AAPEX report: Consumer buying remains constrained, which bodes well for the aftermarket

Low consumer confidence changes driving habits, challenging the auto industry.


The nation’s economy has made some improvement since the start of the Great Recession in 2008, but consumer spending has not recovered much, noted Dr. Timothy Nash, an economist at Northwood University. But Nash did not present a negative picture for the automotive aftermarket in a presentation to the Automotive Aftermarket Products Expo (AAPEX) in Las Vegas. “It (the outlook) does bode much better for the aftermarket,” he said.

The reason is that consumers are holding onto their cars longer.

Nash sat on a panel on “Aftermarket Dynamics and the Road Ahead” along with Dr. John Passante, president and CEO of The Organizational Development Group, and Ron Rossi, AAIA director of market intelligence.

He noted the recent recession hit the white collar workers more than any recession. Homeowners dipped into retirement funds to protect their home ownership.

While the stock market has recovered, investors remain wary of it and are not investing.

These trends hurt overall consumption. “Consumers are not running debt the way they used to,” Nash said. This marks a change over previous recoveries, when consumers ran up debt to pay for things they want. “The U.S. has not seen anything of that magnitude in history,” Nash said.

While employment has improved since the start of the Great Recession, most jobs created are below average pay.

From 2006 to 2010, middle class spending has declined. “Peoples’ purchasing power has been declining,” he said. As a result, consumer spending is not moving the economy forward.

The automotive sector has improved better than most industry sectors, Nash said, but car buying will not achieve pre-recession levels in the near future.

In the long-term, several factors will prevent the younger generation of drivers from buying cars and driving a lot when they do buy cars. These are challenges facing the entire automotive industry.

The recession has caused a large number of young people to delay purchasing cars and/or reduce the amount their driving.

Rossi then showed some charts from the AAIA’s Aftermarket Factbook. The information indicated that total vehicle registrations fell to an historic low of 4.96 million in 2009 before climbing back to 7.094 million in 2012. This level remains short of the 8.802 million in 2006.

As the economy improves, young people will be driving more, but it is not known if the current trend to drive less will reverse.

To encourage younger consumers to buy cars, car companies need to be cognizant of their priorities, which are different than their predecessors.

Younger consumers want cars that are friendly to the environment. Battery-operated cars help address this need, but recharging a vehicle needs to be as fast as pumping gasoline. In addition, cars must be affordable.

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