Wednesday, April 7, 2010

Show n’ Tell - Climbing Out of the Recession – Good News for Parts Sales

We will spend a fair amount of time at this year’s NASPC conference dissecting last year’s parts sales and looking at what 2010 is shaping up to be. There’s cause to feel pretty good.

We’ve been pouring over the results of the 2010 NASPC Recessionary Parts Survey that was conducted in February and March of this year. Over 2,000 parts managers took part in the survey and they reported fairly miserable results for 2009.
  • Truck, Engine, and Motorcycle got hammered.
  • CE/Ag did about as well as domestic auto.
  • With the importers doing the least-worst.
Bottom line is that retailers in all segments expect to see growth in 2010. Auto takes the lead, with CE/Ag retailers coming in about half as bullish. There were some surprises that we will discuss at the conference. So, what do we have? We have a couple of thousand front line troops telling us that battle conditions last year were terrible … and, also telling us that they feel a lot better about 2010.

Things are getting better in the market. We chart detailed monthly parts sales for 6 OEMs – mixture of domestics and importers. Just looking at M&R sales (the chart with too many lines oscillating in it), it is apparent that we started climbing out of the recession in the second half of 2009. To most of us, it certainly didn’t feel like it. You can see the trends even more clearly when looking at the sales deltas per 5-year UIO (last chart in this blog). This chart is loaded with information. First off, it shows that the auto OEMs have been gradually increasing their dollar sales per relevant unit in operation (5-year UIO) since the 4th quarter of 2008. The big problem for everybody was the sheer drop in car sales experienced in 2009. Even though the OEMs sold more stuff per vehicle, the sheer drop in vehicles sold could not be overcome.

Time-out: The 2010 NASPC Collaborative Forecast had baked in some assumptions that will offset, or eventually slow-down, some part of the sales rebound. Unfortunately, the higher quality of new vehicles will partially offset the gains in the 0 to 5 year old market … and car/truck mix will also have an effect. The 4 to 7 year old market will decline as 2007-2010 vehicles roll through starting in 2011. The domestics will be hardest hit. Companies with paid maintenance (i.e. VW and BMW) will enjoy higher retention. Toyota's recent gambit to include maintenance for two years is interesting and may be a forerunner of future policy ... 36 month bumper to bumper with maintenance may become industry standard. Ford is always an interesting case and may surprise everyone with some bold moves. The decline in older vehicles on the road, due to high scrap rates, will hurt aftermarket the most as vehicle age begins to drop. .
The other message was that one OEM pulled away from the pack – I call it “Big Red” on the chart. Big Red seems to be doing something different with customer service retention. We will unmask Big Red at the conference and talk about what they are doing that makes such a big difference.

Our retailers’ bullishness is credible. We are pulling out of the recessionary nose dive, and this is across all segments that we track. Increases in whole-goods sales will bring back parts sales, and we can all enjoy the 2010 baseball season with even more relish than last year.

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