Aging Vehicles, Higher Prices and Tariffs Impacting Industry Outlook

The most recent iteration of the quarterly Key Issues and Impacts Survey revealed that the top issues impacting the automotive aftermarket are:

1. Average age of vehicles
2. Consumers opting to maintain their vehicles as opposed to buying a new vehicle
3. Longer lasting vehicles are extending the vehicle repair window
4. Telematics that could exclude small repair shops
5. General health of the economy

Based on 44 responses collected from December 10, 2024 - January 8, 2025, these issues line up virtually identically to the overall impacts across 2023 (available on p.7 of the 2025 Factbook – “General health of the economy” ranked sixth).

In addition to the above, several identified “Telematics that level the playing field by connecting vehicles to repair shops” as a high-impact technology issue. Rich Hulden, president of AutoSport Manufacturing shared that “Telematics and [technologies] like ADAS affect so much on later model vehicles.” For example, if you “do an alignment, [you] may need to reset the vehicle system via ADAS. A lot of [the] technology and equipment are expensive and proprietary – so allowing more independent shops to be able to access information and have it be affordable to the shop” is an important issue and has ramifications on the industry.

Tariffs, Trade and Prices

On the topic of affordability and cost control, a lot has happened in the country since January 8 – you may have seen “tariffs” in media headlines and subject lines of various corporate e-mails. The Wall Street Journal (1) reported, “the word “tariff” appeared in 172 earnings call transcripts of 1,500 publicly listed U.S. companies [in the first week of February] … compared with 32 in all of February last year.”

Having trouble keeping up? Check Auto Care’s Tariffs and Trade page for the latest.

The issues identified above are not new for the industry, and policy changes will likely encourage vehicle owners to continue maintaining their current vehicle given high new vehicle prices – Cox Automotive (2) reports an average price in January 2025 of $48,641. While a 2.2% decrease from December, let’s face it – it’s still high. Add in decreasing consumer confidence (3), elevated inflation (4), higher insurance premiums (5), uncertainties related to tariffs and it makes a strong case for keeping the same vehicle. 

Industry Challenges Focus of Recent Webinar

ICYMI, there was a terrific panel discussion hosted by Auto Care’s Manufacturers’ Representatives Council a few weeks ago (available here to members). Mike Mohler of Automotive Parts Service Group described challenges he anticipates related to “butterfly effects” associated with the supply chain, including the effects of tariffs on products’/components’ point of origin and the potential constraints introduced by legislative actions.

This was echoed by Ron Aparicio of Motorcar Parts of America – as a premium supplier, he voiced tariff concerns and associated inflationary pressures for top-end imported parts, particularly with more frequent updates to price sheets due to the new tariffs.

At the same time, opportunities exist for optimizing inventory management – Aparicio talked about the opportunity to leverage technology and catalogue management to ensure that his company can provide the right parts to his customers – service providers – which allows his company to closely partner with customers.

That consumers are keeping their vehicles longer encourages Jim Dykstra’s team at Great Waters Garages to look at customers as fleet owners – balancing the need for the “best” option for a 7-9 year old vehicle while also needing a “good” option for older vehicles in their household. Access to the right parts and highly skilled technicians is essential, and increasing labor efficiency, recruiting top technicians, are always top-of-mind for multi-store operators like Dykstra.

Reflecting on the past year, Dykstra shared that sequencing and implementing training needs to be practical and applicable. Similarly, Aparicio spoke of the need to be flexible and nimble to meet customers where they are to quickly provide answers to customers.

Supplier Cutbacks

The aging vehicle fleet and high costs of new vehicles is impacting major suppliers, particularly in Europe – Bloomberg News (5) reports that “Schaeffler AG, ZF Friedrichshafen AG and Robert Bosch GmbH have all said in recent months that they’re planning to ax thousands of jobs in response” to “a slump in car sales”.  Most of the job cuts are planned for Germany and other European countries due to high labor costs, the shift to electric vehicles, and overcapacity in traditional auto parts manufacturing.

The job cuts are primarily focused on OE (Original Equipment) production, rather than the aftermarket. One company pointed to stagnating global auto sales and a slower-than-expected transition to EVs, which has impacted its OE-focused divisions, especially in driver assistance systems and vehicle software.

For now, North America is less affected by these announcements, and the aftermarket business remains resilient.

Stay in Touch

Thanks to all who participate in our market intelligence surveys and feedback. Don’t hesitate to stay in touch with me with questions and updates on how you and your company are doing, anything you’re doing differently, and your observations in the market.

Footnotes:

1: “Trump’s conflicting business policies sow economic uncertainty”, Justin Lahart, Ruth Simon, Paul Kiernan, Feb. 12, 2025; https://www.wsj.com/economy/trump-business-uncertainty-tariffs-immigration-energy-ef57cfbb

2: “Kelley Blue Book Report: Average New-Vehicle Prices Fell in January, But Were Higher Year Over Year By 1.3%”, Cox Automotive, Feb. 11, 2025. https://www.coxautoinc.com/market-insights/january-2025-atp-report/

3: “United States Michigan Consumer Sentiment”, Trading Economics, Feb 12, 2025. https://tradingeconomics.com/united-states/consumer-confidence

4: “2025 State of Auto Insurance: Rate Increases Are Slowing Down in 2025”, PR Newswire, Jan. 7, 2025. https://www.prnewswire.com/news-releases/2025-state-of-auto-insurance-rate-increases-are-slowing-down-in-2025-302344613.html “After an average rate increase of 16.5% in 2024 and 12% in 2023, insurers are raising rates 7.5% on average in 2025.”

5: “Continental to Cut 3,000 Jobs to Slash Costs at Auto Unit”, Bloomberg, Feb. 18, 2025. https://www.bloomberg.com/news/articles/2025-02-18/continental-to-cut-3-000-jobs-to-slash-costs-at-ailing-auto-unit