3. Read Aftermarket Perspectives online at npd.com/lps/Auto_Brief
Greetings from David Portalatin
The big question in 2011 has been, “What’s going on with the economy, and what does it
mean for the aftermarket?” Throughout the year we looked at how factors like high gas
prices and miles driven affected aftermarket sales. While many economic conditions have
started to mirror the events of 2008, we have noticed some key differences in consumer
behavior. For instance, more consumers have turned to DIFM this year than in the past few
years as DIFM has become more of a “must.”
You can learn more in this booklet about the trends that shaped the aftermarket this year
and those that will influence next year’s sales. It is compiled from of past issues of After-
market Perspectives, a monthly communication from The NPD Group. Each edition focuses
on our data and my perspectives on the industry issues that matter to your business right
now. Aftermarket Perspectives is designed to help you better understand your consumers and
their needs and uncover opportunities — especially in these economically volatile times.
As always, we’re pleased to bring you the information you need to succeed in today’s
environment. I hope you find these articles helpful. Please contact me if you’d like to learn
more, or visit npd.com/lps/Auto_Brief. The site is updated each month with a new article.
David Portalatin
Director of Industry Analysis
The NPD Group
713-576-5126
david.portalatin@npd.com
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Table of Contents
Are Things Sounding Familiar? ........................................Page 5
Aftermarket-Friendly Vehicles ..........................................Page 7
DIFM Picks Up .................................................................Page 9
Industry Expertise/About NPD..........................................Page 11
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Are Thing Sounding Familiar?
As talk in economic circles heats up concerning the prospects of a double-dip recession,
questions arise about how such a scenario could affect the aftermarket. Fortunately, we know
how consumers responded to the economic downturn in 2008, and we can look at current
trends for any similarities. The overriding change in consumer behavior when the recession hit was
a notable deferral of all spending. In 2008, consumers reported they postponed approximately
one-third of all needed vehicle maintenance and repair. As a result, unit sales volumes in
the auto parts channel declined nearly 8 percent. By mid-2009, in a more stable economy,
consumers embraced the reality that spending to keep their old cars running smoothly was
the most economically responsible alternative, ushering in the robust aftermarket sales of the
past 24 months. But now, are high gas prices and persistent economic challenges pushing
consumers back into deferral mode?
Updating key market drivers
To begin to evaluate the prospects of an aftermarket double-dip, let’s take a look at the macroeco-
nomic factors most relevant to the aftermarket, as determined by our 2011 forecast model:
■ GDP — Real GDP in the second quarter rose 1 percent (this is the revised second estimate).
While this number signals some economic growth, it is fairly weak. An economy with a
more robust growth rate would provide a better environment for stronger after market
sales.
■ Miles Driven — Gasoline prices remain well above the critical $3.00 per gallon mark,
and in response, consumers are cutting back on driving. Through June, total miles driven
were down 15.5 billion miles on the year, or 1.1 percent. Based on gasoline sales indicators,
we don’t expect July or August results to show improvement. Fewer miles translates into
less wear-and-tear and longer maintenance intervals, and therefore has a negative effect
on the aftermarket.
■ Unemployment — Unemployment is a double-edged sword for the aftermarket. First,
rising unemployment constrains consumers’ ability to spend. Second, it takes people out of
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the daily commute, reducing miles driven. The unemployment rate in July was 9.1 percent,
showing no lasting improvement in 2011. There are still 6 million fewer employed persons
in the U.S. than there were in July 2008. Furthermore, the average number of weeks un-
employed rose to 40 – the highest in modern history.
■ Revolving Credit — After paying down $200 billion in debt following the recession,
a new frugality emerged where consumers were motivated to take care of their cars to
avoid incurring more debt for new vehicles. However, recent economic conditions have
consumers once again relying on credit cards. Revolving credit debt in June is up 10 bil-
lion dollars (1.3 percent) since April. If the monthly household budget gets “maxed out,”
consumers may be pushed back into deferral mode.
■ CPI Used Cars — Consumer attitudes have changed about how to define an “old”
car. This means more and more consumers are content to drive older vehicles and are
revaluing used cars. The CPI for used vehicles reflects this attitude, which is favorable to
the aftermarket and continued to rise with an index value of 152 in July, up from 144 in
January.
What does in all mean?
