By Philip Atkins, ​director, Strategic Research and Planning, Automotive Aftermarket Suppliers Association (AASA)

Is the aftermarket recovering faster than expected? Or are we seeing a welcome, but temporary, spike in sales? While the effects of the ongoing COVID-19 pandemic continue to have a major impact on the automotive aftermarket industry, we currently see cause for a faster return to normal. AASA has spoken with suppliers and analysts from Wall Street and looked at several market indicators to understand how sustainable recent sales increases are and believe that full recovery is still not likely until Q1 2021. But let me list the positives and negatives of the current market so that you can make your own judgment.

Wall Street reassessments trending positive in the short term

Wall Street analysts now believe the worst is behind us and that aftermarket recovery is underway. This outlook suggests the deepest trough was in early April and that recovery began later in the month. Support comes from Advance Auto Parts’ (AAP) recent quarterly call that reported positive same store sales during April. These revised, positive views trump earlier projections that forecasted the low point would last through April and the recovery would begin in mid to late May. 

Does that mean we have turned the corner? Not so fast: at least one Wall Street analyst believes that same store sales will be negative in the second half of 2020 and push off the return to full “normal” until March of 2021.

Increases in Average Miles Driven

Car usage drives aftermarket sales. Since a severe drop at the beginning of March that saw the Jefferies Collision Index, a proxy for vehicle miles driven, drop from 85 on March 1 to a very low 25 in mid-April, the index has made its way up to 34 on May 25, showing that this important measure has formed a bottom.

Further evidence of increases in car usage and miles driven is represented by Apple’s mobile data. The driving index shows an upswing from a bottom of 37 on this index to 110 on May 15, which is back to normal levels. 

This is a good reflection of increased driving, but as the paragraph below shows, we can expect vehicle miles driven to continue to be a drag on aftermarket sales.

Keeping an eye on employment numbers

As stay-at-home orders are relaxed, many people will take advantage of the low cost of gasoline to get out of their homes again. But the largest influence on miles driven is employment, with as much as 60% of total miles driven related to driving to and from the office. So, with unemployment at 14.7% and companies enforcing work-at-home policies, job travel has been a drag on miles driven. 

This is beginning to change, however. An AASA survey shows that the number of members with more than 66% of their staff working in the office has increased from 15% to 27%. While this has helped aftermarket sales somewhat, job commuting is still well below normal levels. And ultimately, Wall Street analysts believe that miles driven in the U.S. won’t reach fully normal levels until Q1 2021.

Repair shops increasing purchases

The biggest cause for optimism comes from sales, however, and there certainly is good news here. Suppliers are telling AASA that their sales have been strong, and this is supported by market data.

After sharp declines in March and early April, shops have increased purchases from distributors for four consecutive weeks, according to Epicor’s new product, MarketPACE. After increasing a solid 17% the week ending April 17, we have had three weeks of week-over-week increases in the 6% – 7% range and nearing January levels of sales.

Supplier orders have also halted their decline, according to a survey of aftermarket suppliers conducted by Evercore ISI. After holding steady at the end of April, supplier orders then ticked upward over the two weeks ending May 14 in all three categories: maintenance, failure, and discretionary.

So, is the aftermarket recovering faster than expected? Or are we seeing a welcome, but temporary, spike in sales? All that can be concluded from current data is that we hit a floor and have begun moving upward. But the uncertainty around infections and the economy is sky-high. How will the population react to loosened stay-at-home orders? Does that lead to more infections and shut-downs? Or a very welcome surge in miles driven? Look for answers to those questions over the summer, and remember this: compared to our current global business environment, the automotive aftermarket’s future looks bright. Over the course of its history, our industry has weathered many economic storms. And together, we will re-emerge stronger from this current global crisis.

As we continue to move through these challenging and uncertain times, I encourage you to use the resources provided by AAPEX co-owners – AASA and the Auto Care Association – and to join your community at AAPEX 2020, the aftermarket’s homecoming in November. 

In addition to providing the opportunity to reconnect with colleagues, AAPEX will shed light on new innovations, share data and insights on efficiency and effectiveness, deliver hands-on training, advocate for access to vehicle data, and be your voice for the industry.  

We look forward to seeing you there!