All posts by Marty Miller
Experian’s Q4 2020 Market Trends Review takes a closer look at aftermarket trends, including the growing sweet spot.
In 2020, new trends emerged, driven by a continued shift in consumer preferences. Let’s take a closer look at how the industry fared during the year.
Millennials and Gen Z consumers have proven to be future trend shapers for the auto industry.
In late September, California announced a new requirement for the sale of all new passenger vehicles to be zero-emission by 2035. While that’s still 15 years away, the executive order created quite a buzz in the automotive industry, reigniting conversations about electric vehicles (EVs) and the current market penetration of the most common zero-emission vehicles. With that in mind, we wanted to take a closer look at the state of EVs—across the country and more specifically, in California—to better understand the EV market and how it’s grown over the past few years. As of Q2 2020, electric vehicles comprised just 0.312% of vehicles in operation (VIO). While EV market share seems small, there has been significant growth since Q2 2015, when they only held 0.0678% of the VIO market—meaning the growth of EVs has more than tripled (3.6x) in the last five years. But even still, other segments, such as CUVs have seen faster growth in the same time period (10% market share in Q2 2020 compared to 6.2% in Q2 2015). California sees faster EV adoption California has seen growth in EV adoption in the last decade, but it has grown exponentially in the last five years. EVs comprised 1.79% of new vehicle registrations 2015, and the percentage grew to 5.32% as of Q2 2020. Much of the growth occurred between 2017 and 2018, when market share jumped from 2.62% to 5.04% year-over-year, with the introduction of the more cost-effective Tesla Model 3. Even with that growth, California new vehicle purchases have a long way to grow to move up to 100% EV. With the popularity of the Model 3, it’s somewhat unsurprising, Tesla holds the lion’s share of the EV market in California, making up 61.9% of EVs on the road within VIO, and nationally at 64.8% share. That could potentially change down the road though. Over the next two years, numerous manufacturers have plans to introduce electric versions of popular models or introduce new EV models altogether. This not only creates competition but could also help continue to drive down vehicle cost, making EVs a more viable option for consumers. Examining costs and other factors Cost is one of the key considerations that industry experts have routinely brought up over the years as a barrier to EV adoption. While some say that maintenance and fuel are cheaper in the long run, purchasing an EV today is typically a more expensive option at the dealership. The average loan amount for an EV in California in 2019 was $40,964, compared to an average vehicle loan amount of $32,373. That said, as EV adoption has seen exponential growth in the last five years, the average price has reduced. The average loan amount for an EV in 2016 was $78,646, dropping more than $35,000 in just five years as the technology continued to mature and vehicle costs lowered. Additionally, tax incentives, particularly in California, have also helped reduce affordability concerns. Though today’s tax incentives may not be in place through 2035, California will likely need to evaluate if economic incentives are required along the way to achieving the zero-emission vehicle deadline. However, even as costs lower, there are additional challenges to be overcome. For instance, infrastructure continues to be a barrier to adoption. In a 2019 AAA study, concern over being able to find a place to charge is the top reason listed as to why respondents are unlikely to purchase an EV in the future. In addition, according to Statisa, in March 2020, the U.S. had almost 25,000 charging stations for plug-in electric vehicles, and approximately 78,500 charging outlets. Of those charging stations, nearly 30% are in California. But with continued growth of EV sales, there will be a critical need for continued infrastructure nationwide—not just in California. In addition to these considerations, many impacts of the new mandate remain unknown. California will have to navigate increased electricity demand—especially during peak hours—and increases in battery scrappage, as EVs wear out. Gas stations will need to manage a loss of revenue, while changes in fuel taxes are likely, and vehicle technicians will require new training. If increased adoption of zero emission vehicles is California’s long-term goal, this could also impact the popularity of used vehicles, which could leave dealers looking for alternative locations to sell their gasoline-powered inventory. Looking toward the future of EVs Realistically, with 15 years until the mandate takes effect, the California mandate won’t have much of an immediate effect on the industry. But it does highlight key considerations for automakers and the aftermarket moving forward. To achieve better adoption rates, automakers need to understand the barriers to success and how they impact consumer behavior. An example of this is how California has seen higher EV adoption rates as the availability of plug-in stations has increased. Continuing to find ways to lower costs and focusing on savings over the lifetime of the vehicle is will help consumers see the value of an EV. At the end of the day, automakers play a large role in moving the country toward EV adoption, so having a clear understanding of the trends can help refine strategies as we move toward an electrified future.