Of the five factors driving aftermarket sales, three are trending negative. We’ll call GDP
neutral and the used car value positive, as it reflects a continued desire to assign higher
value to aging vehicles. As a result, it is not surprising that auto parts channel unit volumes
are trending below the level we projected nearly one year ago. At last year’s AAPEX show,
we announced a 2011 forecast of -0.9 percent in unit volume versus year-ago. Year-to-date
through July, unit volume was down 1.7 percent versus the same period in 2010. In part, the
strong performance in 2010 creates a difficult hurdle for positive growth in 2011. But thanks
to the forecast modeling done last year, we have a rational basis for better understanding
why the market is trending lower. We will revise and update the forecast model based on all
of this new information. You’ll see the results, along with our 2012 forecast, here at AAPEX.
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Aftermarket-Friendly Vehicles
Most in the automotive aftermarket have long understood that there is a typical vehicle
profile that is friendly to the aftermarket. Such vehicles are likely no longer under the original
manufacturer’s warranty and are beginning to show some normal wear-and-tear with age
and usage. How to precisely define this vehicle profile is the subject of some discussion, but
generally the conversation centers around a vehicle age range that begins at about four years
after purchase (when most warranties begin to run out) and ends at around 10 years.
In the past, conventional wisdom held that spending on vehicles more than 10 years old will
wane as these cars lose value and consumers begin to look toward replacement. The vehicle
population that fits into this range has often been referred to as “the sweet spot.” Borrowed
from the sports world, this term refers to that place right in the center of the barrel of a base-
ball bat or the face of a golf club. When you hit the sweet spot, the contact feels pure, and
the ball seems to effortlessly spring to life and take flight. For aftermarket manufacturers and
retailers, hitting the vehicle sweet spot is the key to a home run of revenue.
A growing “sweet spot”
For some time now, we have monitored the lingering effects of the recession on consumer
attitudes and behaviors. A new frugality among many consumers has them holding on to cars
longer than before and seeing value in the necessary expenditures on repair and maintenance
required to keep older cars going. This new vehicle mindset calls for some closer examination
and re-evaluation of how we define the sweet spot. Our Car Care Track® captures automotive
purchase information from a nationally representative sample of approximately 72,000 vehicle
owners annually. Comparing pre- and post-recession behavior allows us to gain insight into
emerging new behaviors and opportunities.
Automotive Purchasers With Vehicles More Than 10 Years Old
43%
37%
2005 2010
Source: The NPD Group/Car Care Track /December 2010
®
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While it is true that average annual expenditures on a vehicle tend to peak at around 10 years
of age, Car Care Track provides evidence that there may be a growing opportunity among
owners of cars over 10 years old. Of those surveyed for Car Care Track, 43 percent of consumer
panelists said they had a vehicle more than 10 years old in 2010. In 2005, before the recession
and the decline in new car sales, only 37 percent of respondents had cars over 10 years old. The
spending curve in 2010 peaked at $633 in annual expenditures for 2001 model year vehicles. But
although the curve declines gradually at this point, spending on older cars remains relatively
high. In fact, spending on vehicles 10 years and older is an average of 10 percent higher than
spending on newer vehicles. So the vehicle population is aging, and consumers are demon-
strating a willingness to continue to spend on these vehicles.
Annual Expenditures by Vehicle Age
$700
2005 2010
$600
Annual Expenditure
$500
$400
$300
$200
$100
$0
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1
Vehicle Age in Years
Source: The NPD Group/Car Care Track®/December 2010
Responding to Change
While these new trends in consumer behavior are clearly positive for the aftermarket, retailers
and manufacturers will need to stay focused on the trend to maximize the opportunity. Here
are some questions to ask in considering how best to benefit from older vehicles:
■ Does my assortment reflect these new vehicle realities?
■ Does my value proposition appeal to the consumer trying to extend the life of an aging vehicle?
■ What needs can we anticipate owners of older vehicles will have?
The surge in aftermarket-friendly vehicles represents a great opportunity for growth, and a clear
understanding of the consumers who own them will help marketers benefit from this trend.
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Do-It-For-Me Automotive Service Picks Up Steam
New car sales in the U.S. are on the rise. Through the first six months of 2011, light vehicle
unit sales were up nearly 13 percent over last year. Even though this increase is significant, it
only translates into about 6.3 million new cars, trucks, and SUVs sold. That puts us at a rate
still well below pre-recession levels, meaning most Americans remain focused on repairing
and maintaining the nation’s aging vehicle fleet.
