aftermarket ‘Sweet Spot’ is growing
To appreciate these trends and grasp why owning the full vehicle lifecycle is so important, we must understand the underlying factors.
Vehicles are lasting much longer. Improvements in car and truck quality mean they can remain on the road and accumulate more miles than ever. It explains why, in the 20-year period between 2002 and 2022, the number of light vehicles in operation (VIO) that are 16 years old or older more than doubled, from 35 million to 74 million. These older cars and trucks now represent one in four vehicles on the road.
In addition, the share of VIO that are seven or more years old is growing at a faster rate than unit sales of new vehicles.
New-car sales are flat. Between 2020 and 2022, as supply chain issues hampered production and inflation drove up prices, new-vehicle sales in the U.S. decreased by 15%. According to Lang Marketing, this trend will likely continue through at least 2024.
This drop in new-vehicle sales points to two shifts in consumer behavior. One is that rather than purchasing new cars or trucks, consumers are opting for less expensive, used vehicles. The other is that instead of replacing their vehicles, owners are investing in repairs necessary to keep them for additional years of service. Both trends reflect a growing confidence that vehicles will remain dependable even as their odometer readings rise, and they explain why owners increasingly believe maintaining and repairing their vehicles is a worthwhile investment.
Electrification is having an unintended consequence. About 99% of cars and light trucks on the road in 2022 were powered by internal combustion engines (ICE). But the future – at least on dealership lots – will look very different. Car and truck manufacturers have gone all-in on electric vehicles, in some cases even announcing plans to eventually eliminate ICE vehicles from their product lines.
While this strategic pivot promises, in time, to convert consumers to EVs or other alternative-fuel vehicles, in the short term it’s having the opposite effect. Turned off by comparatively high price tags and questions about battery range and other unknowns, owners appear to be delaying new-car purchases. This strategy might further extend the lifespan of existing ICE vehicles, even as EVs inevitably conquer the new vehicle market.
Where’s your opportunity?
If you want to earn a significant share of this growing service lifecycle, you might need to adjust your business and rethink your approach to serving customers.
Service providers that win will be those that can:
- Quickly identify and source the right parts, tires, and related supplies at the right time
- Offer customers brands and parts at various price points
- Successfully meet the needs of customers who have grown accustomed to having repairs completed within an ever-shrinking repair-time window
- Stock or have ready access to a broad array of parts for all vehicle makes/models/years
To further explore the opportunities associated with the aging vehicle population, you will want to make plans to join friends and colleagues at Epicor Insights 2023, May 15-18, at Mandalay Bay Resort and Casino in Las Vegas.
This three-day event includes more than 500 sessions, strategic business insights discussions, product roadmaps, educational sessions, and hands-on training. The agenda also includes an insightful keynote from Billy Beane, former executive vice president of baseball operations for the Oakland Athletics and the mastermind behind “Moneyball,” and an appearance by the legendary and hilarious Jerry Seinfeld.
To register, visit: Epicor Insights 2023
