It’s been no secret that light vehicle sales – particularly where pickups are concerned – have been on a tear in recent months, to the point where OEMs are adding extra shifts to keep up with demand.
Take Ford Motor Co. For example: it recently added a third shift of 900 new hourly workers to its Kansas City Assembly Plant in Missouri to meet what the automaker dubbed “surging customer demand” for its F-150 pickup – part of an overall capacity increase by the OEM of 600,000 units in North America to meet demand for cars, trucks and utility vehicles alike.
“Ford F-Series sales are the strongest since 2006, and we are increasing production to meet this demand,” noted Doug Scott, Ford Truck Group’s marketing manager. “This is an important indicator that our economy is growing again.”
Well, maybe some economic growth is behind this surge – but more likely it’s due to the need to replace aging vehicles as owners, especially in the work truck arena, put off acquiring new steel for several years.
Take some recent analysis by Polk and Colorado-based consulting firm IHS that found the average age of all light vehicles on the road in the U.S. now stands at a record high of 11.4 years, based on review of over 247-million U.S. car and light truck registrations earlier this year.
For passenger cars, average age also met a record high at 11.4 years, while the average age of light trucks also increased, to a record 11.3 years – trends both Polk and IHS expect to continue, while a shift in the fleet of vehicles in operation (VIO) is underway.
Indeed, with the rebound in new vehicle registrations, Polk is forecasting the total VIO to grow 5% to more than 260 million vehicles by 2018.
The situation is more pronounced in the light truck market because the average for such units shot up significantly over the past half decade – from 9.8 years in 2008 (up from 9.4 years in 2002) to 11.3 years by 2013.
None of this surprises Len Deluca, director of Ford Commercial Trucks, and he told me in an interview that this “pent up demand” is one reason Ford’s gone to such great lengths to revamp its commercial vehicle lineup.
“If you go back to the recession’s start in ’08, you’ll see that buyers – but especially small business owners – put off acquiring a wide range of equipment, trucks included,” Deluca explained. “So now the bulk of what we’re seeing in terms of [light truck] sales is that replacement demand; they’ve held their current vehicles together as long as they could. Now they need new ones.”
Yet Deluca also feels the rapid improvements in fuel economy, powertrain selection, and especially alternative power options by OEMs is going to help sustain this light vehicle “sales surge” for a good stretch as well.
“We’ve got much more capable and flexible vehicles that offer better operating footprints for commercial users,” he said. “The commercial buyer just has many more options than before.”
That’s not to say that commercial truck users won’t continue to try and extend vehicle ownership periods, though.
Indeed, Polk found as part of its most recent analysis that while the volume of 6 to 11 year old vehicles is declining, vehicles older than 12 years is on the rise – a trend supporting the increase in average age and one that also creates a potential strategic shift in the aftermarket as business owners consider options for growth and opportunity.
By the numbers then:
- For vehicles in the under 5-year age range, Polk predicts they will experience a compound annual growth rate or “CAGR” of 7.1% over the next five years. But their total population will increase 41% through 2018 as well
- For vehicles aged 6 to 11 years, the CAGR will decline 4.8% over the next five years, with total population falling by 21.9% by 2018.
- Yet for vehicles aged 12 years or more, CAGR will increase 2.2% over the next five years, with total population increasing 11.6% by 2018.
And with all those “older models” on the road, new opportunities should about for aftermarket parts and repair shops alike, contends Mark Seng, VP of Polk's aftermarket practice.
"These are interesting times for the automotive aftermarket," Send said. "Customers from independent and chain repair shops should be paying close attention to their business plans and making concerted efforts to retain business among the do-it- for-me (DIFM) audience, while retailers have a unique and growing opportunity with potential consumers wrenching on their own vehicles."
It will be an interesting trend to watch, indeed.