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Global platforms, aging vehicles could boost auto aftermarket

28 May 2015 Mark Seng

Automakers' increasing use of core platforms to expand production and meet global demand carries significant opportunity for aftermarket suppliers in tune with the shifting landscape.

Driven by the need to control costs as they move into emerging markets, automakers are shifting to more modular architecture and standardized components across vehicles sold around the world. As a result, millions more cars will share common parts, reducing aftermarket suppliers' inventory requirements and increasing revenue potential.

The revolution is taking place quickly. OEMs-led by Ford, General Motors, and Volkswagen-are expected to double their production volume per platform by 2021, by which time almost 60% of light vehicles are expected to be built on global platforms.

This trend presents potential supply chain challenges as well, as an increasing percentage of vehicles in operation (VIO) will be in locations where the aftermarket has less infrastructure in place. While the size of the global automotive aftermarket is expanding-VIO is forecast to grow 27% to 1.4 billion vehicles by 2021-currently 71% of VIO is centered in North America, Europe, and Japan. By 2021, that is expected to decrease to 58%. The rest of the world will represent 42% of total VIO, up from 29% today.

For aftermarket suppliers, in addition to understanding how vehicles are becoming more similar around the world, the key to thriving amid this changing market is determining how these dynamics will affect their "sweet spot"-loosely defined as the population of vehicles 6-11 years in age that are no longer under warranty but are still young enough to be worth maintaining with aftermarket parts. IHS forecasts that, by 2019, the number of US vehicles 6-11 years of age will decline 21% while vehicles 12-plus years old will grow 15%.

For suppliers to the US aftermarket, these numbers might suggest potentially softening demand for the next several years. However, the industry has been defining the "sweet spot" in relatively the same terms for years-even when the average age of light vehicles was 8-9 years old. In 2015, the average age of light vehicles stands at 11.5 years in the US. With older vehicles growing significantly as a percent of total VIO, this might point more to how the aftermarket needs to begin thinking differently about its "sweet spot."

As to the high-growth emerging automotive markets, where cultural, socioeconomic, and other factors create a more varied picture of the vehicle landscape (see figure), anticipating the growth of the aftermarket "sweet spot" in each region is arguably a more complex process.

What is clear, however, is that given the dramatic increases ongoing in VIO worldwide and the increasing vehicle age in most emerging markets, the global automotive aftermarket is set for strong growth over the next decade.

Mark Seng is global aftermarket practice leader, IHS Automotive

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