Scrappage Is Shaping the Aftermarket

Vehicles in operation (VIO) are a primary determinant of the volume and mix of the light vehicle aftermarket products and brands in the U.S. The VIO is shaped by new car and light truck annual sales and vehicle scrappage (vehicles removed from operation).

The relative importance of these two factors in shaping the VIO and, therefore, the aftermarket is changing. Over the past three years (2020 to 2022) new vehicle sales have moved sharply lower, with annual volume down approximately 15 percent. Lang Marketing projects that new vehicle sales will remain weak through 2024 and, perhaps, longer. Accordingly, the number of vehicles in operation and their age and nameplate mix are changing based on the number and type of vehicles being scrapped each year.

Low Scrappage Rates

The vehicle scrappage rate in the U.S. historically increased with the growth of new vehicle sales and declined when the new car and light truck market slumped. Before COVID-19, light vehicle sales were running at a record-high rate and contrary to historical patterns, annual vehicle scrappage was low.

Annual Scrappage Rates

From 2000 to 2010, annual scrappage averaged more than 5.3 percent of vehicles in operation. In 2013, the light vehicle scrappage rate rose to 5.7 percent. However, in 2016 when new car and light truck volume reached five million more than five years earlier, the scrappage rate fell to 4.4 percent.

Despite record-high new car and light truck annual sales between 2015 and 2019 (yearly sales averaged more than 17 million), annual scrappage averaged only 4.5 percent, significantly lower than the 5.2 percent average annual scrappage over the previous five years (2010 to 2014).

Scrappage from 2020 through 2022 averaged below five percent, despite some “catchup” in scrappage stemming from the low annual levels of the previous five years.

Differing Scrappage Rates by Vehicle Features

The annual scrappage rate varies by three vehicle features: age, nameplate and power plant. With new vehicle sales at a low ebb since 2020, scrappage has taken on a greater significance in shaping the VIO according to these three vehicle features.

Vehicle Longevity and Age

The average life of vehicles in operation has significantly increased over the past three decades as manufacturing techniques have improved and the durability of materials used in new cars and light trucks has increased.

These factors have boosted the age at which vehicles are scrapped. In addition, the increasing value of used vehicles has raised the cost threshold at which vehicles are scrapped due to accidents. Accordingly, even as the average age of vehicles increased and the number of older cars and light trucks on the road climbed, the scrappage of older vehicles has been moderate among age groups that traditionally had high scrappage rates.

Domestic Nameplates

Domestic nameplates account for a minority of new car and light truck sales but represent a large share of vehicle scrappage. This reflects the higher average age of domestic nameplates compared to their foreign counterparts.

Despite averaging more than 53 percent of cars and light trucks in operation from 2016 through 2021, domestic nameplates represented two-thirds of light vehicles scrapped during these years.

Foreign Nameplates

The VIO share of foreign nameplates was onethird greater between 2016 and 2021 than their 33 percent share of vehicles scrapped during this time. This reflects the younger average age of foreign nameplates and their higher average value compared to domestic nameplates of the same age category.

Scrappage by Power Plant

Almost all vehicles scrapped in the U.S. are Internal Combustion Engine (ICE) models. Accordingly, low annual scrappage allows greater numbers of ICE vehicles to remain in operation, boosting the size of the ICE aftermarket.

In contrast, low new vehicle sales diminish the number of ICE vehicles in operation, but ICE cars and light trucks still account for the predominance of cars and light trucks on U.S. roads (99 percent in 2022).

Aftermarket Impact

Low scrappage rates in the U.S. are boosting aftermarket size and changing the mix of aftermarket products and brands used. This occurs in three ways. First, low scrappage boosts the average age of vehicles in operation and the population of older cars and light trucks on the road. Since older vehicles use more aftermarket products per mile than newer models, low scrappage helps to increase aftermarket sales.

Second, since vehicle scrappage is concentrated among domestic nameplates, low rates mean that more domestic nameplate cars and light trucks remain in operation longer. This slows the rate at which the domestic nameplate aftermarket is declining.

Third, low scrappage rates help to maintain the number of ICE vehicles in operation since virtually all vehicles scrapped (besides those in accidents) are ICE vehicles. Accordingly, low scrappage boosts the ICE aftermarket.

