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Average age of U.S. vehicles creeps up, creates opportunities for aftermarket suppliers

BY Sunday, August 16, 2020 06:40pm

Over the last decade and a half, the average age of light vehicles on United States roads has slowly risen. 

That trend only continued this year, per a recent study by market research and consulting firm IHS Markit, and could accelerate because of the effects of the COVID-19 pandemic.

Mike Wall, director of automotive analysis for IHS Markit COURTESY PHOTO

According to IHS, the average age of light vehicles in operation in the United States saw a slight uptick to 11.9 years. This was one month older on average than in 2019, a small step that will likely lead to an even more aged fleet in the years to come, as well as provide manufacturing and sales opportunities for businesses that operate in the aftermarket space.

A slow creep up

Regardless of whether it moves up or down, the average age of vehicles in operation will only trudge slowly along given the size of America’s fleet, which eclipsed 280 million units this year.

“Any time you have a fleet size like that, first and foremost, you don’t typically see major changes in the average age of vehicles because it’s like turning a battleship with an oar,” said Mike Wall, director of automotive analysis for IHS Markit. “You might see some subtle shifting and indeed that’s what we saw: We saw it creep up a bit.”

The average age of vehicles climbed despite the fact that vehicle scrappage rates have increased, which would presumably drive the average age down.

In fact, 2019’s scrappage rate — a measure of vehicles leaving the active population — sat at 5.1 percent, which compares to 4.6 percent in 2016.

However, this increase in scrappage was balanced out by a vehicle sales plateau combined with drivers holding on to their cars longer and modern vehicles lasting longer.

“Coming out of the last recession, we were kind of under trend in terms of scrapping vehicles,” Wall said. “We saw the vehicle population growing but we weren’t necessarily venting many vehicles. The one exception was the Cash for Clunkers program.”

“We are getting close to what I would call a trend-level scrap rate,” he added. “Does that slow that average vehicle age growth? I think you can make an argument for that, but it’s not going to slow it by much. (Vehicle age) will remain pretty elevated for a bit longer due to the complexities of the fleet.”

According to the IHS Markit report, the COVID-19 pandemic is certainly one of those “complexities” and has played a role in accelerating the age of vehicles on the road and will continue for the coming years. The report cited rising vehicle prices as one reason drivers aren’t necessarily enthusiastic about ditching their older rides. As well, Wall noted many people are able to hunker down with their current vehicles because the pandemic has cut down on many forms of travel, including work commutes.

Before the pandemic, new vehicle sales in the U.S. were already on a downward trend, representing 6.1 percent of vehicles in operation in 2019 compared to 6.7 percent in 2016, which was a record-setting sales year.

In 2020, new vehicles sales are poised to represent only 5 percent or less of all the vehicles on the road.

Good news for aftermarket players

IHS Markit reported that the segment of vehicles six to 11 years in age is expected to expand, which is considered a sweet spot of sorts for the aftermarket space because warranties and dealer service plans begin to expire.

The aftermarket players that can potentially seize on this influx of customers include both dealership and independent mechanics in addition to aftermarket parts suppliers and retailers.

“When you see the O’Reilly (Auto Parts) and Pep Boys of the world, a lot of time when you go through a recession, you tend to see their stock pop a bit because of the demand,” Wall said. “You start to see a sort of trend with those component groups.”

Philip Atkins, director of strategic research and planning for North Carolina-based Automotive Aftermarket Suppliers Association (AASA), agreed that this trend signifies opportunity for suppliers and other aftermarket businesses.

“Many cars come off of warranty and that’s when car owners stop taking their car back to the dealer,” Atkins said of vehicles that range from six to 11 years old. “(Owners) have their favorite repair place. The car is in good enough shape, it’s got enough value that the owner wants to get good quality parts and that’s all to the benefit of the aftermarket.”

This is an opportunity that will only expand as COVID-19 limits new vehicle sales and prompts drivers to hold on to their vehicles. The situation essentially mimics how the age of vehicles accelerated upward on the heels of the Great Recession. To that end, the average age of vehicles jumped 0.3 years each year from 2009 to 2011.

The IHS report indicated that the average age could balloon by four to six months in the coming years.

“The pandemic has really been an economic jolt,” Atkins said. “With unemployment where it’s at and household income falling and the uncertainty surrounding all of the economy, what we’re seeing is people choosing to repair their current car instead of replace it with a new car.”

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