Source: Noah Brown, ADAPT Automotive
To put it lightly, 2021 has not been kind to the automotive aftermarket.
This past year, the industry has seen a range of challenges, from Right to Repair and a global semiconductor chip shortage to an explosion of EV mandates, autonomous vehicle advancements and trying to figure out which trends will last.
On top of all of that, the world is still trying to figure out how to navigate the post-COVID economy and get back to “normal,” whatever that is, while the virus still continues to rage on.
“Life was thrown upside-down with the pandemic. It was for all of us,” NASTF Executive Director Donny Seyfer said during the ADAPT: Automotive Technology Summit. “Sometimes it feels like we’re living in a novel in which the creators of the world are benched while other people are running it.”
Despite that, the aftermarket has shown time and again that it is more than capable of handling any hurdle thrown its way. Here’s a recap of some of the biggest challenges shops faced this past year, and more importantly, how they handled them and were able to build momentum going into 2022.
Unofficially, 2021 appeared to be the year of the EV. According to a report from Kelley Blue Book, EV sales jumped nearly 60 percent in Q3 this year compare to the same period in 2020. U.S. automakers sold more than one million EVs through Sept. 30, accounting for 10.4 percent of all new vehicles sold in the U.S. through the third quarter.
In early November, the U.S. House of Representatives narrowly approved President Joe Biden’s massive $1 trillion infrastructure package, which included a $7.5 billion provision for EV infrastructure investments. Adding credibility to that push, a study from consulting firm KPMG surveying more than 1,100 global automotive executives found that, on average, an executive expects around 52 percent of all of their new car sales to be EVs by 2030.
Major American automakers such as Ford and General Motors have also placed significant in EVs, promising to have 40 to 50 percent of all new vehicle sales be all-electric by 2030.
Though the automotive industry will look significantly different 10 years from now, there is still room for the aftermarket.
“The world needs us right now more than ever,” Seyfer said. “Despite what some people might tell you, cars are still going to need to get fixed. Electric vehicles are still going to need maintenance. People are still going to get into crashes.”
Though EVs, along with other technologically advanced vehicles, are different beasts to maintain and repair than ICE vehicles, they still need to be repaired and maintained. It will take some work, but shops can survive and thrive in the EV revolution.
“The good news is for the shop owners that are willing, aggressive, and want to grow, all of the tools are out there,” Dorman Products Ideation Director Lester Kovacs said. “If you’ve been investing in technology over the years, the real barrier to entry will just be training.
Right to Repair
The battle over who owns vehicle data and who can access it has been raging for years, but some progress has been made recently in favor of the aftermarket.
The state of Massachusetts in late 2020 passed into law the nation’s first Right to Repair act, though that has faced some significant challenges and appeals from OEM lobbyists.
Despite those challenges, though, Schwartz Advisors Managing Partner Derek Kaufman says the fact the law passed in the first place is a sign that consumers are invested in the debate and want to have some say in it, which is good for the aftermarket.
“The people of Massachusetts have said they want the ability to own the data coming off their cars and to use that data to direct the vehicle to the service location of their choice,” Kaufman says. “That is going to be an ongoing battle between the OEMs and the independent shops, and that hand-off of information is something that is going to have to be managed.”
As vehicles get older, Kaufman says, owners are less likely to bring them into dealership or OEM-certified shops for maintenance. During the ADAPT Summit OEM panel discussion, moderator Mike Anderson of Collision Advice said that roughly 60 percent of drivers who experience an issue with a repair or maintenance on their car think it “will never be the same” and switch cars within a year or so. Of those who do switch, around 60 percent choose a different brand.
Because of that, Kaufman says it is in the OEMs’ best interest to make telematics data readily available to repairers.
“All the shops are asking is the same amount of data that a dealership has to work on a car so they can do it correctly. It’s in [the OEM’s] best interest to partner with the independent aftermarket to maintain the reputation of their brands.”
Over the course of the past year, lockdowns and other preventative mandates across the globe have caused semiconductor chip manufacturers to shutter their plants temporarily from time to time, all while demand for computers, vehicles, video game consoles, phones and other technology that use those chips has drastically increased.
“Although semiconductors only directly contribute about 0.3 percent of the U.S. GDP, they are necessary to produce 12 percent of the national output,” a report from DBusiness says. “As a result, the supply chain bottleneck is forecasted to cost as much as 1 percent of 2021 U.S. GDP growth.”
So, at least in the short-term, the auto industry is going to feel the pinch. However, DBusiness says the long-term outlook is already looking brighter directly because of the shortage.
The pandemic highlighted weaknesses in the supply chain, and in the U.S. specifically it showed an increasing reliance on other countries for its chips—the report shows the U.S. only manufactures about 12 percent of the world’s semiconductors by accounts for 47 percent of all global sales.
Because of the, the federal government has allotted $52 billion in funding for “semiconductor-related initiatives,” partnering with tech companies such as intel to boost U.S. chip production infrastructure.
Demand, in general, is a good thing. Over the next five years, the U.S. is on track to catch up to increased chip demand. That means more cars on the road and, most importantly, in your shop.
“Although the current chip shortage has caused an economic disturbance, it is important to remember that high demand is promising, and low capacity is temporary. Semiconductor companies are continuing to expand, and governments are seizing the opportunity to invest in one of the fastest growing industries in the world,” the report says. “Looking past fear-mongering reports and low short-term output, we see that the chip shortage indicates long-term economic expansion.”
It’s no secret 2021 has not been easy on the automotive aftermarket. At the end of the day, though, shops have survived and, in many cases, thrived. A report from the Automotive Aftermarket Suppliers Association shows the sector grew around 11.2 percent this year over 2020, a resilient increase amid a global pandemic and the challenges that has caused.
The world will still need mechanics as EVs become more popular. Drivers will still get into crashes and will need to take their vehicles to collision repair shops. EVs still have other fluids that need to be checked and changed. All vehicles still have tires that will wear out and will need to be replace.
Despite what some OEMs and policymakers might say, the aftermarket plays a critical and irreplaceable role in the automotive industry.
However, that doesn’t mean shops can just sit on their hands and move into 2022 doing what they’ve always done. They need to evolve with emerging technologies and keep up to date with the latest trends to stay relevant.
They need to adapt.