How The US Iran Conflict Could Reshape Auto Repair Demand

Stacey Miller 0:12

Welcome to AutoCare on Air, a candid podcast for a curious industry. I'm Stacey Miller, Vice President of Communications at the Auto Care Association, and this is Traction Control, where we chat about recent news from the global to the local level and what it may mean to the industry featuring guests on the front lines. Let's roll. The US-Iran conflict could affect the U.S. autocare industry in several indirect but meaningful ways. The biggest channels are fuel prices, supply chains, shipping costs, and consumer behavior. So here's how each could play out. Fuel price spikes may cause changes in driving and maintenance. So the largest immediate impact right now is through oil and gasoline prices. Gas prices in the US have already jumped 11 cents in a single day following escalating tensions with Iran, according to Business Insider. And according to Time, Brent crude has risen above$80 per barrel, with risks of reaching$100 and more if shipping disruptions worsen. If the Strait of Hormuz were blocked, oil prices could potentially surge towards$150 per barrel in extreme scenarios, according to the Houston Chronicle. So what does this mean for the autocare industry? Fuel price spikes historically cause two competing effects. So let's talk about the short term. People driving less, meaning fewer miles traveled. That's slower wear on parts like brakes and tires, of course. But in the medium term, consumers may delay buying new vehicles and keep their cause longer, which mean more maintenance and repair demand potentially. So for the aftermarket, that second effect is often net positive, especially if the conflict lasts months. Now let's talk a little bit about supply chain disruptions for parts, because the Middle East conflict is already disrupting shipping and logistics because automotive supply chains depend heavily on global shipping routes and petrochemical inputs. Shipping through the Strait of Hormuz, which carries about 20% of global oil supply, has stalled due to security risks. According to the AP News, cargo ships are rerouting around Africa, adding approximately 14 days and about a million dollars in extra fuel per trip. So obviously, there are autocare industry implications, and possible outcomes include longer lead times for aftermarket parts, higher freight costs, and inventory volatility for distributors. And also increased risk for parts sourced from Asia or Europe. And this resembles some of the COVID-era supply chain dynamics. So we can go back and learn a little bit from that. The other consideration is higher costs for materials and manufacturing. Many automotive parts rely on petroleum-based materials, right? Like plastics, polymers, synthetic rubber, like belts and hoses, lubricants, and adhesives and coatings. So when oil prices rise, petrochemical prices also increase. Manufacturing costs go up for manufacturing costs for parts go up. And distributors and retailers may face price inflation on inventory. And we also can't forget that freight and logistic costs may also rise. So even beyond oil prices, shipping insurance in conflict zones has surged, and air cargo routes are disrupted due to that closed airspace. So for the aftermarket supply chain, this means higher landed costs for imported parts, potential margin pressure for distributors and retailers. We also have to think about the potential consumer behavior changes because of these elevated costs, right? So if gas is up, as oil is up, consumers may delay buying a new vehicle and they're going to repair their older vehicle and seek much more affordable maintenance options. They may also buy fewer performance upgrades or discretionary accessories. So something to consider. This usually benefits core maintenance categories like filters, brakes, fluids, ignition components, but it can hurt discretionary aftermarket segments as well. So something to be aware of. So what are the strategic opportunities for the autocare industry? Ironically, geopolitical disruptions can and have created opportunities. So some possible positives, like I said earlier, some increased demand for repair versus purchasing new vehicles, growth in independent repair shops, the opportunity for domestic manufacturing and sourcing of parts, and more focus on inventory resilience and regional supply chains. So what's the bottom line? If the conflict escalates or lasts months, hopefully it doesn't come to that, the U.S. autocare industry may see some risks such as higher parts costs, shipping delays, inventory instability, but also opportunities, such as older vehicles staying on the road longer, higher demand for maintenance and repair. AutoCARE is actively monitoring the situation, and we remind members that they can log into our trendlens platform at autocare.org slash trendlens to see the latest interactive economic and industry indicators. Qualified manufacturers can utilize Demand Index at autocare.org slash demandindex to see how product lines are performing against the market as these developments continue. Thanks for tuning in to another episode of Autocare on Air. Make sure to subscribe to our podcast so that you never miss an episode. And don't forget to leave us a rating and review that helps others discover our content. Autocare on Air is a production of the Autocare Association, dedicated to advancing the autocare industry and supporting professionals like you. To learn more about the association and its initiatives, visit autocare.org.