With consumers still largely focused on spending only on those things they absolutely need,
many are finding professional automotive service among the “must” expenditures in the
family budget. To help you get a better handle on where America is going for do-it-for-me
(DIFM) automotive services, we’ve just released a special report: Consumers Shifting Gears to
DIFM Outlets. It drills into Car Care Track® (our monthly consumer tracker of automotive purchase
behavior) data, complemented by insight from a customized consumer survey on the topic.
This timely study, fielded in mid-June, found 68 percent of today’s drivers said they will have
all automotive service and repair performed by a professional. For you, that means it is critically
important to understand the changing behaviors and motivations of DIFM consumers to
make the most of this opportunity.
Consumers shifting gears on service outlets
The comprehensive report contains more than 100 pages of charts and expert analysis covering
every aspect of the DIFM marketplace. Among the findings is that many consumers’ outlet
behavior is shifting. Reliable personal transportation is a must-have, yet consumers are still being
squeezed by rising unemployment, high gas prices, and price inflation in many automotive
categories. In the tension between the need for transportation and the economic pain consumers
are feeling, the value equation is being closely scrutinized. For some consumers, this means
making new choices about where to have their vehicles serviced and why.
In this environment, tire stores and car dealers are two segments that have gained momentum.
Dealerships have likely benefited from the uptick in new unit sales, as some new car owners are
returning to the dealer for initial services. But a closer look reveals these two distinct outlets
may have something in common contributing to their success. Both appear to be perceived
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by consumers as bringing more coupons and promotional offers to the table, compared to
other outlets. When looking at what attributes of the service/repair occasion consumers were
most satisfied with, those at dealerships and tire stores were much more likely to say they
were extremely satisfied with a coupon or special offer. While it is important to acknowledge
that overall value can be derived from delivering on a variety of attributes including, trust,
convenience, knowledge, price and others, it appears these outlets might be leveraging cou-
pons and specials to appeal to a price-conscious and value-driven consumer.
Customer Satisfaction Index
Coupons or special offers
140
127
120 117
56 64 98
100
80
60
Independent Car Discount/ Quick Lube Tire Store
Repair Shops Dealership Mass Merchant
Source: The NPD Group/Consumers Shifting Gears to DIFM Outlets/June 2011
Positioning for success in the DIFM market
Understanding where consumers perceive value in the marketplace and uncovering what relevant
attributes play to your strengths is critical to creating a position that will be attractive in
today’s environment. Knowing who is winning in the market and how they are doing it will
allow both suppliers and installers to collaborate to craft winning strategies. Key questions for
a winning DIFM strategy include:
■ How is the consumer defining value, and is that changing?
■ What outlets offer the best opportunities for growth?
■ What attributes of my brand, product, or service model are most relevant to consumers in
the current economic environment?
Among the many truths reinforced in these turbulent times is that change is inevitable. Taking the
consumer’s pulse will help you stay abreast of changes in attitudes and behaviors and keep
your offer and message relevant.
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Industry Expertise
The NPD Group is the premium provider of consumer and retail information for the North
American automotive aftermarket, petroleum marketing, and convenience retailing industries.
NPD expertise and data provide industry leaders with essential market information to assist in
making more effective business decisions. NPD is uniquely qualified to help marketers apply
information to address key marketplace issues from multiple perspectives, based on more
than 20 years of experience in these industries.
NPD’s diverse portfolio of services includes consumer panel tracking and national and Store
Level retail point-of-sale (POS) tracking. Specifically, NPD information supports benchmarking,
competitive analysis, assortment and product planning, and identification of new channel
opportunities.
About The NPD Group
The NPD Group is the leading provider of reliable and comprehensive consumer and retail
information for a wide range of industries. Today, more than 1,800 manufacturers, retailers,
and service companies rely on NPD to help them drive critical business decisions at the global,
national, and local market levels. NPD helps our clients to identify new business opportunities
and guide product development, marketing, sales, merchandising, and other functions. Infor-
mation is available for the following industry sectors: automotive, beauty, commercial technol-
ogy, consumer technology, entertainment, fashion, food and beverage, foodservice, home,
office supplies, software, sports, toys, and wireless. For more information, visit npd.com
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For more information, contact The NPD Group at
866-444-1411 or email contactnpd@npd.com.
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