While the automotive industry initially took a hit at the onset of COVID-19, things are beginning to rebound. New vehicle registrations are still down compared to 2019, however, the year-over-year comparisons by month are starting to level out. And, while most of the attention has been paid to new registration figures, we can’t lose sight of the vehicles on the road. Some consumers acted to take advantage of automaker incentives and low interest rates, and others purchased due to newfound needs, but the vast majority have stuck with their current vehicle. That means, despite some bumps over the past few months, opportunity for the aftermarket and dealer service departments to thrive by keeping these vehicles on the road still exists. It starts with understanding what’s on the road. Insight into these vehicles will better position aftermarket suppliers and repairs shops to perform scheduled maintenance and address the needs of drivers. According to Experian’s Q2 2020 Market Trends Review, there were 280.6 million vehicles in operation, up from 278.1 million a year ago. Of those vehicles on the road, light-duty trucks accounted for 56.5%, and passenger cars made up the remaining 43.5%. So, there’s little surprise that the top three segments on the road were full-sized pick-ups (16%), CUVs (10%) and mid-range cars (9.9%). And if we break it down even further, the top three brands were Ford (15.5%), Chevrolet (14.3%) and Toyota (12.1%). But we understand that not all 280.6 million vehicles will need aftermarket parts or service; it’s important for the industry to keep a close eye on the aftermarket “sweet spot”—those vehicles that are six- to 12-years old. Identifying these vehicles and anticipating their maintenance needs will help aftermarket suppliers navigate the recovery. In Q2 2020, 31.2% (87.6 million) of vehicles in operation fell within the “sweet spot”—with a mix nearly 46% domestic and 54% import brands. And while the opportunity today is significant, we expect the “sweet spot” to continue to grow for at least the next four years. To make the most of the opportunity, aftermarket suppliers need to understand where these vehicles are located, what types of vehicles fall within the sweet spot and the most common parts that are used. COVID-19 has shifted the industry for all parties involved. Some consumers may opt to hold onto their vehicles a little bit longer rather than purchase a vehicle; only time will tell. In any event, the more aftermarket suppliers and repair shops understand about the vehicles on the road, the better positioned they will be to address the needs of consumers and grow business. To view Experian’s full Q2 2020 Market Trends Review, click here.
Staying ahead of the trends and adjusting will support sales growth, while also supporting consumers as they begin to recover from the impact of COVID-19.
Experian recently released its Q1 2020 Market Trends report, which provides insights about the vehicles on the road and the most popular vehicle segments.
Essential personnel and organizations are working tirelessly to deliver food and other resources, not to mention, protecting the health and safety of those around us. These vehicles still require proper maintenance and care to ensure they run smoothly. That’s where the automotive industry can help.
In the past 10 years, consumers begin purchasing convertibles as early as March.
Electric vehicles have 2.08 percent of total VIO share through September 30, 2019
Pickups are the most common vehicle in operation at 20% share today and hold 16.5% of new vehicle registrations in the market in Q1 2019.
There were 276 million vehicles on the road in Q1 2019.
Beginning with the birth of stock muscle cars, like the Pontiac GTO, vehicles with powerful V8 engines permeated the roads in the 1960s. Given consumers’ “need for speed,” these vehicles were synonymous with American culture following World War II - some going as far as to call muscle cars as American as apple pie. It’s no doubt that these vehicles have made an undeniable lasting impression on the automotive industry. Today, there are still automotive enthusiasts who appreciate the style and strength of the muscle car, but most of us want practical vehicles with better fuel economy and easy maintenance. This has resulted in a dramatic increase in the volume of 4-cylinder vehicles on the road. As seen in the graphic above, over the last 11 years, 4-cylinder engines have increased in volume over 55%, 6-cylinder have declined 4% and 8-cylinders have increased 9.8%. More power, smaller engines This trend doesn’t necessarily mean that those of us who elect for a smaller engine size aren’t able to satisfy our need for speed. Horsepower has received a significant boost over the past two decades. This has been partially driven by EPA guidelines, as manufacturers have implemented engine enhancements to increase gas mileage to meet the guidelines, resulting in higher horsepower. 4-cylinder engines have as much horsepower today as 6-cylinder engines had in 2003. That gives today’s drivers a lot more pep in engine performance. Similarly, today\'s 6-cylinder engines have nearly the same horsepower today that V8s had in 2009. Where does that leave true muscle car enthusiasts? Well, if you are looking for raw power, things are looking up. In 2018, V8 engines averaged a whopping 370.4 horsepower, nearly double V8 output of 204 horsepower in 1999. Those who buy V8s today have power to burn. Above chart detailing percentage of total volume count and average vehicle MAX HP over history. The automotive market is driven by consumer preferences and offers a range of engine options, which provides something for everyone. The boost in horesepower in today’s engines provides a nice mix of fuel economy and performance. While muscle cars remain an important fixture in American society and automotive culture, demand has shifted and understanding these data points in the broader industry context empowers dealers to make the right inventory decisions. To learn more about the latest automotive trends impacting the marketplace, view the full Q4 2018 Automotive Market Trends Analysis.
