NATIONAL NEWS 0921

www.langmarketing.com

Hot Used Vehicle Market Boosts Aftermarket

Used vehicle demand in the U.S. has risen to unprecedented levels. The surge in remote working, a low supply of used vehicles and decline of new vehicle production (and sales) – hampered by a shortage of computer chips – have combined to push used car and light truck prices to record heights during the first half of 2021.

Rocketing sales and record-high used vehicle prices are positive for the aftermarket since they raise the value threshold at which cars and light trucks are totaled or scrapped (positive for VIO growth), increase the age of vehicles in operation and encourage customers to invest in repairing their vehicles.

Miles Plunge Per Vehicle in New Lang Annual

Average miles per vehicle plunged at an unprecedented rate last year. Lang Marketing estimates that the typical car and light truck in the U.S. travelled approximately 1,350 fewer miles during 2020 than in the previous year.

The historic 2020 mileage decline continued a trend of reduced annual miles for cars and light trucks dating back to 2015. As a result, the average car and light truck in the U.S. has recorded nearly 2,100 fewer miles on its odometer over the past five years compared to what would have occurred absent this downward mileage trend.

Mobile Repair Surge

Mobile auto repair in the U.S. – while still a small share of the total automotive repair market – has surged in recent years, with strong growth during 2020, when the overall Do-It-For-Me (DIFM) market fell at a double-digit rate.

The mobile repair market expanded from 2016 to 2020 at an average annual rate more than 20 times that of total DIFM product growth for cars and light trucks in the U.S. See the 2022 Lang Aftermarket Annual for analysis of the surging mobile repair sales over the past five years.

Barriers to Auto Repair Disruption

Three factors have long been thought to protect the auto repair market from disruption: the need for mechanical diagnosis, having the required parts at the repair outlet and the personal relationship between car owners and repair outlets.

In recent years, however, advancing technology and the changing values of younger generations have significantly altered how consumers decide when and where to have their vehicles repaired. Mobile Repair Overcomes Disruption Barriers

Mobile repair has demonstrated that the barriers to auto repair disruption are no longer as formidable as they were thought to be.

Mobile repair operations are able to successfully complete repairs in one visit to the client more than 85 percent of the time, and the range of repairs that they provide is expanding.

Need for Diagnostics

By defining the scope of repairs that they perform and having customers answer a series of questions to determine what is wrong with their vehicle, mobile repair operations have been able to reduce the need of “hands-on” mechanical diagnosis by brick-and-mortar technicians.

This ability to remotely diagnose vehicle issues is improving with the application of artificial intelligence to the databases of vehicle symptoms and repairs that mobile repair operators are developing.

Needed Parts at Repair Site

Mobile repair operations are able to bring the necessary parts to the repair location for most jobs as the result of improved remote diagnostics and the menu of repairs on which they focus.

Even at brick-and-mortar outlets the need for additional parts is not uncommon once a job is started and related issues are discovered. In these cases, parts are secured from local sources in the same way that mobile repair operators who need additional parts can obtain them.

Younger Generations’ Buying Preferences

Many Millennials and Gen Xers prefer to purchase auto repair online, like their other purchases, rather than in face-to-face transactions. As a result, developing a personal relationship with repair outlets is not important to many Millennials.

Generation Y and Z consumers show a much greater inclination to use mobile repair than older Americans, who traditionally have valued doing business face-to-face.

Implications for o2o Expansion

The ability of mobile repair to address a growing segment of the overall DIFM market and the increased willingness of consumers to purchase automotive repairs online are strong indications of the vast growth potential of o2o (online to offline) transactions in the car and light truck DIFM market. o2o auto repair has much greater potential volume in the light vehicle aftermarket than mobile repair because o2o auto repair can be sold by platforms such as Amazon to reach hundreds of millions of households and offered at tens of thousands of brick-and-mortar repair outlets.

These o2o auto repair transactions, besides establishing the site of repair, will increasingly supply automotive parts to the DIFM outlets for their o2o auto repair jobs.