Thursday, August 12, 2010

Mid-Term Look at Sales


The auto sector has a critical mass of OEMs who participate in Market Watch, so we can see how the year is shaping up. So far, it looks pretty good. Year-to-date total parts sales are up significantly, with the Asians up in double-digit territory. That’s interesting, because they were less roughed up last year on the vehicle side of the business. So, their sales gains reflect more than just a vehicle-side recovery.

Don’t you just hate charts like this? I love them. Here’s how to look at it. Assume that Accessories (chart shows year-to-date – YTD – growth vs. the same period last year) is about 15% of the total sales mix; so this growth impact gets watered down a tad. Next, look across the sets of columns and notice that YTD “Collision” is in the toilet; “Powertrain” (YTD) is outperforming total “YTD” growth, and “M&R” (again, YTD) is nearly as good as total “YTD.” To the right of “YTD” (reflecting total parts sales) is “3-MO%” which is a 3-month moving average, which is next to “June” reflecting June’s sales.
  • Collision sales have not rebounded very much due to fewer miles driven through the start of the summer (it has picked up recently) and all the other usual suspects (insurance company impacts, more totals, more competition, fewer insurance checks being converted to repair work, stuff like this). This means that dealer wholesale businesses have not yet rebounded. Contrasting this tepid news is LKQ’s second quarter results; their revenue is up 20%, with organic growth up 8.7%. So, the problems here aren’t all about the “market.” I expect this segment to increasingly look better through the remainder of the year as folks take more to the highway for pent-up get-away time. High airfares and horrible service by the airlines will help this shift to more highway miles driven. Furthermore, a healthier dealer body incentivized by hungry collision managers will order more collision parts in preparation for winter. So, I am bullish on the last half of the year for collision.
  • Powertrain sales are up due to more aggressive selling, older UIO, and unavoidable repairs for those economically forced to keep their vehicles on the road longer. Powertrain will maintain this pace through 2010.
  • M&R is in recovery and reflects rebounding customer-pay parts sales. The worst dog-days of the recession are behind us and delayed repairs can only be delayed for so long. The bar chart “YoY Sales Growth” shows recovery in the independent aftermarket; so, everybody is recovering.
  • Accessories Obviously, the best news is that the moving 3-month averages look great for all the segments – all but two OEMs show double-digit short-term growth. Where’s the growth coming from? Increased vehicle sales have pumped huge growth into accessory sales … make that incredible growth there. The chart above is fresh from this year’s accessory satisfaction survey. It is my favorite. While we celebrate increased accessory sales from rebounding vehicles sales, a little thing called market share is lost in the mix. It is astounding how much dealers buy from the aftermarket in this segment. It is astounding to look at the ranges of lost share across the OEMs – some OEMs have no excuses and do much better than others. Looks like a huge opportunity here.

Bottom Line: We are in recovery – the numbers show it. We saw the path out of last year’s mess over a year ago with the “Collaborative Forecast” process for auto and heavy truck (CE/Ag decided not to participate in this process.) If you want to participate this year, call Jessica.

One last thing. I do rant and rave about how you should focus on service retention, not dealer purchase loyalty. Let me asterisk that. Accessories is the one area that is filled with lost dealer share opportunities. It is also a business sector that most OEMs are loath to tackle with enlightened information and innovative strategies.

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