Aftermarket companies staying agile in dynamic economy
Based on mid-July Market Intelligence Pulse Survey
Margin Pressure Is Universal
The macro environment has been painful – all four topics was identified as moderately, very or extremely impactful by a supermajority:
Figure 1: If this were The Lego Movie, Emmet Brickowski would shout with glee, “Everything is Painful!” If this were a '90s prog rock song, Michael Stipe would ruefully croon, “Everybody hurts".
Freight rates and tariff volatility are more salient for manufacturers, distributors, and tool & diagnostic developers.
K-Shaped Economy Influencing Demand and Supplier Response
Half of participating companies (49%) are already observing “a shift in product/service tier demand”, and another one-third (33%) expect one. Likely as a result, nearly half (42%) have “doubled down on premium, enthusiast, or high-margin specialty segments”, while more than one-third (38%) have “expanded budget/white-label offerings to address price sensitivity”. One-third (34%) have observed “a migration from DIY sales to DIFM services”.
Figure 2: Consumers often delay maintenance, trade down, and/or take on repairs themselves during tough economies – many aftermarket companies have observed or anticipate these behaviors.
Vehicle Complexity is Forcing a Tech Upgrade
Vehicle complexity is driving catalog modernization and AI-enabled predictive analytics. As charted below, increasing the velocity of getting parts into consumers’ hands is a focus.
Wide Range of Response to Supply Chain Challenges
As charted below, responses to global shocks are evenly spread across four strategies:
Cautious Optimism on Right to Repair
Regarding confidence in the Federal government’s likelihood to legislate on Right to Repair, the vast majority are somewhat confident that this will happen:
Figure 5: Market Intelligence Committee members and guests predominantly anticipate slow progress on the issue of fair data access (n=39).
Thumbnail Summary
- Cost pressure is challenging. Four separate macro factors are highly impactful (Top 3 70%+), pointing to the challenge of achieving profitability goals.
- Catalog management demonstrates distinct customer profiles. That companies who “Double down on premium, enthusiast, or high-margin specialty segments” (42%) parallels “Expand our budget / white label parts offerings” (38%) demonstrates the K-shaped recovery.
- Digital commerce leads hardware as the tech priority. Catalog modernization and predictive analytics point to efforts to increase efficiencies in delivering in-demand products to customers.
- Revenue level affects the supply-chain response. Higher revenue companies are more likely to pursue dual sourcing; lower-revenue firms are evenly distributed across the strategies queried.
- Right-to-repair risk is perceived as manageable but unresolved. That 74% are “somewhat confident” bolsters the need for continued advocacy, not complacency.
- By organization type: parts/component manufacturers (n=14), warehouse distributors (n=7), retailer/e-commerce (n-3), repair shop / service provider (n=3), professional services (n=3), tool / diagnostic equipment developer (n=1), other (n=6).
- By revenue: “in the millions” (n=24), “in the billions” (n=13).
Welcome to the new YANG Effect! Your one-stop quarterly newsletter for all things Automotive Aftermarket contributed to and written by under-40 industry professionals.
More posts
Market Insights with Mike is a series presented by the Auto Care Association's Director of Market Intelligence, Mike Chung, that is dedicated to analyzing market-influencing trends as they happen and their potential effects on your business and the auto care industry.
More posts
Want to stay updated on Auto Care Association initiatives, tools and resources?