Six Major Takeaways

• The VIO in the U.S. is shaped by new car and light truck annual sales and the vehicle scrappage rate. Over the past few years, the relative importance of these two factors in shaping the VIO has shifted.

• Despite record-high new vehicle sales from 2015 through 2019, annual scrappage averaged only 4.5 percent, substantially lower than the 5.2 percent average yearly rate over the previous five years. Scrappage remained moderate from 2020 through 2022, despite an increase in the average age of vehicles in operation and the growing population of older cars and light trucks.

• The rate of vehicle scrappage varies by three vehicle features: age, nameplate and power plant.

• Low scrappage increases the average age of the VIO and the population of older vehicles. Since older vehicles use more products per mile than newer models and product brand use differs by vehicle age, low scrappage is boosting aftermarket product volume and influencing aftermarket brand use.

• Low scrappage helps to keep more domestic nameplates on the road, slowing the aftermarket reduction of that aftermarket segment. Since product brand use differs between domestic and foreign nameplates, the domestic and foreign nameplate share of aftermarket product volume influences product brand use.

• Since ICE vehicles constitute 98 percent of the VIO, low scrappage keeps more ICE vehicles on the road, boosting the ICE aftermarket and the volume of aftermarket brands.

Audatex: Adjusting Blend Labor Value – Audatex provides customers a quick and easy process to adjust the automated blend hours.

Solera has provided the following instructions to adjust the blend labor value.

“A user can adjust the time in our Solera Qapter estimating solution when there is a need to adjust the automated blend hours. The slide out provides the full refinish time and the blend time so the user is aware of the full panel refinish times as they consider any adjustments for blend labor time.

Steps for adjusting blend refinish hours in Solera Qapter Estimating:

1. Select the appropriate part (the slide out will appear)

2. Select Blend Refinish

3. Select the gear icon in the Blend Refinish bar

4. Enter the user defined time in the Labor Hours box

5. Select Save & Close”

CCC/MOTOR: “Blend” Allowance for Parts Not Serviced as Individual Components – DEG Inquiry 23447 states,

“After review of MOTOR Crash Estimating Data, estimated Refinish times are developed for the exterior panel(s) as serviced by the OEM. Blend allowance is calculated using 50 percent of the nonoverlapped base panel refinish time for the same component published in the MOTOR database. The 2018-23 Toyota Camry “Lock Pillar” is not serviced as an individual OEM component. Blend allowance can be selected from the Quarter Panel or as a Manual Entry for a section (Lock Pillar) of the vehicle that is not offered as an individual OEM component.

Please note: It is MOTOR’s position that Blend allowance for a section or area of the vehicle that is not offered as an individual OEM component is best reserved for the judgment of an estimator/appraiser following a thorough on-the-spot evaluation of the specific vehicle and refinish requirements in question.”An example of these parts may include lock pillars or roof rails which are common components of a larger service assembly.

All Three Systems: Back Side Corrosion Protection/ Overspray Mist – Replacement or repaired body panels may require additional efforts to restore the corrosion protection on the panel backside by using an epoxy or 2k primer that has been tinted to replicate the OEM appearance. In addition, the backside may have a unique overspray appearance. Additional labor and material for backside panel corrosion protection and refinishing effort is NOT INCLUDED in CCC, Mitchell and Audatex.

Honda provides an excellent example of its requirements on Corrosion Protection for Honda Vehicle Repair, page 3, “Backside treatment of new panels.”

OEM Electronic Parts Catalogues – DEG has made recent updates to its Electronic Parts Catalogue resource page with additional manufacturer links to OEM parts schematics. In addition to the OEM websites listed, we’ve included partslink24, which has become a useful tool for DEG validation, and provides repairers the ability to look up the same OEM electronic parts catalogues from major European automakers (Audi, BMW, JLR, Polestar, Volvo, Porsche, VW). The online catalog provides a VIN decode that helps with correct part pricing and part numbers including any supersessions.

Note: The estimating databases are all intended to be used as a GUIDE ONLY. View these tips and others at DEGWEB.ORG