When it comes to new vehicle registration, there is one segment that stands out from the pack: crossover vehicles. According to Experian’s Q4 2018 Automotive Market Trends Analysis, over the last four years, crossovers (CUVs) have spiked in popularity, representing about a third of new vehicle registrations in 2014 (34.1 percent), but growing to nearly half the new vehicle market in 2018 (47.6 percent). In fact, the large growth in CUVs isn’t limited to just the last four years – there was a large volume of growth year-over-year compared to 2017; the share has grown nearly 4 percent. Sedans and hatchbacks, meanwhile, have seen their share decrease year-over-year. The charts below detail this change in market, based on Experian’s latest 2018 quarterly findings. Source: Experian Automotive VIO as of December 31, 2018 (light duty registered vehicles only) What’s driving this growth? Across the board, the number of light-duty vehicles on the road continues to increase, up to 275.3 million in the U.S. market, at the end of 2018, compared to 271.4 million a year prior. The growth in CUVs isn’t entirely unprecedented, as it’s been going on for a number of years. CUVs continue to grow in popularity for a variety of reasons including: Greater visibility, as the driver sits higher than in a sedan/coupe Larger storage capacities for passengers or cargo Number of varieties available, such as size, engines, and manufactures Higher fuel efficiency than a full-size SUV or minivan Currently, there are over 130 different CUV/SUV Make/Model combos offered, and of those, the different engines, options, etc. drive that volume even higher. Source: Experian Automotive VIO as of December 31, 2018 (light duty registered vehicles only) Potential for growth Currently, there are only two CUVs among the top vehicles in the aftermarket “sweet spot.” Vehicles in the sweet spot are 6 to 12 model years old, and typically aged out of general OEM warranties for any repairs. These vehicles likely require more part replacement services, which may be performed by aftermarket service shops using parts from aftermarket part manufacturers. According to Experian data, the sweet spot has stopped falling and has settled for now. But, there is expected growth of the number of vehicles that fall into the sweet spot over the coming years. One of the segments where the aftermarket industry can begin to focus on will be CUVs. Source: Experian Automotive VIO as of December 31, 2018 (light duty registered vehicles only) The aftermarket can use this data to make more informed product decisions, specifically, around the high volume of CUVs expected to come into the sweet spot. With the number of vehicle options available on the market today, CUVs will continue to stand out as a segment to watch within the auto industry. There’s a greater story beyond the numbers and understanding how to leverage the data at hand can provide the industry with a greater understanding of CUVs and its potential for even greater growth. To learn more about CUVs/SUVs and total vehicles in operation, view the full Q4 2018 Automotive Market Trends Analysis.
Like every other industry, the automotive market is driven by consumer preferences and behavior. While there are a myriad of options to choose from, fuel-type seems to dominate media headlines as a hot topic of conversation among industry pundits and consumers, alike. Little surprise then that alternative fuel vehicles, which include diesels and hybrids, have maintained a steady demand over the past few years. But, there’s a specific segment that’s beginning to emerge. As we detailed in our earlier blog series, electric vehicles (EVs) are began to stand out as a prominent alternative fuel vehicle. And during Q3 2018, we saw more of the same. EVs held 1.8 percent share of total vehicle registrations. While that number may seem small, consider this. Just two years ago, in 2016, EVs comprised only 0.5 percent of registrations, growing at a much slower pace since 2014, when it was 0.4 percent. It’s worth noting that gasoline-powered cars still dominate the market, making up 92.9 percent of registered vehicles through Q3 2018. But, the demand for alternative fuel type options should not be underestimated. Alternative fuel vehicles are becoming a significant segment in today’s auto market, and the large growth in EVs are a testament to that growth. While EVs are proving to be a popular option compared to other alternative fuel types, other options remained steady. Diesel vehicles maintained 2.8 percent of the market year-over-year, while hybrid vehicles saw a slight increase since 2017, growing from 2.6 to 2.8 percent of the market. A picture of the alternative fuel buyer So, who’s investing in these alternative fuel vehicles? We see that most buyers tend to be married, single family home owners with a college education, and belong to either the Baby Boomer generation or Gen X. It’s interesting to note that EVs make up a notable percentage of registrations of alternative fuel type preferences across generational car buyers, according to Q3 registration data. Among Baby Boomers, EVs fall second to hybrids, accounting for 1.0 percent of registered alternative fuel type vehicles compared to 1.2 percent respectively. But, EVs made up the biggest share of alternative fuel type registrations among Millennials (1.1 percent) and Gen X’ers (1.2 percent). With the number of vehicle options available on the market today, EVs stand out as a segment to watch within the auto industry. There’s a greater story beyond the numbers and understanding how to leverage the data at hand can provide the industry with a greater understanding of the EV market and its potential. To learn more about the electric vehicle market and other alternative fuel type vehicles, view the full Q3 2018 Automotive Market Trends Analysis webinar.
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